The Federal Reserve (Fed) is wrapping up its April meeting today and will release a post-meeting statement after it has concluded its deliberations. Senior housing analysts and economists are anxiously awaiting this statement to see what decisions the Fed makes with respect to interest rates and its quantitative easing program. While analysts aren’t expecting any surprises from the statement, they are still looking forward to seeing how it lines up against their own projections.
After the Fed’s last meeting in March, its members announced that they would continue to taper the Fed’s quantitative easing program by an additional $10 billion a month and that instead of using a single metric like the unemployment rate to determine when to raise interest rates, it will instead use a range of data points; such as the number of long-term unemployed, wage growth, the inflation rate, and economic growth. This update in guidance was perhaps the most important piece of information that came out of the March meeting as it gave analysts additional information that they could use in their own projections.
After this month’s meeting, analysts expect the Fed to announce another $10 billion drawdown of its quantitative easing program. This would reduce the Fed’s monthly purchase amount to $45 billion, which is significantly less than the $85 billion in monthly bonds it was purchasing at the end of last year. Analysts also expect the Fed to draw more conclusions from the impact that severe weather had on the economy in the first quarter. The Fed’s April Beige Book made numerous mentions of the impact weather had on its 12 districts and analysts expect the Fed to reiterate that today. Outside of these areas, analysts are not expecting any bold pronouncements from the Fed. Recent economic data indicates that although the economy was adversely affected by the harsh winter, it continues to grow at a slow but steady pace and inflation is still running below the Fed’s 2% target. With low inflation and the absence of any material economic shocks since its last meeting, the expectation is that the Fed will refrain from making any changes to interest rates this month and will stick to its current timetable for raising rates, which most analysts believe will happen sometime during the middle of next year.
In addition to the Federal Reserve’s April meeting this week, there was also action in Congress taking place that will affect the Fed and future monetary policy. Specifically, President Obama’s three nominees to join the Fed cleared a key hurdle on Tuesday when the Senate Banking Committee voted unanimously to approve the nominations of Stanley Fischer, Lael Brainard, and Jay Powell to the Fed. The next step is for the full Senate to vote on them and most observers believe that all three will be confirmed. However, speed is of the essence here because there are currently only four members on the Fed’s seven seat board of governors and next month Jeremy Stein will be leaving. This means that if President Obama’s three nominees aren’t approved by the end of May, the Fed will have only three members on its board for the first time since 1936. While this won’t cripple the Fed, it will deprive it of valuable input and additional voices in its deliberations.
For now though, if as expected the Fed does not raise interest rates, senior living providers and others who are interested in taking advantage of today’s low interest rate environment should contact the successful financing firm Cambridge Realty Capital to learn more about the many different financing options if offers.