Fed signals low rates are here to stay

Strategy allows inflation to rise, which could bolster commercial real estate asset prices

National /
Aug.August 28, 2020 10:45 AM
Federal Reserve Board chairman Jerome Powell (Photos by Samuel Corum/Getty Images; iStock)

Federal Reserve Board chairman Jerome Powell (Photos by Samuel Corum/Getty Images; iStock)

The Federal Reserve has shifted its strategy for setting interest rates, allowing inflation to rise higher than previous targets.

The change codifies what the Federal Reserve has been practicing for the past 18 months, and signals that interest rates will remain low, the Wall Street Journal reported. As the Federal Reserve allows inflation to rise above 2 percent, the target set in 2012, the move could bolster commercial real estate asset prices.

Lower rates can make buying a house more affordable, at least initially. But while the lower cost of borrowing encourages more buyers, increased competition can drive up housing prices.

With the onset of the coronavirus, the Fed acted swiftly to provide liquidity to financial markets. But in a conference broadcast on Thursday, Fed Chairman Jerome Powell said the crisis demanded more action from lawmakers, who have the power to raise taxes, pass regulations and increase spending.

The response “needs to be an all-of-government, all-of-society kind of thing,” Powell said. “We really need it to be broader than just the Fed.” [WSJ] — Georgia Kromrei


Related Articles

arrow_forward_ios
Cineworld Group CEO Mooky Greidinger and Regal Cinema (Photo via Getty; Wikipedia)

Regal Cinemas scores financial rescue package

Regal Cinemas scores financial rescue package
(iStock)

What doom-and-gloom forecasts miss about the office market

What doom-and-gloom forecasts miss about the office market
Union Square Hospitality Group CEO Danny Meyer and the Union Square Cafe (Photos via Getty; Wikipedia Commons)

Danny Meyer’s Union Square Hospitality halts indoor, outdoor dining

Danny Meyer’s Union Square Hospitality halts indoor, outdoor dining
A recent study that found 1 in 10 Black homeowners returned to renting between 1984 and 2017 (iStock)

Black homeowners twice as likely to lose homes and return to renting: Report

Black homeowners twice as likely to lose homes and return to renting: Report
(iStock)

Ski resorts gear up for tough season in the shadow of pandemic

Ski resorts gear up for tough season in the shadow of pandemic
Palermo, Italy (iStock)

For some employees, WFH now includes a view of the Mediterranean

For some employees, WFH now includes a view of the Mediterranean
(Simone Golob/Getty)

Workers in prime earning years are struggling to pay rent: Survey

Workers in prime earning years are struggling to pay rent: Survey
Mayor Bill de Blasio and Governor Andrew Cuomo (Getty)

Real estate braces for new restrictions as virus cases surge

Real estate braces for new restrictions as virus cases surge
arrow_forward_ios

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

Loading...