US Inflation and Interest Rates

Carl Zulauf and Gary Schnitkey

farmdoc daily, 2025, vol. 14, issue 105

Abstract: In response to higher inflation, the Federal Reserve has raised the effective Federal Funds interest rate from 0.08% in January 2022 to 5.3% currently. It is now higher relative to current inflation than its historical average over the last 60 plus years. In contrast, market interest rates relative to inflation are lower than history suggests. The latter is consistent with the market’s view that post-2020 inflation is temporary. If the market’s view is correct, the Federal Reserve will begin to cut interest rates but market rates will likely decline less than the Federal Funds rate. If the market’s view is incorrect, market interest rates will need to move higher if inflation remains at or increases above its current level. The data in this article come from the Federal Reserve Economic Data files (FRED) maintained by the Federal Reserve Bank of St. Louis.

Keywords: Agribusiness; Agricultural Policy; Farm Program Analysis and Outlook; Farm Program Description (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ags:illufd:358501

DOI: 10.22004/ag.econ.358501

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