The March jobs report was a good one, as the Department of Labor reported that 192,000 jobs were created in the month. By all accounts the Federal Reserve (Fed) should like the report’s findings and continue tapering its quantitative easing program. While the positive jobs report means the continued winding down of this program is a virtual certainty, the timing of when the Fed will increase the federal funds rate isn’t quite as predictable. In an earlier post, we discussed how comments from numerous Federal Reserve members seemed to indicate that the Fed will most likely raise rates sometime in mid-2015. Indeed, thirteen of the Fed’s 16 members expect rates to increase sometime next year and believe that the fed funds rate will be 1% by the end of the year. A number of Wall Street economists were also recently questioned on their views on interest rates and their projections are helpful as well. One thing is certain: after not increasing rates since 2006, encouraged by a growing economy and reduced unemployment, the Federal Reserve is now poised to raise them. The question that everyone wants to know the answer to is when this will happen.
A little while ago, Reuters conducted a poll of 22 Wall Street firms that do business directly with the Federal Reserve and found that 4 of the primary dealers that were polled expected the Fed to increase rates by the first half of 2015. Reuters just conducted this same poll and this time 8 out of 18 U.S. primary dealers believe that the Fed will raise rates by June of next year. This represents a 50% increase in the number of dealers who thought this would happen when the earlier poll was conducted. The reason for this increase is rooted in favorable economic data, recent comments by Fed members, and the March jobs report. Even though the economy produced slightly fewer jobs than economists had expected, the report was still viewed favorably across the board. Once the Fed increases rates, most analysts expect the pace of increases to remain slow until the labor market sees more wage growth, less underemployed workers, and less long-term unemployed workers as well. For example, 10 out of 17 firms that were asked about rates expect the initial increase in the fed funds rate to be less than a hundred basis points, from its current 0% to .25% range to .50%.
Reuters poll results show that an increasing number of Wall Street economists agree with the Fed members who think that the Fed’s first rate increase since 2006 will happen by mid-2015. Of course, that’s over a year from now and this view could shift before, then depending on future jobs reports and other economic data. But for now, it appears that rates are likely to increase around then so long as the status quo remains unchanged. Before this happens, senior housing participants and other parties that are interested in obtaining capital for growth or other needs should contact the successful senior housing financing firm Cambridge Realty Capital to learn more about the many different financing options that it offers.