Posted on August 6, 2019 by John Posey
Below is an article from Ben Carlson that takes a look at historical interest rate changes. With the Fed cutting rates recently, I found it a timely conversation. Prior to last Wednesday’s 25 basis point Federal Funds rate cut, Ben finds that there were nearly 140 rate cuts since 1960, 30 double-digit stock market corrections and 8 recessions in the U.S. over that time. My primary takeaway is when Ben says, “In the short-term, any Fed actions likely provide more of a psychological impact on the markets than a lasting change in fundamentals.” In other words, it’s not really a new world with the interest rate strategy the Fed has chosen even considering the current period is unique with historically low unemployment and inflation. Take another look at the chart of the historical Fed Funds rate from 1960 to 2019. Although we’ve seen a decade of persistently low rates, I wouldn’t bet they will continue bottom bouncing over the next decade. An upswing in economic activity and inflation could have a profound impact on pressuring higher rates yet that remains to be seen. I think I speak for all those involved in agriculture that higher inflation in some select commodities would be more than welcomed but the 1980’s can forever keep those interest rates!
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