For the first time in three decades, the Federal Reserve raised its key interest rate by 75-basis points. This move is also a sign of additional rate increases to come.
“The talk right ahead of the Fed announcement was that they would go 50, 75 or even 100,” says Alan Brugler, president of Brugler Marketing. “The debate was if they would go ‘shock and awe’ and go 100. But they left it at 75.”
To bring inflation back down to a steady 2%, Brugler says the Fed will have to continue to raise rates.
“All they can do is try and slow down demand and that’s by continuing the rate hikes,” he says. “The problem with this one is a 75-point hike still leaves you with very, very negative real interest rates. It’s not really providing that much of a break on the economy.”
Inflationary environments tend to be positive for agriculture, Brugler says.
“As long as you have the inflation, you’ve got extra money that’s coming out of the equity sector and into commodities because that’s where you go when there’s inflation,” he says. “Commodities tend to outperform equities in high inflation environment.”
