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Latest Fed rate hike could increase borrowing costs for farmers ahead of harvest

An ag economist says the latest increase in interest rates could put added financial pressure on farmers ahead of harvest.

David Widmar with Agricultural Economic Insights says many producers are already struggling to stay afloat. 

“Inflation has a big impact on the broader economy,” he says. “It’s just being stubborn. We thought we had inflation under control about a year ago, but over the last six months we got a reality check. Inflation is actually headed in the wrong direction and it’s actually going up.”

The Federal Reserve raised interest rates by a quarter of a percentage point Wednesday, lifting the range to 3.75 percent to 4 percent for the first time since 2023.

He tells Brownfield farmers could continue to face additional financial pressure heading into 2027.

“The Fed has changed its positioning and is signaling another interest rate increase by 25 basis points this year,” he says. “There’s the potential for another one in 2027. It looks like this is just one of many increases that we could see.”

The U.S. inflation rate currently sits at 3.4 percent, compared to 2.7 percent this time last year, and 0.12 percentage points higher than the long-term average.

AUDIO: David Widmar, AEI