Pulse Price Report: Jobs Report Encourages Interest Rate Hikes

The Federal Reserve (Fed) is again considering the hike of short-term interest rates following a strong jobs report from the Labor Department, stating that 287,000 jobs had been added in June, the most in eight months.

In December of last year, the Fed decided to raise short-term interest rates for the first time in nearly 10 years. The decision came after several years of economic strength in the United States following the financial fallout in 2008.

Raising interest rates is an indication that the Fed is confident in the strength of the economy. It encourages people to put more money into savings accounts where they can have greater returns instead of spending it on consumer products. The idea that higher interest rates reflect a strong economy also pushes more investors into the stock market and away from safe havens such as gold and government bonds.

The Fed has considered raising interest rates all year, but predicted turmoil leading into the Brexit vote and the presidential election year has kept them cautious.

Federal Reserve Bank of Kansas City President Esther George is among the biggest advocates for an interest rate hike, using the most recent jobs report as her newest bullet.

“The economy is at or near full employment,” said George in a speech in Lake Ozark, Missouri. “And yet short-term interest rates remain at historic lows. Keeping rates too low can also create risks.”

Although things seem to be looking good, the Fed has its reasons for holding back. In May, the month before the strong jobs report, the country added only 11,000 jobs, the lowest since 2010. Everything that comes along with the presidential election, from party conventions to primaries can also have a volatile impact on the market. The Fed doesn’t like volatility. They want to have a good grip on the economic outlook when they make their move on interest rates.

Crop prices (July 13)

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: $2.22

United States one year ago: $2.77

Wisconsin: $2.28

Wisconsin one year ago: $2.75

Northern Door: $2.40

Sturgeon Bay: $2.46

Other Commodities

Gold: $1,342.10/troy ounce

Silver: $20.40/troy ounce

Oil: $46.30/barrel

Sources: aaa.com, agweb.com, gasbuddy.com, cnn.money, Bloomberg News