Fed Returns to Rate Hikes

Now at a target range of 5.25 percent to 5.5 percent, the federal funds rate is the highest it has been since 2007.

Fed Chairman Jerome Powell at the FOMC Press Conference July

Federal Reserve Chairman Jerome Powell speaks at the July 26 FOMC press briefing. The central bank has increased interest rates for the first time since May. Screenshot of the Federal Reserve livestream by Jordana Rothberg

The Federal Reserve is back at it. Following last month’s pause, the central bank has resumed its interest rate hikes, increasing rates by a quarter of a percentage point. This latest 25 basis point spike brings the federal funds rate to a range of 5.25 percent to 5.5 percent.

“We’ve covered a lot of ground and the full effects of our tightening have yet to be felt,” Federal Reserve Chairman Jerome Powell said during Wednesday’s Federal Open Markets Committee press conference. “Looking ahead, we will continue to take a data-dependent approach in determining the extent of additional policy firming that may be appropriate.

Last month marked the central bank’s first pause on interest rates after 10 consecutive hikes. This Wednesday’s decision to again increase rates was largely predicted and priced in by the markets. During Powell’s June press conference, he heavily implied that the Federal Reserve would resume rate increases this month. “Nearly all committee participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year.”

Sure enough, the federal funds rate is now the highest it has been since 2001. There are several economic factors at play that influenced the Federal Reserve’s decision, but the main one is the rate of inflation, which has persisted above the central bank’s 2 percent target.

Multifamily experts say that the impacts of the Federal Reserve’s decisions over the last 18 months are already being felt. Sales volume in multifamily fell significantly in the first quarter of 2023 when compared to the first quarter of 2022. Meanwhile, loan maturities are causing concern among multifamily players. Despite assurances that it was a temporary pumping of the brakes, last month’s pause provided some relief for the real estate sector.

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