Report | Watch for a rate hike this week for June 13, 2018
The data released last week will not prevent the Fed from hiking rates another 25 basis points this week. The ISM Nonmanufacturing data rebounded from April's decline, showing that business demand remains firm despite relatively scarcity of inputs to production. The international trade deficit for goods and services narrowed in April with demand for exports from the U.S. reaching record-high levels while imports declined slightly. Meanwhile, weekly unemployment claims continue to hover near cyclically-low levels. The Fed should announce a rate hike this week, though beyond that we do not expect much of a change in either their forecast or their statement. This hike will continue to flatten the yield curve as it pushes real short-term interest rates closer to positive for the first time since before the Great Recession. Participants in the CRE market should view this hike as just one in a series and remain focused on the long-term impact long-term rate hikes will ultimately have on the economy and the CRE market while avoiding short-term fixations.
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