Impact of Rising Interest Rates on Agricultural Loans

The Federal Reserve Bank, known as the Fed, has opted for several rate hikes over the past year to combat rising inflation. Inflation can be caused by various factors. However, it is generally the result of too much demand and insufficient supply, leading to high prices. Many Americans received excess funding during the pandemic, and with supply chain disruptions, items were in high demand and unavailable, and the cost of these items increased.

Raising interest rates is one option the Fed is pursuing to keep inflation in check, reducing the economy’s money supply. In general, the money supply is the total amount of money in circulation throughout the economy. The Federal Reserve can control the money supply through quantitative easing, a Treasury-backed process of buying and selling assets. During the pandemic, the Fed chose to buy assets so banks could lend to individuals and businesses. The Federal Reserve is now trying to sell these assets, reduce the money supply and keep inflation under control.

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