The Real Deal New York

Fed expected to keep interest rates unchanged

Real estate industry will watch for central bank's economic evaluation

January 27, 2016 10:30AM

Janet Yellen

Janet Yellen

In a move that will likely put a smile on the face of real estate players, the Federal Reserve is expected to announce Wednesday that it’s keeping interest rates unchanged.

The Fed is slated to deliver a policy statement at 2 p.m. today, and with the market taking a tumble in the new year, all eyes will be on what pace the central bank will set.

If the Fed decides to move more apprehensively than expected on interest rates, it could be yet another indication that economic momentum is slowing down.

The announcement will be watched closely after the Fed opted to raise short-term interest rates in December by 25 basis points, a move many in the real estate industry had long expected. But market turmoil this year has led some to question whether the hike was the right move.

If the central bank maintains its December outlook with another increase on rates, it may put downward pressure on stocks that have had a rough start to the new year, according to the Wall Street Journal. But if the Fed suggests its pace of tightening will be slower than it expected, it could be a sign that the economy is not doing as well as previously thought.

In December, the central bank forecasted it would raise interest rates by about one percent a year over the next three year — reaching 3.3 percent by 2019, the New York Times then reported. As mortgage rates tend to rise with the benchmark rate, this is an important issue for real estate.

Some in the market believe the one percentage point target this year will not be met, and, instead, the Fed will only raise rates another 25 basis points this year, according to CME Group data.

The Journal reported the Fed may strike a cautious tone with China’s economy slowing further and inflation still muted in the U.S. In September last year, the central bank did just that, maintaining interest rates near zero. [WSJ]Dusica Sue Malesevic

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