Last week, the Federal Reserve decided to pause interest rate increases. Missouri Extension agricultural economist Ben Brown says the Federal Reserve has done exactly what it said it was going to do.
Brown; “The market and a lot of traders largely had priced in decreasing interest rates at the back end of this year. The market had always kind of been wrong, even though the Federal Reserve had told them what they were going to do. And as a market economist, I don’t say that very often, the market is never wrong is what we usually say. But this was a prime case where the Federal Reserve has done what it said it was going to do.”
Most surprisingly, Brown says, the Federal Reserve last week said there would be two more interest rate hikes this year. He says; “That’s unique because normally the Federal Reserve comes out and says economic conditions continue to exist that would suggest increases in the future. So, it’s kind of broad, and the fact that they came out and said not one, but two interest rate hikes later this year, it signals to me that the Fed is very serious about not repeating the issues of the early 80s when the Federal Reserve eased too early, and inflation came roaring back.”
The good news for consumers is food inflation is starting to come down, but there are some areas of concern according to Brown.
He says; “We’re starting to see some easing there. We’ve got, you know, inflation potentially in what we call the post farm gate. So, the packaging, the employees, the transportation, that all kind of still exists there. And there is concern in that fuel sector to where, you know, OPEC has announced their cuts for the summer, we’ve seen fuel prices rise just a little bit, so still fighting that battle.”
Story provided by NAFB News Service and Todd Gleason, WILL, Urbana, Illinois