On the heels of St. Patrick’s Day, what better time to reflect on the similarities between the holiday and credit union finances – the color green for money, the search for the income pot of gold and the hope for an extra bit of luck to get us through the rough patches. Given the increase of uncertainties in 2025 – tariffs, taxes, consumer spending, loan demand, higher or lower interest rates – who doesn’t want to find a lucky charm to make it through the year?

Navigating the cloudiness

As hopeful as we want to be, however, it takes more than luck to be successful. In the world of finance, interest rates and knowing where they are headed are the keys to successfully managing a balance sheet. No one can accurately predict the direction of interest rates, even as much as one may try. All we can do is look at the “nuggets” of information we are given and try to build a rainbow that’ll lead us to the pot of gold.

But the data this year is confusing. The inflation gauge cooled in January, but now seems to be stuck or worse, inching higher. The labor market was strong, but weekly news of government and private sector layoffs is creating nervousness. Consumers were spending almost non-stop until this year, when uncertainty and rising prices finally started to take a toll. It’s no mystery that consumer optimism is beginning to wane. Even the Federal Reserve is scratching its head and pausing on what to do next.

The Fed told us earlier this year it was leaving monetary policy alone for now. But with inflation seemingly moving higher, it may raise interest rates again. At the same time, weakness in the labor market could prompt a lowering of interest rates. At the very least, rates could move sideways for a time. The question for credit unions becomes what to do – cut deposit rates and risk losing liquidity, raise loan rates and risk losing loans, or do nothing and hope for the best? None of those options are the right path to reach the pot of gold, especially when you meet your examiner along the way.

Laying out the path to gold

The first step in outlining your rainbow path is knowing what your members need to help them through this uncertain financial landscape. The savings from the post-pandemic stimulus have dwindled for the most part, especially for the working- and middle-class members. 

Fortunately, as cash levels have declined, the worst of the tight liquidity scenario credit unions found themselves in during 2023-2024 has dissipated. Now is the time to focus on maintaining the right level of liquidity without being forced into above market borrowing rates. This requires regularly reviewing and adjusting deposit growth strategies, share draft and CD rates, as well as paying attention to your members' habits. Keeping an eye on loan-to-deposit ratios, liquid assets ratios and the net stable funding ratios will keep you on the right path.

Loan demand is the other side of the equation for credit unions. Demand for cars, home improvement, etc. has continued to increase along with interest rates, and shows no signs of ending. While most mortgages have a long way to go before refinancing is possible, the new mortgage market is opening. Housing inventory is increasing, and builders continue to offer incentives to lock in buyers. A recent study by TransUnion showed nearly one in four people intend to shop for a new auto loan this year. 

Offering personalized loan solutions based on member needs, diversifying loan products, actively engaging with the community and utilizing digital platforms for easy loan applications are some steps to bring you and your member closer to their personal pot of gold. 

Finding a four-leaf clover

The uncertainty surrounding the direction of interest rates is a reminder that, like the search for a lucky clover, the future is usually unpredictable. Yet, with careful analysis, strategic planning, and perhaps a bit of luck, it is possible to create a path, or a rainbow if you prefer, that can guide your credit union in the right direction. 

Listening to your members’ financial needs, tailoring rates to help them and keeping an eye on the long-term picture are a few steps that can help you reach the ‘pot of gold.” 

Catalyst experts and solutions deliver unique strategies to ensure the health and longevity of your credit union. Contact us to learn more.