Fed hints interest rate hike is coming in March, Cape Girardeau banker comments

Federal Reserve System Chairman Jerome Powell said last week high inflation has become a serious threat to the Fed's goal to help put more Americans back to work, hinting a hike in its key interest rate is coming in March.

Jay B. Knudtson

The increase would be the first in more than three years and is sure to kick off a series of three or more quarter-point increases in 2022 aimed at arresting sharply rising consumer prices.

James P. Limbaugh

Speculation about the coming rate jump, analysts say, is a prime reason for the stock market's sharp sell-off this month.

Jay B. Knudtson, executive vice president and chief banking officer of First Missouri State Bank and former Cape Girardeau mayor, said Thursday, "It is time our depositors begin to earn a higher rate of interest on their hard-earned money and the only way for that to occur is for Fed rates to begin to inch up."

"The Fed has been saber-rattling for six months and the impetus for this is the huge spike in inflation and, economically, this action is designed to slow things down," said James P. Limbaugh, Montgomery Bank executive vice president and Cape Girardeau and Sikeston regional president, who also serves on the Southeast Missouri State University Board of Governors.

Limbaugh also notes an overall concern about the world situation impacting the business community.

"There remains a huge supply-chain issue coupled with worries about the Ukraine and also how (the U.S.) will handle China's manufacturing capabilities."

Knudtson added he is studying the analytics to gain an insight into the current economy.

"I'm not sure if it's necessarily reflective of a robust economy or an artificially ballooned economy driven by government surplus," he said. "Either way, it does appear there is a tremendous amount of cash in the economy."

The federal Bureau of Economic Analysis of the Commerce Department reported the gross domestic product, the broadest measure of U.S. economic activity, expanded 5.7% last year, the fastest pace since 1984 during the Reagan administration.

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