Little Doubt About Interest Rate Trajectory

WASHINGTON, DC-Federal Reserve Bank Chairman Ben Bernanke has all but hired skywriters in his efforts to signal, again and again, that interest rates are going to start to rise. On Wednesday, following the bank’s two-day policy meeting, Bernanke told reporters that the Fed will probably start winding down its monthly $85 billion quantitative easing program this year and end it altogether by mid-2014. He didn’t commit to this path however– Bernanke leaves open the possibility that the economy may falter, in which case the Fed will delay any moves to end its bond-buying initiative. But if macroeconomic fundamentals continue to trend as they have been, that is not likely to happen.

For the commercial real estate industry, of course, rising interest rates have deep implications. They were a topic of debate at this week’s RealShare Investment & Finance conference in San Diego. While panelists said they expect interest rates to remain low for the near term, they do believe rates will begin to rise within the next three to four years—and rise quickly when they do—which will greatly impact buyers at refinancing if they’re buying at high prices due to cheap debt.