Tempest in a teapot?
The financial calamity that is Greece is the latest reason why borrowers in America are being told that the Federal Reserve Board may not make good on threats to raise short-term interest rates in September – or any time this year.
“As ever, senior housing/healthcare borrowers have a stake in how this drama plays out. If I were a betting person (I’m not), my thinking would be skewed towards a ‘wait until next year scenario’,” said Cambridge Realty Capital Companies Chairman Jeffrey A. Davis.
Cambridge is one of the nation’s leading senior housing/healthcare lenders, with more than $4.5 billion in closed transactions. Davis says the senior care industry has thrived in a low interest rate environment
When the Fed will be able to start raising rates as part of a rate normalization process isn’t clear. Fed Chair Janet Yellen has warned that Greece is a factor:
“To the extent that there are impacts on the Euro-area economy or on global financial markets, there would undoubtedly be spillover to the United States that would affect our outlook as well,” she said.
Davis says some economists argue that blow-back from Greece could eventually force the Fed to hold off raising rates until December or next year. Others aren’t so sure.
The economy has very little direct exposure to Greece. And even big European banks have far less exposure to Greece now than they did just a few years ago, economists say.
“But there are a couple of things that might change all this. For example, if the dollar becomes even stronger or if the U.S. stock market starts heading south,” Davis said.
“What’s clear is that European economies are still tied to the Greek economy and the U.S. is tied to Europe. If things go poorly in Europe, there are reasons for concern,” he added.