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Federal Reserve delivers another interest rate hike

The Federal Reserve raised interest rates another quarter of a percent this week to 4.75%.

Dr. David Kohl, Professor Emeritus of Ag Economics with Virginia Tech tells Brownfield this is the largest interest rate increase since the 1980’s.

“It looks like the Fed is signaling that we might have another quarter percent interest rate hike, but when it is all said and done, it will probably be between 5 and 5.5%.”

Kohl says he is concerned that some Fed members want the rate to reach 7%, making the prime rate 10%.

“That would come back to really influence producers’ cash flows but also interest in land, real estate, etc. because there would be other alternatives like CD’s and treasuries that we haven’t had the past couple of years.”

He says banks and lenders are going to tighten up on credit so farmers need to have a good understanding of their financials.

Brownfield interviewed Kohl at the Illinois Farmland Values Conference in Bloomington on Thursday. The featured photo above is a slide from Dr. Kohl’s presentation.