Will Interest Rates Move Next Month?

Questions abound about the health and direction of the farm economy.  Ben Brown, agricultural economist with the University of Missouri’s Food and Agricultural Policy Research Institute, said he’s getting a lot of questions about the overall U.S. economy.

I've been getting more and more questions about the macroeconomy and where we see things going as it relates to consumers’ expenditures, as it relates to the employment market, and then, frankly, interest rates," Brown stated.  "You know, one of the things that really can impact agriculture producers a lot is how much they're paying for operating notes at the beginning of the year that they paid back at the end of the year. So, a lot of questions about where interest rates could go in the months ahead.”

So, what’s the expectation of interest rates in the coming months, and how will that impact the farming community?

“So, I've got the opinion that interest rates are maybe a little bit lower right now than where we probably need to see them to have a neutral position," Brown said.  "That's my opinion. Others might disagree, and certainly, there are people all over the spectrum. But my opinion is that last year, in 2024, we saw a one-percentage-point decrease in the federal funds rate. That's a short-term federal funds rate set by the Federal Reserve. We saw a full percent, and half, was maybe justified. I felt like the other half was just the market moving because that's what the Fed did because that's what the market was expecting them to do.”

Brown said it’s unlikely that interest rates can stay where they are right now.

“Given the inflation data that we've seen both at the consumer level and at the wholesale level the last couple of months, I have a really hard time seeing how the Fed can just maintain interest rates where they're at, and certainly I wouldn't remove the possibility of an interest rate hike here before May or June. To look at last week's inflation data, the Consumer Price Index came up month-over-month higher than even what the expectations are. That's the third straight month that we've seen inflation come in hotter than expected, and the Producer Price Index was also up, signaling that that wholesale inflation will eventually trickle down to consumer inflation as well, so I do think we're seeing the prices increase faster than they expected. I think that's got the Federal Reserve a little bit concerned.”

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