News

Farm Credit CFOs anticipate interest rate rise

Short-term interest rates are expected to increase by two to two-and-a-half percent over the next three years.

That’s according to poll of chief financial officers (CFOs) for Farm Credit Associations located in America’s heartland.

Brian O’Keane is the CFO of AgriBank, which conducted the survey. He says it reflects the consensus of many economists that the Federal Reserve will begin raising the Federal Funds rate by the middle of 2015 or early 2016.

“The expectation from our CFOs is that within a year, they anticipate that that rate may be moved up about half a percentage point—up about another percentage point two years out—and anywhere from 2 to 2½ percentage points three years out,” O’Keane says. “So the expectation, based upon that poll, is that rates are going up and, obviously, pretty dramatically.”

O-Keane says, if they haven’t already done so, it’s time for borrowers to minimize the potential effect of rising interest rates on their operations before the anticipated rate increases begin.

“Given where rates are right now it creates a great opportunity to potentially look at your portfolio and assess, are there aspects of my debt that I can maybe lock in and take advantage of these low rates and really mitigate that risk of interest rates increasing—and focus their attention on other aspects of their business,” he says.

AgriBank is based in St.Paul Minnesota. It works with 17 affiliated Farm Credit Associations which provide ag loans in a 15-state area stretching from Wyoming to Ohio and Minnesota to Arkansas.

AUDIO: Brian O’Keane