The commodity markets have been concerned about recession lately and what moves the Fed takes on monetary policy from here. The Fed gave us some indication as they released their June meeting minutes on Wednesday. They’re poised to raise rates in July by either one-half to three-quarters of a percent to curb inflation. They also agree that a more restrictive stance could be appropriate if elevated inflation pressures were to persist…and they think they can do it without sending the economy into recession.
The Fed’s move doesn’t come as a big surprise to many noted economists who are already expecting a hike at the FOMC’s July meeting and more down the road. A lot will depend on the latest Consumer Price Index.
Ernie Goss, Economist at Creighton University says, “We’ll see on the 13th of July the latest CPI, Consumer Price Index. I expect it to show indicate that inflation is already cooling. So the market is already doing some of the Feds work.”
Goss says if that CPI confirms it may curb the aggressiveness of future rate hikes. “We may see two more Michelle. Early on we were expecting a lot more but the economic weakness is just out there. So I only anticipate a rate hike in July and then another rate hike in September. That will be an increase of about 1-percentage point between those two rate hikes.”
He says the Federal Reserve admittedly acted too late and their aggressive action has now become part of the reason the U.S. is moving into or is already in a recession.
Goss adds that their recent survey of ag bankers in the Midwest indicates the higher interest rates are becoming a problem for farmers who are having to borrow more money just to pay for higher input costs.
