Fed expects to raise interest rates more aggressively in 2017

Central bank projects federal funds rate to hit 1.4% next year

TRD New York /
Dec.December 14, 2016 03:31 PM

The Federal Reserve on Wednesday raised interest rates for the first time in 2016 and also indicated it will raise short-term interest rates more aggressively in 2017 than initially planned.

It now expects the federal funds rate, a short-term benchmark rate for overnight interbank loans, to rise to 1.4 percent next year, up from a September estimate of 1.1 percent. With Wednesday’s hike, the central bank expects that rate will likely end this year at 0.6 percent, CNBC reported.

The hike, only the second one since the central bank cut borrowing cuts to almost zero in 2008, was widely expected by forecasters. Federal Reserve officials project three quarter-point rate increases in 2017 and three quarter-point rate increase in 2018, according to Bloomberg.

The central bank said in a statement that a quicker move to trim rates was warranted given that inflation had moved closer to the 2 percent target and that unemployment had fallen to a nine-year low in November. President-elect Donald Trump’s economic plan to greatly increase infrastructure spending and offer large tax-cuts creates some uncertainty for the central bank.

Higher short-term interest rates typically spill over into higher long-term rates, which raises the cost of real estate financing and pushes cap rates up, putting downward pressure on real estate prices. [CNBC, Bloomberg]Konrad Putzier


Related Articles

arrow_forward_ios
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”
Federal Reserve Board Chairman Jerome Powell (Photo by Win McNamee/Getty Images)

Fed to mall and hotel owners: Drop dead

Fed to mall and hotel owners: Drop dead
US Federal Reserve Chairman Jerome Powell (Credit: ERIC BARADAT/AFP via Getty Images)

Fed plans major commercial mortgage buyback

Fed plans major commercial mortgage buyback
Jerome Powell and New York City construction in October 2019 (Credit: Getty Images)

Fed cuts interest rate to near-zero, moves to prop up mortgage market

Fed cuts interest rate to near-zero, moves to prop up mortgage market
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
Jerome Powell (Credit: Chip Somodevilla/Getty Images and iStock)

Fed cuts interest rate amid coronavirus fears; hotel stocks sink

Fed cuts interest rate amid coronavirus fears; hotel stocks sink
Some investors continue to find U.S. commercial real estate as attractive places to park their capital (Credit: iStock)

Brexits and Bubbles: How investors view Europe’s shaky real estate market

Brexits and Bubbles: How investors view Europe’s shaky real estate market
arrow_forward_ios

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

Loading...