Ahead of the Federal Reserve Open Markets Committee’s next meeting on June 14, many across commercial real estate anticipate a likely, if short-lived pause on interest rate increases. Following the committee’s meeting in May, Fed Chairman Jerome Powell hinted at a pause on rate increases, if data from sources such as the Consumer Price Index, the Employment Cost Index and metrics such as inflation and wage growth allow for one.
With inflation, the root of all recent interest rate hikes, moderating considerably to 4.9 percent since its high of 9.1 percent in July of 2022, an average 40-basis-point increase of the CPI and labor costs rising 1.2 percent over the last quarter, many in the industry anticipate a certain, not implied pause. At the same time, many anticipate another increase in the funds rate in July, which could alter these fundamentals. Either way, it will not be a panacea to the economic conditions that investors, lenders and developers in commercial real estate face.
Timely, if fleeting
Experts near-universally expect a pause, as the encouraging data, coupled with the existing rate of 5 to 5.25 percent factors into the decision-making of lenders, borrowers and employers. “It takes time for these increases to work their way through the system,” explained Bryan Kenny, president & principal of Bandon Capital Advisors. “A pause makes sense given the encouraging data,” he told Commercial Property Executive.
