A Fed hearing on'stranglehold' from high rates.
On Friday, Federal Reserve Chair Jerome Powell and fellow governors heard from business and community leaders how the Fed's interest rate hikes and price and labor market pressures are affecting Americans.
Higher interest rates and commodity price volatility "has a stranglehold on the American agriculturalist right now, which leads to a stranglehold on all of rural America," said Burlington, Colorado's Whitney Ferris-Hansen, who runs J/W Farms and Ranch.
"An increase in rates is always expected and planned for, but the speed at which these increases happened could not be risk-managed; we could not forward contract grain fast enough to hedge these interest rates."
The Fed rapidly hiked interest rates in March 2022 to fight decades-high inflation, keeping its short-term target rate at 5.25%-5.5% since July. Ferris-Hansen and five others talked and answered policymakers' questions at the latest "Fed Listens" session, the latest in a series started before the pandemic to show U.S. central bankers the real-world repercussions of their rate-setting decisions.
At the same table, policymakers kept the benchmark short-term policy rate constant earlier this week. After that meeting, Powell said policymakers intend to decrease rates later this year once inflation is under control. The Friday panel showed that some Americans cannot wait for that moment.
Small and medium-sized manufacturers are struggling with increased borrowing costs, energy and transportation costs, and wages, according to Cara Walton, director at Harbour Results, a consulting service for small manufacturers in Southfield, Michigan. She added others had stopped buying new equipment due to higher borrowing costs and sluggish demand.
"The total cost to invest is very high, and the return on that investment is very long and getting longer," stated. Small manufacturers with youthful CEOs "have never run a business with interest rates like this... it's uncharted territory for us." Other panelists discussed the effects of rising prices even if inflation has moderated due to the Fed's interest-rate hikes.
Svenja Gudell, chief economist at Indeed, highlighted indicators of a cooling labor market compared to the "frenzied" 2021-2022 timeframe, notably in higher-paid areas like technology where job postings had declined the most. Policymakers were interested. She said food service and other low-wage positions with health insurance and time off grew rapidly in 2021 and early 2022, but growth has halted.
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