The Azucena Take: Highlights from the Feb 2023 Federal Reserve Meeting

During the February 2023 Federal Reserve Meeting, it was announced that the overnight interest rate would be raised by 25 BPS. This of course was an unexpected move . . . according to anyone who has not been paying attention. 

I say this because as far back as December 2022, a 25 BPS rise was expected. Markets, lenders, and investors have been working with the notion that this was going to happen. The real highlights came during the press conference with three major takeaways that will impact the investment real estate market in 2023.

Highlights from the Federal Reserve Meeting

Starting the Disinflationary Process: Jerome Powell has confirmed that the disinflationary process has begun. With inflation starting to come down, the Federal Reserve is not under intense pressure to increase interest rates. That means going forward, we will not see radical hikes in the 50 to 75 BPS range. 

Possibility of a Soft Landing: The Federal Reserve feels confident that inflation can be brought down without significant economic decline or a spike in unemployment. This is completely different compared to December in which there were concerns about a recession or the need for high unemployment. The new numbers and the Fed's current position means the possibility of a soft landing is now greater than before. 

Future Rate Increases: The good news is we might not see massive hikes in the future. However; rate hikes are still not off the table just yet. We could see another 25 BPS rate hike at the next Federal Reserve meeting. At the same time, we could see more stability in the investment real estate market going forward.  

What it Means for Investors

If inflation continues to fall and interest rate hikes slowdown, we could see a more active 2023. The gap between reality and expectations among sellers is starting to settle. At the same time, investors will less likely to take the "wait and see" approach going forward. It's important to remember that investment real estate requires long-term planning and one should seek the advice of a market expert before going forward. 

The Azucena Take provides an inside look into the investment real estate market using the research done and data collected by Marcus & Millichap