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Kashkari to Frerichs and SD Farmers: Interest Rates Probably Won’t Rise. Probably.

Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, held a public forum in Pierre this morning. Among the questions he fielded was a question from Senator Jason Frerichs (D-1/Wilmot), who expressed concern that rising interest rates could drive him and his fellow farmers and ranchers, who pay tens of thousands of dollars in interest alone each year, into a crisis just like we saw in the 1980s:

Kashkari could only offer optimism, not promises. He said the bond market is signaling confidence that inflation will stay under control well into the future. If global investors lose confidence due to our growing deficit and decide Europe or China looks stronger, Kashkari says interest rates will rise here because less money is coming into the U.S. Kashkari says we face questions about getting our fiscal house in order, but he doesn’t forecast that happening. Since the U.S. economy looks stronger fundamentally, Kashkari expects a “reasonable interest environment well into the future”

7 Comments

  1. jerry 2018-02-08

    Hope the feller is correct, Dow dropping like an anvil in CAFO muck, 620 points in the red with no sign of correction. Today may even beat the last record drop that just happened a couple of days ago.

  2. jerry 2018-02-08

    Really hope the feller is correct, Dow dropped 1,043 points today.

  3. Bucko Bear 2018-02-08

    Hmmm, let’s see. There was that “tax cut” — huge deficit predicted and already slow-down in revenue collection. Now the deficit busting budget.
    Someone is gonna hafta sell some bonds to pay for it, right. It sure won’t be a seller’s market when it comes to interest rates. Hell yes interest rates are going to go up!

  4. Cory Allen Heidelberger Post author | 2018-02-08

    I’d ask if the drop in the U.S. indices this week corresponds to the kind of withdrawal of foreign investment of which Kashkari warns, but markets worldwide are having a bad week… and I suspect Kashkari would warn that one week’s market track does not make a trend that should guide investment or policy decisions.

  5. jerry 2018-02-08

    “The banks are broke, and each day their capital requirements skyrocket, but there’s no place to raise capital,” says Sean Egan, managing director of ratings agency Egan-Jones.” http://abcnews.go.com/Business/story?id=6660268

    The only place to raise capital is from taxpayers…kind of reminds back to the early days of the Obama administration. At least then, I had confidence in the treasury. With Ms. Yellen gone, there is a huge gray area with Mr. Powell.

  6. jerry 2018-02-08

    Today 2/8/18 “Deficit financed tax cuts and spending increases in a full-employment economy will result in more Fed tightening and higher interest rates.”https://www.bloomberg.com/news/articles/2018-02-08/trump-s-soaring-budget-deficit-risks-intensifying-market-frenzy

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