Rates, spending, & borrowing: A high-level outlook

Over the past few months we’ve reflected on the many financial battles facing consumers, and how your credit union might respond. Last October, we reviewed the Federal Reserve’s continued fight against inflation using accelerated interest rate hikes. In December, we analyzed the broader state of the housing market. From there, we explored consumer credit and the future borrowing base. In this article, we’ll take a high-level look at those same issues with an aim towards helping you update your strategic focus for the months ahead.

What’s the outlook for interest rates and inflation?

As of June 2023, inflation is hovering around 4.0% The last time inflation rates hovered around 4.0% came nearly two years ago in May of 2021. In the time in between, inflation has tracked much higher forcing consumers to deal with escalating prices for goods and services for an extended period of time.

Since 2022, the Federal Reserve, in order to combat higher inflation, has been increasing the Federal Funds Rate. As of June 2023, the effective federal funds rate is at 5.25% – a 500 basis point increase since the start of the campaign. Consumers have thus been forced to also deal with escalating credit costs for an extended period of time.


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