NC State Ag Economist Dr. Mike Walden – “The Unexpected Drop in Interest Rates”


Mary:    I’m Mary Walden with economist MW welcoming you to the economic perspective.  Today’s program looks at the unexpected drop in interest rates.  Mike, interest rates took a big jump at the end of 2017 and the beginning of 2017.  For example, 30 year mortgage rates rose a full percentage point between November 2016 and March 2017.  But recently those same rates have slid by one-third percentage point.  What happened?

Mike:  Summary Answer

  1. For long-term interest rates, especially, expectations about the economy are an important factor
  2. After Donald Trump was elected President, the financial markets expected pro-growth economic policies would be enacted
  3. Would create more jobs and faster growth, but also would generate higher inflation and more borrowing
  4. Inflation and borrowing tend to send interest rates up
  5. But, the pro-growth policies have yet to be enacted, and there are big questions about whether they can be
  6. So markets have revised their views on more inflation and borrowing – and result is some give-back of those higher rates
  7. But, expectations can change again!!
  8. I’m MW


Mary:  And I’m Mary Walden for the North Carolina Cooperative Extension Service.