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United States

Report | A Hawkish Turn for March 28, 2018


The Fed increased rates by 25 basis points, as expected. But the Fed struck a slightly more hawkish tone, not just in its statement, but also in its forecast for the Fed funds rate. This reflects stronger optimism from the fed, evidenced by their most positive forecasts for economic growth, unemployment, wage growth, and inflation. In the short term, consistent increases of 25 basis points pose little risk to the economy and commercial real estate (CRE). In the longer term, continued increases risk pushing the Fed funds rate past the neutral rate to a point that begins to constrain economic growth, which would become problematic for CRE. The situation surrounding international trade remains unresolved. The tariffs on steel and aluminum imposed by the Trump administration took effect last week and the administration announced up to $60 billion more in tariffs on China. China responded to the first round of tariffs with some of its own, but has yet to respond to the latest salvo. China appears to be extending an olive branch by offering to buy more semiconductors from the U.S. and allow foreign majority stakes in its financial firms. But the administration continues to replace cabinet-level officials with individuals who are less upbeat on free trade. 

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