Insights from Catalyst

The most recent U.S. inflation figure reported for the last 12 months was 5.3 percent, the highest level in 13 years. Surprisingly, inflation has not been more than three percent since 2011. But, these numbers are coming off a low base from the pandemic slowdown. We should expect outliers in the data from the upside to the downside.

As you may know, the London Interbank Offered Rate (LIBOR) is being phased out in the U.S. and replaced with a new benchmark rate, effective June 2023. As LIBOR’s replacement – the Secured Overnight Financing Rate (SOFR) – becomes more visible, here’s what you need to know.

The first three terms above are probably familiar, but stagflation may be new to some. The word, which merges stagnation and inflation, originated in the hyper-inflationary days of the 1970s. However, this term has been popping up more frequently in recent news. What does it mean and how should we prepare for the possibility of its arrival?

Lower gross asset yields, due to sluggish loan activity, and a prolonged low interest rate environment add up to downward pressure on credit union net worth and net interest margins. The current outlook on short-term interest rates is that they’ll likely remain low for an extended period, while loan portfolio growth is expected to slowly improve. So, what does that mean for the now?

Conversation around interest rate derivatives has slowly gained more traction within the credit union industry over the last year. And the NCUA Board approved a final rule that modernizes the proposed derivatives rule, making it more of a principles-based approach, while retaining essential safety and soundness components.