Not everyone is down in the mouth about the Federal Reserve Board’s decision to once again start incrementally raising interest rates, a Bankrate Economic survey of many of the nation’s leading economists suggests.
Some describe “unintended benefits” that could prove advantageous to many business owners, including the owners and operators of senior housing/healthcare properties, says Cambridge Realty Capital Companies Chairman Jeffrey A. Davis.
Cambridge is one of the nation’s leading senior housing/healthcare borrowers, with more than 4.5billion in closed transactions. The company has closed more than 400 transactions since making a management decision to specialize in senior housing/healthcare financing 20 years ago.
Mr. Davis says rising rates obviously benefit those seniors who rely on interest income to help cover living expenses. Since the Great Recession of 2008, the average 1- and 5-year certificates of deposit have paid less than 1 percent.
Despite concerns, economists point out that inflation has been a no-show in the current cycle. So far, the Fed has in fact been falling short of its goal to keep inflation at 2 percent.
“Economist point out that the good news in all this might include lower prices for imported goods due to a likely higher exchange rate for the dollar. Also, when rates rise, banks have an incentive to loan out reserves at the higher rates.” he said.
Mr. Davis says it’s possible for the dollar to strengthen further as the Fed continues to slowly raise rates. “The dollar has been flexing its muscles recently against the euro, which gives traveling Americans more buying power.
“Some suspect that as the Fed works to achieve its goal of normalization, stock prices might start to make more sense. A normalization of interest rates would turn the focus to market fundamentals and away from the nuances of each Fed statement,” he said.
Mr. Davis notes that the housing market has been slowly recovering after serving as the epicenter of the 2007-08 downturn. “Economists believe rising rates could eventually lead to a slowdown in the housing market, but not necessarily during the Fed’s initial stages of rate liftoff.”