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Fed Rate Hike Could Mean $70.3 Million More in CU Investment Income

WASHINGTON - Credit unions can expect an additional $70.3 million in investment income thanks to the Federal Reserve Board's most recent rate hike. The increase is expected to come in the last half of the year from credit unions' short-term investments, going from a 1.00% yield to a 1.25% yield,...

By Staff Writer | Updated on July 13, 2004

WASHINGTON – Credit unions can expect an additional $70.3 million in investment income thanks to the Federal Reserve Board’s most recent rate hike. The increase is expected to come in the last half of the year from credit unions’ short-term investments, going from a 1.00% yield to a 1.25% yield, said John Marron, senior industry analyst at Callahan & Associates, Inc. “Since cash and cash equivalents make up approximately 25% of the entire credit union investment portfolio, the overall investment yield for credit unions should grow just over 6 basis points,” Marron said. “The same is true for the yield credit unions are receiving on the $56.2 billion in cash and cash equivalents they hold as short-term investments.” The Fed’s decision to raise its target overnight lending rate to 1.25% means that yields on money market shares, certificates of deposit, credit card rates and other accounts will rise as well, Marron said. As of March 31, the entire credit union investment portfolio totaled $223 billion, Callahan reported.

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