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Answers to 4 questions on interest rate hikes

Russian-Ukraine war could lessen prime rate hikes, but they will still likely happen sooner than later.

Ashley Arrington, Director of real estate lending

March 14, 2022

2 Min Read
man placing percentage block on stack
Getty/iStockphoto/Dilok Klaisataporn

There are a lot of questions surrounding interest rates right now, specifically the prime rate. I am here to answer those questions, but remember, no one knows for sure exactly what the Fed will do as it relates to prime rates.

Is prime going up soon?

Define soon. Had you asked me this question before Putin attacked Ukraine I would have said at the next Fed meeting! Now I am unsure if the rate hike will happen at this upcoming fed meeting or if the Fed will postpone until the next. Based on this economic climate, rate hikes are on the horizon, but with the global impacts being created by the Russian invasion, I can’t accurately measure how far away the horizon is.

How much will prime go up?

Go up at the first hike? Go up all year? Let me just answer both. If there is a rate hike announced at this upcoming meeting, I would think it would be 25 basis points. Before Russia attacked Ukraine, I would have said 50 basis points. For the year (once again before Russia/Ukraine) the most popular guesstimate was 200-250 basis points. Now I would think it will be closer to 100-200 basis points.

What can I do? I feel like I should do something.

You can’t stop the rate hikes from happening, but you can prepare. Is your crop operating line on a variable rate tied to prime? If so, can you get it on a fixed rate? An additional 200 basis points could be a big added expense. Do you have a real estate loan about to mature in the next 12-24 months? If so, go ahead and take a look at getting it refinanced or renewed NOW!

Related:Why interest rates are all over the map

How can I stay in the know as it relates to rates? What should I watch?

As I have already mentioned, how Russia and Ukraine shake out will play a part in rates. You can also watch bonds to see how they behave; long-term fixed rates are tied to bonds so that will tell you about that market.

We are currently seeing strong rises in this market already ahead of any hike in prime.

The opinions of the author are not necessarily those of Farm Futures or Farm Progress. 

About the Author(s)

Ashley Arrington

Director of real estate lending, Ag Resource Management

Ashley Arrington grew up in Georgia surrounded by everything agriculture. She graduated with a Bachelor’s degree in Finance, then obtained her Masters of Business Administration degree. She worked in the banking industry for 14-plus years where she concentrated exclusively on agricultural banking, financial analysis and debt analysis/placement. She was the founder of AgriAuthority, a consulting company focused on the financial side of agriculture. Now, Ashley is the Director of Real Estate Lending for Ag Resource Management. She also teaches banking and financial concepts and works as a public speaker with appearances at various seminars and conferences. NextGen Business Insight aims to offer valuable business insights for young farmers.

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