Cape Girardeau bankers weigh in on Fed move to slow inflation

Leaders in Cape Girardeau's banking community gave their thoughts Wednesday as the Federal Reserve Board — as predicted — raised interest rates by three- quarters of a percentage point (75 basis points) in its latest effort to tamp down inflation.

The move is effectively the largest rate hike in 28 years and its impact will be felt by millions of U.S. businesses and individuals who will now be paying more for mortgages and vehicles, in addition to many other consumer items purchased on credit.

The increase follows Friday's inflation report showing prices are sweeping over virtually the entire American economy.

"We are strongly committed to bringing inflation back down and we're moving expeditiously to do so. We have both the tools we need and the resolve it will take to restore price stability on behalf of American families and businesses," said Federal Reserve Chairman Jerome Powell during a statement.

"Clearly, today's 75 basis point increase is an unusually large one and I do not expect moves of this size to be common," Powell added.

Local reaction

Clint Karnes

• Clint Karnes, Wood & Huston Bank community bank president, lamented the scale of the rate hike.

"I actually think it's too harsh. A slower measured change has less of an impact on the overall economy. The Fed and the markets always do a 'dance' when it comes to raising rates. Given the recent sell-off in the markets, it appears they're not synched up to the same music. By their own admission, the Fed was slow in starting this process," Karnes said.

Jay Knudtson

• Jay Knudtson, First Missouri State Bank executive vice president, thinks the Federal Reserve Bank's efforts have been too modest in curtailing inflation.

"Given the current state of the economy with record inflation levels, it's pretty apparent that the Fed increases should have been greater and begun earlier. Today our economy is reeling with uncertainty as a result of world events that are out of our control but also as a result of some domestic decisions that are within our control. Unfortunately, our economy has been so artificially 'juiced' with government stimulus over the past few years that we are all feeling those repercussions today," Knudtson opined.

Aaron Panton

• Aaron Panton, The Bank of Missouri regional bank president, echoed Knudtson's views.

"Rates have to go higher. It's likely we see continued increases through the end of 2022 in an effort to get to a Fed neutral rate," Panton said, adding the Federal Reserve has "only two tools to leverage" to fight inflation: balance sheet management and Fed funds rates.

Wade Bartels

• Wade "Pee Wee" Bartels, Alliance Bank president and CEO, expressed concerns about where the series of Fed hikes may lead.

"The Fed does not have many tools to fight inflation, so raising rates makes sense to get prices back down," Bartels said.

"The bigger issue is whether the Fed is going to get too aggressive and raise rates too quickly. It takes months to really see the impact of rate increases, so they may unknowingly cause a recession with these very aggressive rate increases," he added.