Fed increases rates by 0.25%

The Federal Open Market Committee increased the target range for the federal funds rate to 2.00–2.25 percent at its meeting Sept. 25–26. The Fed credited a strengthening labor market and rising economic activity in its announcement.

With “roughly balanced” risks to the economic outlook, the committee expects “further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the committee’s symmetric 2 percent objective over the medium term.”

The unemployment rate was 3.9 percent in August, according to the Bureau of Labor Statistics, and the U.S. economy added 201,000 jobs. In addition, second-quarter GDP growth in the United States was 4.2 percent, according to the second estimate from the Bureau of Economic Analysis (a first estimate pegged GDP growth at 4.1 percent).

This is the third increase in rates in 2018, with many expecting a fourth increase by year-end. A rising interest rate environment could have significant effects on commercial real estate.