Lenders are proceeding with caution when it comes to office deals amid a challenging interest rate environment, as the Federal Reserve weighs its next steps to keep the economy chugging forward.

As the economy reopened last year, the Fed balanced anticipated price growth by installing policies designed to let inflation run above typical targets.  But while "this was initially done to prompt economic growth, producer and consumer prices continued to advance at persistently high paces into this year, prompting a turnaround in monetary policy," analysts from Marcus & Millichap note in a new outlook on the office sector. The Fed began scaling down quantitative easing, and the Federal Open Market Committee has implied another rate hike is likely on the horizon this year.

That's led economists like those at the National Association for Business Economics to downgrade growth forecasts this year, with the median forecast for inflation-adjusted GDP at 2.9% (down from the 3.6% predicted in the December 2021 survey). The median forecast calls for GDP growth of 2.3%, with supply chain issues and geopolitical tensions emerging as the biggest downside risks to growth estimates.