A Direct Line Blog

By Cory Gleason, AIM Financial Analyst

In January, the Fed faced a tough decision: cut interest rates to support jobs or pause to address inflation. Halfway through the year, we have a clearer-cut answer.

The broader US economy has continued to expand at a steady pace, dispelling recession fears. Real GDP growth has held up along with consumer spending. At the same time, the labor market has been in a stable range around 4.3% to 4.4%, keeping the workforce balanced.

Throughout 2026, it has been clear that inflation has influenced policy; the FOMC has held its target federal funds rate between 3.50% and 3.75%. At the June meeting, the committee maintained that rate, but some focus has shifted towards their projections. The market entered the year expecting one or two rate cuts, although the most recent summary of economic projections shows a change in direction.

With inflation tracking higher than the 2% target, the projections from members showed some very eye-opening data, with nine members seeing a hike and four of those members anticipating multiple hikes. Shown below are the actual dot plot results from the June meeting. (Each dot represents an individual Fed policymaker’s projection for the federal funds rate. Notice the upward shift in projection for late 2026.)

Implications for Credit Unions

Looking at the second half of 2026, “higher for longer” is the reality we are in. It will be important to manage your risk and use real data to make pricing decisions. Getting a liquidity stress test is a great step you can take to protect your cash flow in this type of situation. From there, Millennium Corporate’s Asset & Investment Management can help you with NEV and NII modeling to measure your interest rate risk as market rates fluctuate. Being proactive is a great advantage, because you can see how this modeling can protect your earnings and long-term balance sheet health. You can view our ALM solutions on the AIM Website.

As you map out these strategies in the upcoming months, keep an eye on economic releases. The next FOMC meeting is set for July 28 and 29. While the market is anticipating rates to hold steady, the policy statement from the committee could have some information about potential rate hikes this year. Following that, the July inflation numbers (CPI) will be released on August 12.

Bottom Line

The Federal Reserve is prioritizing price stability over rate cuts. Now is a great time to utilize the AIM team at Millennium Corporate. Whether you would like to do a liquidity stress test, build out your investment ladder, or even just talk about pricing strategies with an expert, we are here for you. Reach out to the AIM team at aim@aimcusolutions.org or call 855-882-8474.