Big news from the Federal Reserve Board’s recent Jackson Hole economic summit is that before the current year is over, there’s still a chance the central bank will resume a policy of tightening that began last December. Or maybe not.
At the annual Wyoming economic confab, Chair Janet Yellen said the Fed’s Open Market Committee continues to anticipate that gradual increases in the federal funds rate will be appropriate over time to achieve and sustain employment and inflation near our statutory objectives.
“Indeed, in light of the continued solid performance of the labor market and the Fed’s outlook for economic activity and inflation, the possibility for an increase in the federal funds rate has strengthened over time,” she said in prepared remarks.
The Fed Chair’s comments caused bond yields to move quickly higher while stocks gave back some recent gains. But for those in the business of advising senior housing/healthcare borrowers on trends impacting funding costs, the picture remains as murky as before, says Cambridge Realty Capital Companies Chairman Jeffrey A. Davis.
Cambridge is one of the nation’s leading senior housing/healthcare lenders, with more than $5 billion in closed transactions. The company consistently is ranked among the top FHA-approved HUD lenders in the country.
Mr. Davis notes that the Fed approved a quarter-point rate hike last December in its first move in nine years. At the time, the central bank indicated that four more hikes were on the way for 2016, but nothing yet.
A shaky economy, low inflation and turmoil abroad have kept the Fed from continuing its rate normalization efforts. Mr. Davis says most experts anticipate a coin-flip chance of an increase at any time this year.
Chairman Yellen reports the job market is nearing full employment and inflation is ticking towards the Fed’s 2 percent goal “despite downward pressure from the transitory effects of earlier declines in energy and import prices.”
However, on the downside, the Fed Chairman said she continues to worry about low business investment and declining productivity. These structural economic problems could require monetary policies to remain highly accommodative for no one knows how long.
“If it’s not one thing, it’s another,” Mr. Davis said.