The Federal Reserve opted to hold a key interest rate steady for the first time in nine months–even amidst a sluggish economy–due largely to increasing fears of inflation. By maintaining the federal funds rate at 2 percent yesterday, the Fed was attempting to curb inflation in the wake of skyrocketing commodities prices, especially oil. Though in its statement, the Fed said it expected inflationary pressures to ease later this year, the decision to hold the rate indicated that, at least for the time being, inflation is a more pressing concern than the economic slowdown which spurred the previous rate cuts. According to Gary Gabriel, executive director of the capital markets group at real estate services firm Cushman & Wakefield Inc., the Fed would have liked to even raise rates, but was hamstrung from doing so by the struggling economy. \u201cThe Fed has to control inflation and promote growth; in many circumstances, those two goals are opposed,\u201d Gabriel (pictured) told CPN. \u201cThey are in a tough spot in terms of doing anything at present. In a perfect world the Fed would be inclined to raise rates.\u201d Indeed, one of the Fed\u2019s governors, Dallas Federal Reserve Bank president Richard Fisher, did vote to hike the rate. The other nine members of the committee voted to keep the rate at 2 percent. Gabriel said that since the Fed is beset on both sides–by inflation and a sluggish economy–it is limited in what it can do as far as moving rates, and instead must rely on its statements to shore up confidence in the economy. \u201cRate cuts are done\u2014no question,\u201d he said. \u201c[The Fed] is trying to talk up the economy by making statements that a recession isn\u2019t assured.\u201d Gabriel said that, while the slowdown has had a definite effect on real estate fundamentals, there is currently more an air of uncertainty in the market rather than panic. \u201cLeasing activity is moderating,\u201d he noted, \u201cbut that doesn\u2019t mean a definitive trend in that direction. Decision making has slowed as most participants are trying to get a better look at the market.\u201d Gabriel also noted that, while capital markets remain tight, it is still possible for the \u201cright borrowers\u201d to get financing on the \u201cright projects.\u201d But he predicted that no meaningful improvement in the availability of credit would occur until lenders could clear their balance sheets of hanging loans and under- or non-performing CMBS holdings. \u201cThere are still steps left for that to happen,\u201d he said.To Blog and Comment Click Here<\/p>\n","protected":false},"excerpt":{"rendered":"
The Federal Reserve opted to hold a key interest rate steady for the first time in nine months–even amidst a sluggish economy–due largely to increasing fears of inflation. By maintaining the federal funds rate at 2 percent yesterday, the Fed was attempting to curb inflation in the wake of skyrocketing commodities prices, especially oil. Though…<\/p>\n","protected":false},"author":1314,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[37301],"tags":[],"class_list":["post-1003821268","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"acf":[],"yoast_head":"\n