The Wall Street Journal reported that during Fed officials’ meeting last month, they all but abandoned the question of whether to cut interest rates and have begun to seriously weigh whether to raise rates. 

During Ag Equipment Intelligence’s Executive Summit, Cleveland Research analyst Chris Johnson touched on the impact of interest rates in his economic outlook. 

"And so questions, do we see this oil price spike come through? As we see it, yeah, it will right now with our base assumptions, we will see some pressures for the next 12 months, but we do see it as transitory that in back half of 27 we start to see that inflation come down, but whether it's PCE pricing, core PCE, which excludes the impact of automotives and some other categories, or even inflation CPI at that side, you begin to see this shock that limits the Fed's toolkit for the next 12 to 18 months. And so when we look at pushing out the rate cut, we had come into the year hoping for 3-4 cuts, 4 cuts at the high end, 2 at the conservative end and we had seen a couple rate cuts, correct? Like this is the federal funds rate, this is what the Fed manages and the Fed has two mandates."

"They want full employment and they want inflation. We're stuck in this category of neither fish nor foul here. And so what we see is the federal funds rate probably in our view going to have to stay here. I don't see rate increases yet in our view, but I don't see it coming down further to a place that spurs some categories. And a really quick point on that. With the Fed funds rate right now at 3.6 roughly, you get the 30 year rate of mortgages at 6.3. What's interesting is in our work, what spurs and unlocks this residential market that's been frozen is an interest rate around five. You need the 30 year rate around five for the American consumer to start spending again. Obviously it's not as relevant to the ag machinery market, but I think it's an interesting conversation point when you start to think about the broader macroeconomy optimism about the market."

"So as we kind of freeze here and we don't see any more interest rate cuts, that's a problem."

Watch the full version of this episode of On The Record