Get Ready for More Rate Hikes

LOS ANGELES—The Fed raised interest rates for the second time in three months yesterday, a clear sign that more rate hikes are to come. Interest rates increased from a range between 0.75% and 1%. Increases in interest rates were expected this year, but the back-to-back increases indicate that we should expect more. While increases are generally good, moving away from the near decade long stimulus campaign and a sign of a healthier economy, rising interest rates too quickly could slow economic growth.

“This increase in interest rates away from crisis level monetary policy seems appropriate given the trajectory of the economy and the burgeoning concern over increasing inflation rates,” Jeff Rinkov, CEO, Lee & Associates, tells GlobeSt.com. “The Federal Reserve, along with the rate increase, commented on the potential for the acceleration of future rate-hikes. An acceleration of rate-hikes could be concerning as it may stifle continued economic growth.”

The increases are likely to keep coming, although Janet Yellen did say that further rate increases will come slowly to allow the Fed to adjust in the event of tax cuts or massive spending from Congress. “We will likely see a couple of more rate hikes based upon commentary from the Federal Reserve yesterday,” says Rinkov. “Assuming the positive trajectory of the local and national economy continues these rate hikes should be absorbed in stride. Depending upon the frequency and the accumulation of the rate increases there will be some adjustment to cap rates as competing zero risk investment (treasury bonds) vehicles will provide greater yield.”

The rate increase, however, will likely have minimal impact on the local Los Angeles economy. “I believe this rate hike will have a minimal direct impact,” adds Rinkov. “The L.A. market continues to have very strong demand across product types with underlying fundamentals including rent growth and responsible development supporting sustained value growth.”

LOS ANGELES—The Fed raised interest rates for the second time in three months yesterday, a clear sign that more rate hikes are to come. Interest rates increased from a range between 0.75% and 1%. Increases in interest rates were expected this year, but the back-to-back increases indicate that we should expect more. While increases are generally good, moving away from the near decade long stimulus campaign and a sign of a healthier economy, rising interest rates too quickly could slow economic growth.

“This increase in interest rates away from crisis level monetary policy seems appropriate given the trajectory of the economy and the burgeoning concern over increasing inflation rates,” Jeff Rinkov, CEO, Lee & Associates, tells GlobeSt.com. “The Federal Reserve, along with the rate increase, commented on the potential for the acceleration of future rate-hikes. An acceleration of rate-hikes could be concerning as it may stifle continued economic growth.”

The increases are likely to keep coming, although Janet Yellen did say that further rate increases will come slowly to allow the Fed to adjust in the event of tax cuts or massive spending from Congress. “We will likely see a couple of more rate hikes based upon commentary from the Federal Reserve yesterday,” says Rinkov. “Assuming the positive trajectory of the local and national economy continues these rate hikes should be absorbed in stride. Depending upon the frequency and the accumulation of the rate increases there will be some adjustment to cap rates as competing zero risk investment (treasury bonds) vehicles will provide greater yield.”

The rate increase, however, will likely have minimal impact on the local Los Angeles economy. “I believe this rate hike will have a minimal direct impact,” adds Rinkov. “The L.A. market continues to have very strong demand across product types with underlying fundamentals including rent growth and responsible development supporting sustained value growth.”