he Federal Reserve raised interest rates from a target range of 3.75 to 4 percent at their September meeting. The board wanted to get ahead of “stuck” inflation above 3 percent and unemployment. Their target inflation rate is 2 percent.
“The big reason for that rate increase has been the persistence of inflation,” said Bryon Parman, NDSU Extension agricultural finance specialist, during the September NDSU Agricultural Market Situation and Outlook Webinar.
This is the first time the Federal Reserve has raised rates since 2023.
Parman pointed out there was a big inflationary period from mid-2021 through the early part of 2023, where annualized average inflation rose to more than 8 percent for a period of time.
“One of the big criticisms that folks had for the then Federal Reserve Chairman Jerome Powell was his (and the Board’s) reluctance to raise rates earlier, which possibly could have prevented inflation from going so high,” he said.
Powell and the Board of Governors, at that time, waited as inflation continued to rise, he said. Finally, they began a series of rate hikes to get interest rates higher in an attempt slow that rate of inflation down.
While Parman said it took a long time to come down, the inflation rate eventually came down as interest rates went up.
Parman reminded farmers and ranchers that Federal Reserve Chairman Kevin Warsh was sworn in on May 22, and he served on the Board of Governors during the financial crisis from 2008-09.
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