Feds keep up balancing act as worry for softer market.The Federal Reserve held interest rates at 5.25% last week, ending what had been an over two year stretch of 17 consecutive quarter point increases that brought rates from historic lows to still modest but comparatively more normal levels. The pause represents a shift in monetary policy whose focus had been aimed at combating inflation but now seems, at least temporarily, concerned with not stifling economic growth. "Economic growth has moderated from its quite strong pace earlier this year, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices," the Fed's statement read. Inflation, amid soaring soaring: see flight; glider. soaring or gliding Sport of flying a glider or sailplane. The craft is towed behind a powered airplane to an altitude of about 2,000 ft (600 m) and then released. energy policies, remains a concern, however, and economists and real estate experts alike say that the Fed's mission of containing it while also keeping interest rates low enough to maintain economic growth is becoming an increasingly difficult balancing act. Much speculation emerged when the Fed began its series of interest rate hikes in the summer of 2004, predicting that commercial real estate pricing  This article or section may deal primarily with the U.S. and may not present a worldwide view. would erode Erode (ĕrōd`), city (1991 urban agglomeration pop. 361,755), Tamil Nadu state, S India, on the Kaveri River. The city is located in a cotton-growing region, and its industries include cotton ginning and the manufacture of transport equipment. as a consequence of the growing cost of financing.
Those predictions, of course, have proved incorrect in a market that, at times, has seemed to defy de·fy tr.v. de·fied, de·fy·ing, de·fies 1. a. To oppose or resist with boldness and assurance: defied the blockade by sailing straight through it. b. the odds as it continues to chart a path upwards despite shrinking cap rates. Real estate investment experts say that the aggressive gains in real estate value and the tolerance many investors have had for low, even negative, initial rates of return on their investment, were predicated on the expectation that real estate fundamentals would tighten, allowing real estate owners to markedly improve cash flow. This bet has paid off for many investors, especially in a major office market like New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. , where vacancy VACANCY. A place which is empty. The term is principally applied to cases where an office is not filled. 2. By the constitution of the United States, the president has the power to fill up vacancies that may happen during the recess of the senate. has dipped to a point so low, landlords have been able to markedly raise rents. The Fed's latest move, combined with reports of increased unemployment and diminished di·min·ish v. di·min·ished, di·min·ish·ing, di·min·ish·es v.tr. 1. a. To make smaller or less or to cause to appear so. b. productivity, highlights cause for concern among some investors who worry that the economy, whose health greatly influences real estate fundamentals like vacancy and rental rates, may sputter at a time when they are depending on it to remain strong. Speculation that the Fed would put a hold on an August rate increase spurred a drop in 10-year Treasury rates, an indication that the bond market believes inflation is at least temporarily under control. 5.25%, if it can continue to control inflation, likely would be a rate innocuous in·noc·u·ous adj. Having no adverse effect; harmless. innocuous (i·näˈ·kyōō· both to the economy and real estate investment, which has benefited from the unprecedented amount of capital seeking deals. |
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