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Cool It

Interest Rate Graph

If you were waiting on interest rates to drop before buying that new equipment, expanding your land holdings, or refinancing your debt…well, you might be waiting longer than first expected.

The speculation that the Federal Reserve would reduce borrowing rates at its June meeting has cooled down. Inflation got hotter, and that’s not cool.

The most recent report from the U.S. Bureau of Labor Statistics marked the third straight month that annualized inflation came in higher than analysts had expected. Consumers prices increased 3.5% in March compared to the previous March.

Optimists will note that March’s 3.5% rate of inflation is barely one-third of the searing 9.1% inflation rate that burdened the country in June 2022.

But realists will remind everyone that the Fed wants inflation to drop to 2% -- or at least get close to it – before leaders feel comfortable dropping borrowing rates. This report from ABC News pointed out that housing costs and higher gasoline prices made up more than half of the monthly increase in consumer prices.

The Federal Open Market Committee (FOMC) members expressed concerns during their most recent meeting that inflation wasn’t slowing faster and that they want to “gain greater confidence” that inflation is making a steady descent to its 2% annual target.

According to the minutes of the FOMC, “Participants generally noted their uncertainty about the persistence of high inflation and expressed the view that recent data had not increased their confidence that inflation was moving sustainably down to 2%.”

Douglas Holtz-Eakin, president of the American Action Forum and former director of the Congressional Budget Office, told the Washington Post that the Fed “is nowhere near where they’re going to need to be. “March would not give anyone any confidence.”


American Farmland Owner Hayfields mountains


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