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Fannie Mae Forecasts Toll on Economy from Increasing Interest Rates
The rapid rise in long-term interest rates over the past few months will likely weigh on future economic growth, according to the Fannie Mae Economic and Strategic Research (ESR) Group. Although the ESR Group revised upward its 2023 real GDP projection by three-tenths to 2.5% on a Q4/Q4 basis, nonetheless it continues to expect significant slowing in economic growth through the end of the year and into 2024.
“Personal consumption has not only remained resilient, but recent official data revisions indicate that the consumer has been in a better position than previously thought, increasingly the likelihood of an economic ‘soft landing,'” said Doug Duncan, Fannie Mae chief economist. “However, despite consumer resiliency, the recent rise in interest rates has been precipitous, and in past environments – even with less severe interest rate shocks – this has led to economic dislocations. As such, we still expect to see a mild economic downturn in the first half of 2024.”
He continued, “While the rate of inflation has slowed and continues to slow, we continue to take the Federal Reserve at its word that rates will be ‘higher for longer’ until annual inflation stabilizes at the 2% target; though at this time, in part because of the recent run-up in long-term rates, we do not expect additional Fed rate hikes.”
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- ◦Financing
- ◦Economy
