If you were eyeing a farm expansion, major equipment purchases, or hoping that a variable interest rate loan would take a welcome dip in 2025, you may be disappointed with what the Federal Reserve did. You were likely hoping for more.
The Fed decided during its final meeting of 2024 Wednesday to drop its benchmark rate by 0.25%. It was a modest step. And actions in 2025 could also be modest.
RELATED: Leaders at the Federal Reserve Bank of St. Louis explained to students from Illinois State University the role in the economy of the Federal Reserve System. Read the story from Illinois State University here.
The action by the Federal Open Market Committee lowered its overnight borrowing rate to 4.25%-4.5%, which returns the level to where it finished 2022.
Back then, the FOMC was raising rates, while this month’s cut was the third straight reduction. Fed members indicated that they expect two additional cuts in 2025, half the number anticipated by members last fall when they looked ahead to the new year.
Chair Jerome Powell said, ““We moved pretty quickly to get to here, and I think going forward obviously we’re moving slower.”
RELATED: President-elect Donald Trump’s campaign pledges of escalated tariffs, additional tax cuts, and mass deportations of undocumented migrants could all add inflationary pressures on the economy and challenge the Federal Reserve’s strategies as it watches an economy where inflation remains higher than its goal of 2%, slower GDP growth in 2025, and unemployment that stands around 4.2%
While the Fed’s actions are noteworthy, so is any movement on the 10-year Treasury yield. Businesses and households may be more directly affected by that yield.
A Quartz article stated, “A number of factors can change the trajectory of the yields, including expectations of stronger economic growth, higher inflation, rising national debt, geopolitical and economic uncertainty, or recession fears.”
The article runs through some scenarios about how inflation and the labor market could affect the 10-year note yield. Find that here.
How is the overall economy doing? We know how challenging it has been for certain areas of agriculture. But what about the U.S. economy as a whole? Inflation has refused to fall as fast as some policymakers had hoped. The stock market endured ten straight days of losses but essentially held steady on Thursday.
What happened to the post-election optimism of additional tax and regulatory cuts in 2025 that could further boost profits at some of the country’s biggest companies?
Well…
Congress’ bipartisan framework on a temporary spending plan fell apart (again) Thursday, bringing uncertainty to people who work for the federal government and depend on its services as a potential partial federal government shutdown looms this weekend.
Congress still hasn’t agreed on a Farm Bill extension.
Farmers and producers don’t know how serious President-elect Donald Trump is about a trade war and how higher tariffs could hurt their bottom lines.
Inflation seems resistant to fall faster.
Borrowing costs could remain higher in 2025 if the Fed expects only two rate reductions.
How much will Trump’s mass deportations of undocumented migrants and reduction in legal immigration hamstring farming operations’ workforce along with staffing at manufacturing and processing facilities across the country?
Will there be mass layoffs in the federal workforce as part of Trump’s policy changes?
Will there be immediate, large cuts in federal spending?
