Inflation and interest rates remain a hot topic of conversation for farmers as they plan for 2024. Some good news on that front was shared at Purdue’s Top Farmer Conference Friday from economist Dr. Jim Bullard, the new dean of the Mitch Daniels School of Business at Purdue.
“I think the main story is that inflation was pretty high, as we all know, but is coming down precipitously, especially in the second half of 2023. And so, it looks pretty good for an ‘immaculate disinflation’. Unemployment is staying low as inflation comes down.”
Bullard says that probably means lower interest rates are on the way for farmers that want to borrow for equipment or other inputs.
Bullard served as president of the St. Louis Federal Reserve Bank prior to his appointment at Purdue. He also brings an insider’s insight into Federal Reserve policy as a former member of the Federal Reserve’s Open Market Committee.
Bullard uses the term “immaculate disinflation”. He explains what that means.
“Many prominent economists said that in order to get inflation down, you would have to have a huge recession. They basically had in mind what happened in the early 1980s. Interest rates went to super high levels, and there was a huge recession, unemployment hit 10.8%. That’s what they had in mind for what you would have to do to get this inflation under control. None of that has happened.”
He says this was avoided because of aggressive action from the Fed in 2022 in increasing interest rates.
The prime interest rate currently sits at 8.5%. Bullard told the crowd he would guess it would be closer to 7.5% a year from now.
“Wall Street has already priced in a lot of this. They like to anticipate things, so you’re already seeing a lower 10-year rate and other rates across the board.”
Hear our conversation with Dr. Bullard below.
