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Economy Watch: No Rate Hike Now, but Possible in December

September 27, 2016

Economy Watch: No Rate Hike Now, but Possible in December

September 22, 2016 | by Dees Stribling | Commercial Property Executive

Despite the decision to keep rates unchanged, the vote wasn’t unanimous, indicating a chance for a rate hike before the end of the year.
Economic projections of Federal Reserve Board members and Federal Reserve Bank presidents under their individual assessments of projected appropriate monetary policy, September 2016
Economic projections of Federal Reserve Board members and Federal Reserve Bank presidents under their individual assessments of projected appropriate monetary policy, September 2016

The Federal Open Market Committee didn’t surprise anyone on Wednesday when it declined to raise the federal funds rate. Thus the cost of money for real estate deals and other purposes isn’t going up quite yet. But the decision wasn’t unanimous: Esther L. George, Loretta J. Mester, and Eric Rosengren (three of the 10 members) each wanted to raise the federal funds rate to 1/2 to 3/4 percent.

Rodney Ramcharan, director of research at the USC Lusk Center for Real Estate, tellsCPE that the Federal Reserve is likely setting the stage for a rate hike by the end of the year. “The dissenting members of the Fed Board are likely concerned about being ahead of the inflation curve as well as financial instability, particularly since prolonged low interest rates might be creating asset pricing bubbles in major markets, such as in the commercial real estate market,” he noted.

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