If your business plan involves refinancing a senior housing/healthcare property anytime soon, you’d better get cracking.
To no one’s surprise, Cambridge Realty Capital Companies Chairman Jeffrey A. Davis notes that the Federal Reserve Board’s Open Market Committee (FOMC) voted to increase the federal funds rate to a range of between 0.50 percent and 0.75 percent during its December meeting, and signaled a faster rate of increases in 2017.
During a press conference following the unanimous rate decision, Fed Chair Janet Yellen said Donald Trump’s election prompted some policymakers to shift their view of what’s to come.
“All the FOMC members recognize that there is considerable uncertainty about how economic policies may change and what effect they may have on the economy,” Yellen said.
Partly as a result of changes anticipated under President-elect Trump, the Fed now sees three rate hikes in 2017 instead of the two foreseen in September. But Yellen says this rate hike was also driven by strong job gains and evidence of faster inflation.
“The increase should be understood as a reflection of confidence we have in the progress the economy has made,” she said.
If all goes well, the projected three rate increases next year would be followed by another three increases in both 2018 and 2019 before the rate levels off at a long-run “normal” 3 percent.
Apparently, the central bankers believe the economy is still gaining traction and see unemployment falling to a 4.5 percent next year and remaining at that level, which is considered to be close to full employment.
Mr. Davis says Cambridge is advising clients to be aware of how swiftly things change. The projected rate increases in this timeline could impact a business’ bottom line in a dramatic way.