The second quarter’s strong GDP growth has given Federal Reserve officials some additional things to think about as they deliberate when to raise the central bank’s benchmark federal funds rate and by how much. While no one is exactly sure when this will happen, the general consensus among Fed watchers is that the Fed will raise rates sometime during the middle of next year. Before this happens, senior living providers and investors who are seeking inexpensive capital should contact Cambridge Realty Capital to learn more about the many differentfinancing programs that it offers for acquisitions, sale/leasebacks, joint ventures and other purposes as well.
2nd Quarter Growth More Impressive than 1st
The second quarter’s 4% GDP growth was a significant improvement from the first quarter, during which the economy actually contracted by 2.1%. This dramatic increase, combined with recent job gains, shows that the economy has rebounded since its poor performance earlier this year. However, even with the recent spate of positive economic news, economists should not assume that this means the Fed will automatically raise rates sooner than they originally anticipated, and for a few of reasons. First, although Fed officials are pleased that the unemployment rate has fallen faster than they originally predicted, they remain concerned about the large number of long-term unemployed and continued weakness in wage growth. Second, because the lack of wage growth has helped keep prices low, the Fed doesn’t feel pressured to raise rates to combat inflation since slow wage growth is helping dampen inflation on its own. In fact, slow wage growth could actually motivate the Fed to keep rates low for a longer period of time in an effort to stimulate wages in addition to boosting employment in general.
All Eyes on the Federal Reserve
In the past the Federal Reserve has said that it would continue to keep interest rates low for a “considerable time” after ending its quantitative easing program, which will happen this October. Fed watchers are now debating just how long a “considerable time” is. In order to do this, they will continue to analyze any statements that the Federal Reserve makes in addition to new economic data on the overall economy along with specific information on the housing market, financial sector, job gains and other data points as well. Economists recognize that although economic growth and job gains have picked up recently, the Fed is unlikely to get overly excited about these occurrences. The Federal Reserve is a deliberative body and its members will most likely wait for additional positive economic news before altering their “considerable time” guidance. However, while no one knows exactly when rates will go up, one thing is certain, they will increase at some point as the economy continues to improve. Before this happens senior housing providers and other who are seeking inexpensive capital for acquisitions or other purposes should contact Cambridge Realty Capital to learn more about the many different financing programs that it offers for a wide variety of purposes.
