Economy Watch: Fed Hints at Another Imminent Rate Hike

By Dees Stribling, Contributing Editor

Janet Yellen, Chair of the Board of Governors of the Federal Reserve System

The Federal Open Market Committee recently released the minutes from its latest meeting, which was held Jan. 31 to Feb. 1, revealing strong hints that interest rates will rise soon, and that capital for real estate projects will thus cost more. The betting money is on the next meeting, which is in March, for any rise.

The notes said: “In discussing the outlook for monetary policy over the period ahead, many participants expressed the view that it might be appropriate to raise the federal funds rate again fairly soon if incoming information on the labor market and inflation was in line with or stronger than their current expectations or if the risks of overshooting the Committee’s maximum-employment and inflation objectives increased.”

In other recent news, the American Institute of Architects’ Architecture Billings Index dipped slightly into negative territory in January, after a strong showing in December, the organization recently announced. The index is a leading economic indicator of construction activity, since it reflects the nine- to 12-month lead time between architecture billings and construction spending.

The AIA reported the January index came in at 49.5, down from 55.6 in the previous month. This score reflects a minor decrease in design services (any score below 50 indicates an decrease in billings). The new projects inquiry index, however, was 60.0, up from a reading of 57.6 the previous month.

“This small decrease in activity, taking into consideration strong readings in project inquiries and new design contracts, isn’t exactly a cause for concern,” said AIA Chief Economist Kermit Baker. “The fundamentals of a sound nonresidential design and construction market persist.”