Interest rate announcement to largely sway ag incomes
An ag economist says the Federal Reserve’s announcement Wednesday afternoon on the future of interest rates will likely have a strong impact on commodity markets one way or the other.
The University of Missouri’s Ben Brown says the market is expecting a half a percent increase in short-term interest rates.
“Even if that is held constant, I think you’re going to have some traders that still feel like that’s too short of a move to help tame some of the broader inflation,” Brown said.
But he tells Brownfield too much of a move would heavily impact farm incomes …
“It would reduce the national farm income by about 10 percent if short-term interest rates went back up to a normal two percent interest rate,” he said. “Now granted, they’re talking about a half percentage point here that would take it up to, basically, one percent.”
Brown says while not all farmers have short-term operating debt, quite a few do have debt.
“That’s my biggest concern, that we end up in a very strong recession just by increasing interest rates too fast,” Brown said.
Brown made his comments on Brownfield’s Weekly Commodity Market Update.