With the Federal Reserve on pace to eliminate its quantitative easing program by the end of the year, economists are increasingly turning their attention to the federal funds rate and debating when the central bank will begin raising it from its current near zero level. Encouraged by the latest jobs report showing that the economy created 288,000 jobs in June and that the unemployment rate fell from 6.3% to 6.1%, many economists have begun to change their views on when this rate will increase. Before the Fed raises rates and increases the cost of borrowing for businesses and investors, senior housing participants who are interested in obtaining inexpensive capital should continue to look to the Chicago-based financing firm Cambridge Realty Capital for their financing needs.
Hints from the Fed
Before the Fed changed its guidance on interest rates a few months ago, it had hinted that it would begin raising interest rates once the unemployment rate fell to 6.5%. Then, as the unemployment rate began to inch towards this figure, it updated its guidance to make it clear that this would not be happening and that interest rate increases would be predicated on a number of different data points, not just the unemployment rate. Since then, the Federal Reserve has continued tapering its quantitative easing program and Fed Chairman Janet Yellen has repeatedly said that the Fed will keep the fed funds rate at its current near zero level for a “considerable time” after the program is eliminated. With the program scheduled to end later this year and the unemployment rate having already fallen below the Fed’s earlier threshold rate of 6.5%, economists are now left to wonder what Ms. Yellen considers to be a “considerable time,” and when exactly the Fed will raise interest rates.
Before June’s jobs data was released, most economists believed that the Fed would raise interest rates in mid-2015. However, after the jobs report came out, a slew of comments from numerous economists shows that many of them think the Fed will now raise rates before then. For example, Roberto Perli, a partner at Cornerstone Macro LP said that “If the recent trend in the labor markets continues, the next FOMC interest-rate projections should be even higher. With inflation approaching the 2% target and the unemployment rate continuing to decline, the odds that the Fed will lift rates off of zero sooner than the market expects are increasing.” This sentiment was echoed by Stephen Stanley, the chief economist at Pierpont Securities LLC who said that “So far, the doves at the Fed have continued to preach a very slow path to normalization. This approach should now be considered under fire.” Mr. Stanley has moved his projection for a rate increase from the Fed up from September 2015 to June 2015. Lastly, Chris Rupkey, the chief financial economist for the Bank of Tokyo-Mitsubishi UFJ has said that the “The stellar jobs report hits the Fed right between the eyes on how good labor-market conditions out there truly are. It shows how far behind the curve they are.” Similar to Mr. Stanley, Mr. Rupkey has also moved his timetable for a rate increase up from June 2015 to March 2015.
Contact Cambridge Realty Capital Today
The number of economists that have changed their views on the timing of interest rate increases because of June’s jobs report reveals the impact of the report and indicates that the solid job gains created by the economy last month could increase the pressure on the Federal Reserve to raise interest rates sooner than it had originally anticipated. The Federal Reserve’s next meeting will take place later this month from July 29 – 30 and we will have a clearer understanding of its view of the jobs report and its impact on monetary policy after that. In the meantime, senior housing providers and others who are interested in obtaining inexpensive capital for growth, acquisitions, or other purposes should contact Cambridge Realty Capital to take advantage of the many different financing programs that it offers before rates increase.