News

Federal Reserve increases interest rate

An official with Farm Credit Mid-America says the recent interest rate increase won’t have a huge impact on farmers.

The Federal Reserve raised the federal funds rate a quarter of a percentage point to 1.5 percent following the December Federal Open Market Committee meeting.

Matthew Monteiro, the vice president of finance and treasurer, says the increase was highly expected.

“The markets trade on expectations and with this being expected very widely, markets did not get disrupted,” he says. “Short-term rates have already pretty much moved in line with expectation to what the Fed (Federal Reserve) was going to do.”

The Federal Open Market Committee, the monetary policymaking body of the Federal Reserve System, has increased the federal funds rate three times this year.

Monteiro tells Brownfield, even though rates have increased, they are still considerably low.

“2.8 percent would be about expectation of what that federal funds rate would be today,” he says. “So anything below that, like where we are currently is considered accommodative and we’re expected to be in that kind of market for about another two years or so”

He says the Federal Reserve expects more increases over the next two years.

“They are looking at perhaps three rate increases of a quarter of a percentage point each in 2018 and then two additional ones in 2019,” he says.

Monteiro recommends that farmers should consider locking in long-term fixed rate funding when possible because short-term rates have been increasing.

He says Farm Credit Mid-America has many options for farmers, including competitive rates and patronage payments.

Audio: Matthew Monteiro, Farm Credit Mid-America