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Fed increases interest rates, further increases could be looming
Ag lenders are encouraging farmers to review their risk management strategies as the Fed increases interest rates.
Glen Semple, Vice President of Commercial Lending with Farm Credit Illinois tells Brownfield the Federal Open Market Committee met earlier this month.
“They raised interest rates by 25 basis points, which is one-quarter of 1%. That is the first Fed rate increase since 2018.”
And he says market expectations are for at least one, if not two, 50-basis-point increases by mid-year as the Fed tries to temper inflation.
“At the next Fed meeting in early May, more likely than not, they are going to raise the rate by 50 basis points. So, they’ll essentially double the Fed funds rate from 0.5% to 1%.”
He recommends farmers eliminate interest rate risk where possible.
“Check and see if you can fix your interest rate on any term loans that you have, like equipment loans and real estate loans, to eliminate that interest rate risk on your term debt.”
Chief Credit Officer Jackie Martinie says crop insurance is also an important factor in risk management plans as farmers have much higher revenue to protect and greater loss to mitigate this year.
Semple and Martinie made their remarks during an Insider Look with Farm Credit Illinois presented by Brownfield on Twitter Spaces Friday.
