Interest rate surges in Europe merit close watch by bakers
Dec. 13, 2011
With a new year just around the corner, baking appears to be on the verge of entering an era of major change in the midst of extraordinary economic uncertainty, not just in the United States but worldwide. Urgent, even desperate steps, that are being considered by Western European nations to shore up the euro may seem far removed from bread routes spanning the United States, but what is happening across the Atlantic merits close watching here for many reasons.
One, in particular, is the susceptibility of interest rates to sudden and sharp upward moves in major developed countries. Economic circumstances in the United States are quite different from Europe’s, but the inability to self-impose fiscal discipline is a powerful and worrying commonality.
The Federal Reserve has effectively kept a lid on U.S interest rates and has stated its intention to keep rates low in the year ahead. It seems likely, though, that whether because of stronger economic growth, diminished investor confidence, or inflation rates will move toward historical averages at some point — if not imminently, then in 2013.
Bakers delaying needed capital improvements in an industry becoming ever more competitive may look back on the current period of extremely low rates as a great missed opportunity.