Most FOMC members agree that rates will need to head higher in the next few years, but how quickly is a source of great debate. Don't be surprised to see even greater indecision as uncertainty rises later in the cycle.
With the new administration at the reins and macroeconomic indicators sending mixed signals, investors are wondering what the future promises for the direction of the U.S. economy commercial real estate. This seems to be certain in investors’ minds: interest rates are likely to increase—at least in the medium term, if not in the long run. What would such increases imply for CRE, and particularly for CRE values?
An update on EA's U.S. macroeconomic outlook: Even if Trump is able to enact his economic policies as planned, the stimulus will be slugging against a mature economy. Higher interest rates, the strong dollar, and a tight labor market are enough reason to believe that the natural business cycle is on the downslope. Moreover, there is plenty of evidence that fiscal policy is less effective when the economy is at full capacity, so that will work against any stimulus as well...
There's no reason for the Fed to be vocal at this point, and 2017's first FOMC meeting saw no policy changes made. The Fed is keenly aware of the heightened degree of fiscal uncertainty and clearly has not bought into the notion—already accepted by many economic forecasters—that fiscal stimulus will launch the economy into higher gear. EA's baseline outlook remains tempered as well, at least until we see where the new administration is heading.