Report | Raising rates to curb inflation for March 21, 2018
Retail sales disappointed again in February, declining for the third consecutive month. Weak sales occurred despite tax refunds from 2017 and lower taxes paid due to tax cuts. This weakness will drag on economic growth in the first quarter because the consumer still represents roughly 70 percent of the economy. That should not dissuade the Fed from raising rates by 25 basis points this week, especially since the futures market is currently pricing in a roughly 94 percent chance of a hike. The Fed is trying to remain at least with, if not ahead of, the curve on inflation, which is rebounding from a lull in 2017 and appears to be trending back. The ongoing labor market shortage could contribute to inflationary pressures – open but unfilled positions reached a record high in January even as job growth accelerated. On the whole, the news remains positive for commercial real estate. But the lack of qualified labor holds the economy and CRE market back and could eventually weigh on corporate profits.
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