The big story prevailing through the macro economy and agriculture sectors continues to be about inflation – the Federal Reserve combating inflation via the federal funds rate and how that has been impacting interest rates, according to Bryon Parman, agricultural finance specialist with North Dakota State University.
When producers consider equipment purchases, land purchases, and the cost of carry when they’re storing grain, questions about whether interest rates are going to increase or decrease arise.
“Obviously, interest rates have a big impact, especially as they increase on agriculture and agricultural lending,” Parman said.
The Federal Reserve looks at certain data points when they’re making decisions on what to do with interest rates and the federal funds rate.
“The Fed tends to focus on this core inflation number, which is 5.3 percent in June. It was 5.6 percent in May, and it is coming down,” he said. “The reason they do that is because of the volatility of food prices and energy prices, how those can move and that the core inflation tends to, in some opinions, reflect better how prices are moving.”
Unemployment, another big number that the Federal Reserve looks at when they’re trying to make decisions on the interest rate, is 3.7 percent, which was up slightly from the month before at 3.4 percent.
“The other information that came out is unemployment still remains well below 4 percent. The target has kind of been 4.5 percent and it has stayed low,” he said.
Source: agupdate.com
Photo Credit: istock-martijnvandernat
Categories: North Dakota, Business