Credit Unions’ Opportunities and Outlook for 2024

By LaCorp

2024 already has credit unions looking forward to several things, from easing inflation and interest rates to payment technologies that will keep members happy and your credit union relevant. Here are several opportunities and trends for your credit union to watch throughout the year!

Higher Interest Rates and MMAs

Following the most recent meeting of the Federal Reserve’s Open Marketing Committee, Jan 30-31, the committee’s statement read, “The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are moving into better balance. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks…The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”

While the Federal Reserve is expected to cut interest rates in 2024 after this last meeting, which held rates at 5.25%-5.5%, the when and how are up for debate. Chairman Powell has indicated that the committee is unlikely to lower rates at its next meeting in March. Strong jobs growth could have the Fed holding off until at least June, according to a Wall Street Journal report. And Elliot Eisenberg, a nationally well-known economist and speaker at credit union events, predicts it could be June before the Fed moves.

Additionally, the Fed is still keeping a close eye on the marketand forming its policies to guard against further inflation while avoiding a recession. It will take more clear evidence that inflation is going down to the level of the Fed’s 2% long-term target for them to start cutting interest rates this year. A presidential election year adds another variable to the interest rate forecasting considerations.

Until the interest rate outlook is clarified, now may be the time to take advantage of the higher interest rates with flexible money market account deposits, which are performing well at current interest rate levels.

Ok, do we go with a crystal ball or a Magic 8 Ball?

The Importance of Asset Liability Management

Currently, credit unions' liquidity is tight from the many loans on the books and consumers drawing down savings as they deal with inflation. Many people are pulling from their savings accounts to cover expenses and not replacing those funds yet, which can be challenging to balance with the strong loan growth credit unions were previously experiencing. These shifts make methodical Asset Liability Management (ALM) a must.

Additionally, CD issuance can help your credit union manage liquidity risk. Credit unions can quickly and easily issue CDs to nonmembers, including your fellow credit unions, through services like SimpliCD to loosen up the liquidity crunch.

FedNow and Real-Time Payments

ACH is an easy way for members to move their money around quickly, and doing so digitally means that money can be transferred faster than ever before. Members can send their rent money right up to the last possible minute – just when they need it. Of course, this speed can easily become a problem when money is sent to a fraudulent account. For some categories of funds transfers, particularly wires, it can be difficult to impossible to recover funds when they are sent to a fraudulent account.

To help better protect against such fraud, the Federal Reserve launched FedNow in July 2023 to improve speed and security.Last year, 331 financial institutions sent and/or received funds on the platform, including more than 60 credit unions. Aside from the Federal Reserve, RTP from The Clearing House provides a similar platform. However, FedNow’s systems are less expensive to deploy and do not require a separate master account. The receiving end has been the more popular option.

As faster payments become more available in the marketplace, members will increasingly ask for these services. Moving into 2024, having excellent and secure ACH services will help keep members’ money safe and prevent fraud liabilities down the road.

2024 will bring much change for credit unions, hopefully loosening the current liquidity crunch. In the meantime, your extra funds can do more for your credit union and members atLaCorp, where we still have the best money market account rates among any of the corporate credit unions’ advertised rates. See for yourself!