Pulse Price Report: Federal Reserve Hikes Interest Rates

The Federal Reserve raised interest rates after its policy meeting on Wednesday. It was the first since about a year ago, when the Federal Reserve (Fed) raised interest rates above zero for the first time since the recession of 2008.

A near unanimous prediction of economic analysts on the rate increase comes at the heels of some of the strongest economic growth data in around 10 years. There was a 3.2 percent growth in the economy in the third quarter of 2016, the fastest growth in two years. We have the lowest unemployment rate since 2007. Even the election of Donald Trump has contributed to economic success, with stocks and bonds leaping at record pace.

The Fed typically uses interest rates to encourage economic growth by making it cheap to borrow money, the primary monetary policy employed after the economic crisis of 2008, or to cool down an economy that may be growing too fast, which is the direction it is heading now. If you go to the bank today, your interest rate on a loan will be near the lowest it has ever been and you will be more inclined to borrow money. The Fed will try to balance this incentive by raising interest rates, thus capping the number of people who take out loans that are likely to default.

Any raise in interest rates comes at the heels of a president-elect who has consistently denounced the Fed for artificially holding interest rates down in order to make President Obama look good. In late 2015, the Fed predicted four interest rate hikes this year. This week would be the first and only one of 2016.

Now, the Fed is calling for two more interest rate hikes in 2017 with a long-term goal of 2.6 percent. Historically, the Ronald Reagan era boosted interest rates to record-high levels, near 20 percent, to curb the runaway inflation of around 14 percent during the Jimmy Carter administration. Inflation is currently at 1.6 percent, but that is part of an upward trend during the past two years.

Crop prices (Dec. 12)

Rio Creek Feed Mill – Algoma

Fox River Valley Ethanol – Green Bay

Basis: The difference between the local cash price for a commodity and the Chicago cash price (where the Board of Trade sets national futures price).

Gas Price Averages

United States: $2.21

United States one year ago: $2.02

Wisconsin: $2.11

Wisconsin one year ago: $1.91

Northern Door: $2.17

Sturgeon Bay: $2.13

Other Commodities

Gold: $1,164.00/troy ounce

Silver: $17.16/troy ounce

Oil: $52.47/barrel

Sources: aaa.com, agweb.com, gasbuddy.com, money.cnn.com, Reuters, Wall Street Journal