January Fed Meeting Preview: Predicting a Smaller Hike to Start the Year
The Federal Reserve is poised to meet once again on January 31 to set rates. Kicking off 2023 with the possibility of another rate hike increase seems like déjà vu at this point.
Our FBN® experts have been closely monitoring interest rates over the past year. With this meeting, our experts are predicting a smaller increase of 25 basis points.
According to Kevin McNew, Chief Economist at FBN, “What makes this interesting, is the market is factoring in things the Fed says it won't do. For example, the markets expect the Fed to start easing rates in November and December 2023, but the Fed has stated it won't be doing that. So if the Fed sticks to its script, then the market could be in for some big moves as a result.”
McNew says the market thinks the economic indicators will cool faster (with the possibility of collapse) more than the Fed. And due to that, there are divergent views on what the state of the economy will look like in 2023.
[Learn more about how the economic shocks of 2022 are affecting farmland values in our recent FBN Research report. Unlock the free report today.]
Interest rates highest since 2008
Source: U.S. Treasury
What it means for farmers
With interest rates at the highest they’ve been since 2008 and inflation reaching a 40-year high in June of last year, it appears that 2023 will continue to be a volatile year.
Rates have started to decline as we start the new year. With the 30 year fixed being the lowest it has been since September 2022, now may be a good time for purchasing farm land real estate before the rates potentially increase again.
“I think the drop in 10 and 30-year rates from October to now is reflecting the market's expectation that rates will start to back down in late 2023. But if they are wrong and the Fed sticks to its script to keep rates high into 2024, then those rates should rebound,” said McNew.
With some unpredictability still expected, locking in a shorter term rate may be a viable option. Locking in a shorter term rate now still gives you the flexibility to refinance and take advantage of lower interest rates if they start to drop.
Solutions to grow your business
Every farmer has a unique situation and we aim to make financing for family farmers simple and affordable. We provide a variety of options that may be useful in managing or growing your operation:
Operating lines can help you fund your operation as you see fit. You could receive an instant decision on loans up to $1M. Learn more about how an operating line could benefit your operation.
With rates seeing some relief lately, now may still be a good time to purchase that ag land you have your eyes on. We want to help you finance your ag land, apply for a land loan now.
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