Economic and credit union forecast: The war and more

“When our forecast group met in early April, the top thing on everyone’s minds was the war in Iran and the broader geopolitical unrest throughout the Middle East,” says Curt Long, vice president of data and research and chief economist, in the latest Economic Update.

In the video, he walks credit unions through the state of the American economy, how it could change moving forward, and how credit unions are positioned.

The impact of war on the economy

“The war is the biggest and most visible risk to our outlook,” says Long. “But we weigh those risks against the present momentum of the economy, which actually looks relatively strong.”

He notes that job-market issues have stabilized, consumers are still spending, and there is evidence that investment in AI is driving economic growth. However, Long adds that the longer the war in Iran continues, the more inflationary pressures could impact the economy.

“If the situation in Iran is more prolonged or severe than we expect, that could bring a recession into play,” he says.

Federal Reserve and inflation

Long also calls attention to the changing situation in the Federal Reserve. Chairman Jerome Powell’s term ends this month. The debates over the new Fed Chairman nomination, Kevin Warsh, have already begun.

He points out that the Fed has a difficult task ahead of it. President Trump would like to see a cut to interest rates, but Long forecasts that inflation will likely end up close to 3 percent by the end of the year—a whole percentage point above the Fed’s target. Given this, Long projects the federal funds rate will hold steady this year, with one cut in 2027.

In addition, he says there are a variety of other issues at play: trade policy, immigration, and the longer-term impacts of AI investments.

What this means for credit unions

Long reveals that the credit union forecast looks strong, even with economic uncertainty.

“Households have adjusted to a higher rate environment, and that’s allowing for more typical patterns of deposit growth,” he says. “Credit union core deposits grew by 4.5 percent in 2025, which was the highest level of growth since 2021.”

On top of that, delinquencies and charge-offs have stabilized somewhat after a sharp rise in recent years.

“This isn’t unique to credit unions, though. We see a similar dynamic in broader financial and economic data,” Long adds. “It may be that we’ve found a new normal for credit union delinquencies and charge-offs.”

He notes that although economic uncertainty is putting a lot of pressure on credit unions and their members, the industry remains strong and is well-positioned to handle these issues moving forward.

Watch the video for the full update

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