Local bankers react to Fed's latest interest rate move

Federal Reserve Board Chairman Jerome Powell's announcement Feb. 1 of a quarter point — or 25 basis point — increase in the key federal funds rate is eliciting reaction from three local bank executives contacted by the Southeast Missourian.

The most recent Fed move, its eighth in less than a year, has pushed the benchmark interest rate to its highest level since 2007 after having been at near 0% as recently as March.

The Fed's continued tinkering with interest rates, according to Powell's most recent remarks, are aimed at crushing the nation's stubbornly high inflation level, which is running close to its highest pace since the Reagan years of the 1980s.

Jay Knudtson, First Missouri State Bank

Jay Knudtson, First Missouri State Bank

Jay Knudtson of First Missouri State Bank called the Fed's actions "baffling."

"Consumers right here in Southeast Missouri are going to be dealt a huge borrowing blow as consumer loans approach 10% and coveted home equity loans, which so many folks have traditionally used, will now go north of 7.75% — and this will have an immediate impact," said Knudtson, FMSB's executive vice president.

Wade Bartels, Alliance Bank

Wade Bartels, Alliance Bank

"Inflation seems to be tempering somewhat and I'm sure that's due to the significant rate increases we've seen in the past year. From that perspective, I think the rate hikes are positive," opined Wade Bartels, Alliance Bank president and CEO.

"Our customers who are savers are also seeing a positive impact. Although I think rates were too low for too long, the rate at which the Fed is playing catchup could be detrimental to the economy both locally and nationally. I'm most concerned about the pace of the increases and the negative impacts these have on our customers who borrow," he added.

Phil Moore, Banterra Bank

Phil Moore, Banterra Bank

"The Federal Reserve Bank needs to raise or at least hold until we have more conclusive findings on inflation," said Banterra Bank's Phil Moore, market executive, SEMO Region. "I don't know if sufficient time has passed to be able to determine exactly how much [the Fed] has done to lower the inflation rate."

Knudtson appears to echo Moore's concerns.

"The real scary part is the Fed is making it clear it's not done with these rate increases and I say enough is enough already. Let the banks, the market and perhaps more importantly, the hard-working consumers, catch their breath and settle in for awhile," said Knudtson.

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In other economic news, the U.S. Bureau of Labor Statistics reported Friday, Feb. 3, the nation's unemployment rate had fallen to 3.4%, the lowest since May 1969. Non-farm payrolls swelled by 517,000 jobs in January, crushing Dow Jones' forecast estimate of 187,000.

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