What Does an Interest Rate Hike Mean For You?

December 16, 2015 09:55 AM

Updated 12/17/15

On Wednesday the Federal Reserve raised interest rates for the first time in nearly a decade. What would that mean for farmers? Joe Vaclavik told “AgDay” host Clinton Griffiths what he thinks farmers need to know about an interest rate hike.

On Markets

A higher interest rate could be positive for our struggling commodity markets.

“Hopefully it results in the dollar topping out,” he says.

While fundamentally a rise in interest rates is seen as giving the dollar strength, Vaclavik says historically that’s not the case.

“Historically it will break lower after the rate hike,” he says.  “It’s kind of a buy the rumor sell the fact kind of a thing.”

On Borrowing

Don’t panic. The increase was only a quarter of a percent which Vaclavik says won’t hurt your ability to borrow.

“We're not going to go to interest rates that make borrowing money difficult,” he says. “We’re not going back to the 1980s anytime soon.”

On Exports

The export markets have been struggling to rally with the strong dollar. Vaclavik says that a higher interest rate could cause the dollar retreat as it has historically done, which would be positive for exports.

“Exports of corn soybeans and wheat are below last year and they’re below USDA’s projections,” he says. “A softer dollar would go a long, long way to fixing that.”

The Bottom Line

Vaclavik says the question farmers should be asking is not if this is the last time rates will go up. “The real question is ‘will they raise rates every quarter, six months or every year?’ or ‘is this one and done?’” he says.

Watch the full interview below:

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Spell Check

nashville, NC
12/17/2015 07:47 AM

  While the government plays with interest rates and the dollar value this will break most of the farmer in the US.

ledyard, IA
12/16/2015 08:22 PM

  Lynn you don't read so good do you. Interest going up in the past has made the dollar go down, Making grain go up ^^^^^. Start being positive maybe grain will.

Dallas, TX
12/16/2015 09:28 PM

  Anna is pretty.


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