Fed to start selling bonds, keeps interest rates steady

12 out of 16 officials expect another rate hike this year

TRD New York /
Sep.September 20, 2017 03:00 PM

Janet Yellen (Credit: Getty Images)

The Federal Reserve said Wednesday it will start shrinking its bond portfolio in October following a unanimous vote, but low interest rates could still be here to stay.

The Fed acquired the bonds in the wake of the 2008 financial crisis under a policy of so-called quantitative easing, which was designed to keep financing cheap and instill confidence in financial markets. The decision to start selling was widely expected.

Meanwhile, 12 out of 16 Fed officials said they expect one more raise in short-term interest rates this year, the Wall Street Journal reported. The Federal Funds Rate, a benchmark rate for overnight bank loans, had been close to zero for years but had risen to 1.0 to 1.25 percent in June.

The median official projection of the long-run rate was 2.75 percent, down from 3 percent in June, as low inflation makes further rate hikes less likely.

“It’s premature to conclude that the underlying inflation trend is falling well short of 2%,” Fed chair Janet Yellen said in June. “Policy is not something that’s set in stone, and if our evaluation changes with respect to inflation, that will make a difference.”

The Fed’s interest rate policy can have an impact on mortgage rates and cap rates, and by extension property prices. [WSJ] Konrad Putzier

Related Articles

With a cooling trade war, stocks perform well, including real estate. (Credit: iStock)

Real estate stocks push up this week as U.S.-China trade tensions ease

416 West 25th Street and Maverick Real Estate Partners principal David Aviram (Credit: Google Maps and LinkedIn)

Chelsea landlord claims “predatory” lender is charging a crippling interest rate as punishment after losing foreclosure case

From left: Bruce Molser, David Schechtman, Bob Knakal, David Greenbaum, and Judi Pulice

New York’s real estate bigwigs offer predictions for 2020

Refinancings spur mortgages to record high

The mortgage industry is booming

Renderings of 130-02 South Conduit Avenue and Triangle Equities’ Joshua Weingarten (Credit: Terminal Logistics)

Triangle Equities lands $87M loan for massive JFK warehouse project

Mayor Bill de Blasio and subway damage caused by Hurricane Sandy (Credit: Getty Images)

Program to rebuild Sandy-damaged homes needs extra $92M

From left: 172 Madison Avenue, 100 East 53rd Street, Woolworth Tower, 53 West 53rd Street, 615 10th Avenue

Loan wolves: Bankers are stalking developers as debts come due

State Sen. Julia Salazar and Assembly member Harvey Epstein proposed the tax this month in an effort to disincentivize real estate speculation (Credit: iStock, Getty Images)

Experts take issue with proposed tax on mezzanine loans