Richard Fisher, president of the Federal Reserve Bank of Dallas, voting member of the Federal Reserve’s Open Market Committee (FOMC), and one of the more hawkish members at the Fed, is due to retire in 2015. As a voting member of the FOMC, Mr. Fisher holds considerable influence over monetary policy and interest rate changes. He has used this influence in trying to raise interest rates more quickly. So far his efforts have been unsuccessful–the Committee recently voted to keep interest rates at the near zero level for now. Senior housing participants applauded this vote, since low interest rates increase the value of senior housing assets and help fuel robust deal activity in the sector. Industry participants wishing to take advantage of today’s low interest rates by obtaining financing for acquisitions or sale/leasebacks should contact Cambridge Realty Capital to learn more about the many different financing options it offers for a number of different senior housing transactions.
With Mr. Fisher leaving the Federal Reserve next year, a search firm is looking for suitable candidate to replace him. Currently, the number of Fed officials who would like to keep interest rates low after the quantitative easing stimulus winds down greatly outweighs the number of officials who prefer to raise interest rates sooner than projected. This was reflected in the FOMC’s vote on monetary policy last week. After deliberating monetary policy, eight out of the ten Committee members voted to keep interest rates low for the foreseeable future. The only dissenting members were Mr. Fisher and Charles Plosser, president of the Federal Reserve Bank of Philadelphia.
If Mr. Fisher is replaced with another hawk who advocates raising interest rates quickly to combat the threat of inflation and asset bubbles, then the dynamic at the Fed will remain the same. However, if Mr. Fisher is replaced by a more dovish banker, one who agrees that inflation is not a chief concern right now because it is under the Fed’s two-percent target, then the dynamic at the Fed will change greatly. This could lead to a situation where interest rates remain low for a longer period of time than the Fed is currently projecting. Continued low interest rates on the senior housing sector would spur the robust level of deal activity already taking place. For this reason, providers and investors should continue to monitor this situation to see who emerges as the primary replacement candidate for Mr. Fisher. That candidate’s views on monetary policy could influence interest rates in future deliberations at the Federal Reserve.