News Release: Fed Economists Say Economy Will Be Improving Next Year, Which Means Interest Rates Will Be Rising As Well

If a projection by staffers at the Federal Reserve Bank of New York is spot-on, the central bank may be rethinking fiscal policy changes sooner than expected.

“A prediction that policy changes in an improving economy could come as early as the fourth quarter of 2014 is an important heads-up that senior housing/healthcare borrowers will want to consider,” funding expert Jeffrey A. Davis believes.

Davis is Chairman of Cambridge Realty Capital Companies, one of the nation’s leading senior housing/healthcare lenders. He says the New York Fed’s projection is based on the assumption that economic growth will be accelerating next year at a healthier clip while the unemployment rate declines.

“This is the first clue we’ve had that central bankers foresee a possible end to so-called quantitative easing, the Fed’s controversial practice of purchasing $85 billion in U.S. Treasuries and mortgage-backed securities every month. These purchases are part of an overall strategy to help stimulate growth by driving interest rates even lower than more conventional fiscal policies based on manipulating the Federal Funds rate were able to accomplish.

“The Fed has been using the unemployment rate as a barometer for things to come. If unemployment drops to 6.5 percent, Fed Chairman Ben Bernanke has indicated the aggressive purchases of fixed income and mortgage backed securities will end,” he noted.

A PulsePoints blog post on the http://www.cambridgecap.com/ website quotes Fed economists Jonathan McCarthy and Richard Peach. These experts anticipate that the economy will grow sluggishly at a 2.5 percent rate for the balance of this year, but will be rising at a much healthier 4.2 percent rate in 2014.

Should this come to pass, interest rates will predictably be on the rise next year. The fantastic window of opportunity that has enticed healthcare borrowers to refinance earlier loans in record numbers will remain ajar but will slowly close as the outlook improves,” he said.