by Ben Nuelle AUDIO: World of Agriculture 7-7-16
December saw the first rise in short term interest rates in nine years.
A Senior Vice President with Farm Credit Services of America sees modest increases in 2016. Jim Knuth is Senior Vice President at Farm Credit Services of America.
Knuth expects short term interest rates to rise 25 to 50 basis points.
“The important thing to remember with short term interest rates is that it primarily affects variable rate debt. That is your operating line of credit.”
He says the main demand driver for long term rates is a global flight to quality dynamic.
“It’s real. It’s been happening for several years and it has legs. With the recent action with Britain we think it is going to continue.”
Knuth says when short term interest rates rise long term rates fall.
“When we raise short term rates we signal to the world that our economy was stable. That global flight to quality. With Britain’s actions today we think that is going to extend that because of the instability.”
Knuth spoke at the 2016 Iowa Farm Bureau Economic Summit in June.