But he cautioned that just maybe, despite the December uptick, it is premature to panic about inflation. In fact, added Wai, the December inflationary bump just might be a good thing because it is an indicator that the United States may have dodged deflation and entered a period of economic growth. Exactly that hopeful message has lately been coming out of the Fed, said Wai. "The economy appears to be moving forward, that is good news."

There were two primary triggers for December's inflation, according to data from the Bureau of Labor Statistics. Energy prices spiked and that accounted for about 80% of the all-items seasonally adjusted increase. Food also ticked up. Most other items were flat or down (used cars, for instance, were down 0.1% in December). This was not an across-the-board increase and, furthermore, said Wai, inflation usually has strong regional accents, where some parts of the country are more affected than others.

And yet inflation definitely poses real risks to credit unions, stressed Wai. A key pressure point, he said, is loan quality. Picture a financially strapped borrower-already sweating to cover a $300 per month auto loan-and suddenly everything he or she buys creeps up, say, 5% in cost. "You want to be sure the cash flow of your borrowers could withstand rapid rises in inflation," said Robert Barone, an economist and a longtime banker in Nevada and California.

CUNA Mutual Chief Economist Dave Colby added that a win-win for many credit unions and their members-a tactic that ought to result in fewer defaults-would be to "refinance member loans taking advantage of what still are historic low interest rates." A member struggling to service a mortgage issued at 6% might find it easier to repay a 5% loan, and, said Colby. It's in the interest of all to have conversations about creating just those situations.

This is especially so, said Colby, because he expects loan origination volumes to diminish, as hesitant consumers simply defer making big-ticket purchases. In other cases, homeowners who before might have funded purchases with home equity loans may find they no longer have the equity they need, and the upshot will be both less borrowing and less spending, said Colby.

Barone also urged credit union executives to scrutinize loan portfolios with an eye toward offloading loans with distant maturities. "You don't want to be stuck with long duration assets in a period of rapidly rising interest rates." He conceded that skewing toward shorter-term loans will probably result in lower interest rates, but the payoff is enhanced flexibility in dealing with changing economic situations.

In that vein, CUNA Mutual Chief Economist Dave Colby predicted that this year will see an outright decline in mortgage portfolios for the first time in history as credit unions choose to mitigate risks by selling off that paper rather than holding it.

Consumers, too, are showing strong preference for short-term paper when they are looking for places to park cash, said Colby, who indicated credit unions will see lower demand for longer-term certificates of deposit and greater demand for highly liquid instruments such as money market accounts.

Another area where inflation poses real risks to credit unions, said Wai, is operating costs, including everything from the price of electricity to employee wages and benefits. Periods of high inflation put intense upward pressure on all those costs, said Wai, and credit union leadership needs strategies for how best to deal with these issues. It's not easy. Furnaces cannot be turned off on cold winter days and employees cannot be denied wage hikes when competitor institutions start paying more. But credit unions, he suggested, will need to carefully scrutinize their own operating expenses in the present uncertain environment.

"This a teachable moment. Most credit union decision makers should realize the current environment won't last and you need to be ready for big changes that may involve much higher inflation," said Mike Schenk, vice president for economics at CUNA.

Schenk added: "When the Fed becomes concerned about inflation, things will change dramatically for credit unions. Interest rates will go up. That will be a big deal." He admitted he does not see that happening this year. The Fed, he believes, has its focus on reducing unemployment, and it is prepared to swallow small increases in inflation, at least until unemployment sinks, but in the mid-term inflation likely will return. And it is up to credit union managers to be prepared for this inevitability.