Cryan: Inflation Will Be An Issue For Farm Country For Foreseeable Future
Year-over-year consumer inflation in July was 8.5%, down from the 9.1% we saw in June. The month-over-month inflation was 0%, though that was largely the result of a 4.6% drop in energy prices. Food prices reported a nearly 11% year over year increase in July, with a 1% month-over-month jump.
Roger Cryan, American Farm Bureau Federation Chief Economist, said the Federal Reserve Bank pumped a lot of dollars into the economy in 2020-2021. And now the Fed is raising interest rates and selling assets to soak up some of those dollars. He added the U.S will continue to see headline inflation in the 5%-9% range well into 2024. Cryan continued while the economy remains strong, the market remains weary.
“Job vacancies are a little bit lower than they were a couple months ago, but they're still way above pre-2021 levels. There's ten million job vacancies in the in the U.S. economy right now. That means there's still a lot of demand in the economy. But we have a strong narrative in the market that says if the Fed raises rates, recession will happen and that narrative is driving an overreaction and that overreaction could drive a continuing recession.”
Despite the challenging conditions, Cryan said there are silver linings for farmers and ranchers.
“A recession doesn't help farmers, but commodity prices are still relatively high and if fuel and fertilizer prices keep dropping, that would be a big help. And the Fed’s serious attack now, finally, on inflation, I think is helping to restore faith in the market that inflation isn't going to be a long-term issue. So, we're already seeing long-term interest rates start to drop, which is very helpful for farmers when they're looking to invest, and short-term interest rates will come down once inflation has been beat, that could take a couple of years,” Cryan noted.
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