The Real Deal New York

Fed minutes hint at rate hike, note tighter CRE lending market

Officials split over when to raise rates

November 23, 2016 03:50PM
By Konrad Putzier

Janet Yellen

Janet Yellen

An interest rate hike in the near future remains on the table, minutes from the Federal Reserve governing body’s Nov. 1 meeting show.

“Most participants expressed a view that it could well become appropriate to raise the target range for the federal funds rate relatively soon” provided economic data remains encouraging, the minutes read.

The central bank is widely expected to raise the federal funds rate — a target interest rate on overnight loans between banks that is used as a benchmark for most other rates – at its next meeting in December. The election victory of Donald Trump TRData LogoTINY on November 8 has sent interest rates on low-risk bonds soaring, as investors increasingly predict an uptick in inflation and interest rates throughout the economy.

However, some Fed officials said rates shouldn’t be raised before economic conditions improve.

Meanwhile, the Fed staff’s review of the U.S. financial situation noted that the commercial real estate lending “showed some signs of tightening.” Although overall loan volume grew, banks told the Fed in an October survey that they “had tightened lending standards on CRE loans.”

“Issuance of commercial mortgage-backed securities (CMBS) picked up in the third quarter relative to its pace in the first half of the year,” the minutes read. “Spreads on CMBS were little changed over the intermeeting period.”

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