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Dec 18th- No Surprise as Fed Raises Key Interest Rate, but Hike Still Sends Shiver Through REIT Sector

December 18, 2016

While commercial real estate analysts and investors have anticipated an increase in the Federal Reserve's key short-term interest rate for several months, baked-in expectations failed to prevent a sell off of stocks in REITs and the broader market when Fed Chairman Janet Yellen finally announced a rate hike on Wednesday.


The central bank's Federal Open Market Committee not only announced only its first increase in the federal funds rate since December 2015, raising the short-term benchmark rate by 0.25% to a range of 0.50% and 0.75%, with Fed officials pointed to a strengthening labor market nearing full employment and inflation that's moving more rapidly toward targeted levels.


At the same time, the Fed indicated it will likely raise the rate at least three more times over the coming year as robust job growth and the economic expansion continue followed the surprise election of Donald Trump. The Dow Jones Industrial Average fell 0.6% Wednesday in the rate-related sell off falling short after a record run that has come tantalizingly close to the 20,000 point mark in the record market run in the weeks following President-Elect Donald Trump's surprise victory Nov. 8. The FTSE NAREIT Equity REITs index, meanwhile, took at 2.29% hit, closing at 635.32 on Wednesday.  Learn more.

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