Fed more likely to raise rates in September: report

Strong jobs report indicates economy is improving

TRD New York /
Jul.July 19, 2016 11:00 AM

The Federal Reserve is warming up to the idea of raising interest rates in September.

The Fed raised its benchmark federal funds rate in December, but delayed further increases amid weaker-than-expected job reports and uncertainty over Britain’s vote to leave the European Union.  It is still unlikely to raise rates in July, but is increasingly likely to do so in its Sept. 20 meeting, the Wall Street Journal reported.

The U.S. economy added 287,000 jobs in June – a higher figure than previously expected, indicating that the economy is gaining strength. And financial markets have recovered from their post-Brexit shock, removing another reason to keep rates low. As a general rule, the Fed seeks to keep interest rates low when the economy is weak to stimulate investment, and raise them when it is strong to prevent runaway inflation.

The Atlanta Federal Reserve Bank’s president Dennis Lockhart last week said that the Brexit vote “does not seem to have caused direct harm to the country’s economy.”

For the real estate industry, the prospect of a rate hike is a mixed bag. On the one hand, it indicates a healthy economy, which means more demand for office space, retail and housing. On the other hand, higher benchmark rates tend to trickle down to higher mortgage rates and bond yields, which raise the cost of financing and put downward pressure on commercial property prices.

But not everyone on the Fed’s board of governors supports a September rate hike. Federal Reserve Governor Daniel Tarullo recently told the Journal he would rather wait for inflation to pick up before raising rates.

“This is not an economy that is hot,” he said. “This is not the late ’70s.” [WSJ] – Konrad Putzier 


Related Articles

arrow_forward_ios
(iStock)

Older Americans increasingly saddled with housing debt

Older Americans increasingly saddled with housing debt
The number of single-family homes on the market hit historic lows in July, driving prices up (iStock)

US housing supply reaches nearly 40-year low

US housing supply reaches nearly 40-year low
The rates for a 30-year fixed-rate mortgage dropped 7 percentage points for the week ending September 10, reaching 2.86 percent. (iStock)

Mortgage rates notch new low

Mortgage rates notch new low
Since the pandemic started, there is a much smaller pool of lenders willing to offer jumbo loans (iStock)

Mumbo jumbo: Why are mortgage rates all over the place?

Mumbo jumbo: Why are mortgage rates all over the place?
Federal Reserve Chairman Jerome Powell (Getty, iStock)

Real estate stocks outperform broader market but still sink

Real estate stocks outperform broader market but still sink
Federal Reserve Chairman Jerome Powell (Photo by Sarah Silbiger/Getty Images)

Fed “not in any hurry” to raise interest rates: Powell

Fed “not in any hurry” to raise interest rates: Powell
From left: Ace Watanasuparp, SVP National Director of Strategic Sales, Citizens Bank; Alan Rosenbaum, CEO/Founder, GuardHill Financial Corp; Mark Favaloro, President, New York Association of Mortgage Brokers

Home lending in the time of corona: “Underwriting is really difficult right now”

Home lending in the time of corona: “Underwriting is really difficult right now”
Coronavirus chaos is driving lenders to safe, stable projects such as 445 West 35th Street (Credit: iStock and Google Maps)

Coronavirus chaos driving lenders to safer projects amid low interest rates

Coronavirus chaos driving lenders to safer projects amid low interest rates
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...