Interest Rates Will Never Be Lower

August 26, 2009 07:00 PM
 

Greg Vincent, Top Producer Editor
 
The good news is the worst of the recession is probably over—if it hasn't ended already, says Ed Siefried, an economics professor at Lafayette College in Connecticut. The list of economic indicators he follows show that, when he spoke at the AAPEX (Association of Agriculture Production Executives) meeting on Aug. 13. He also expects the economy will be in relatively good shape for the next two to three years due to a boost from the stimulus package. After that however, several questions begin to pop.
 
Leading the list of concerns is what interest rates will do and how inflation can impact that. "If you're considering doing something in expenses and you have to borrow money to do it, now is the time to do it. There never in your lifetime be lower interest rates than where you are today,” he says.
 
Why? The Fed Funds rate is currently at 0% interest and they can't get any lower than that. So how much longer can the government afford to print money and loan it out with a guarantee of no return? That's the big question and the reason most economists like Siefried are predicting inflation and rates to rise.
 
Typical Fed Fund rates in inflationary periods settle out in the 7-8% range, a majority of the economists in the AAPEX meeting agreed. With the Fed rates in that range, mortgage rates for land will likely fall into the 9%-10% range and operating loans could reach into the double digits at 10%-12%.
 
Siefried believes the Fed Funds rate will reach a range of 5%-6% in the next 12-187 months.
 

 
You can e-mail Greg Vincent at gvincent@farmjournal.com.
 
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