Fed Warns of Unexpectedly High Rates

In a trend of the past several months, stock markets fell Tuesday on the prospect of interest rate hikes that might go higher and continue longer than some analysts expected after comments from Federal Reserve Chairman Jerome Powell.

Powell told the Senate Banking Committee the ultimate level of the Fed’s key lending rate “is likely to be higher than previously anticipated,” as the Fed looks to bring down inflation in the face of recent economic data that was “stronger than expected.”

The next Fed rate-setting meeting is scheduled for March 21-22, by which time the government is expected to release closely watched February data on jobs and inflation, among other metrics. Those numbers could help decide whether the Fed goes bigger or smaller on rate hikes in 0.75% monthly increments between June and November, then downshifted to a half-point in December before lowering to a quarter-point in January and February.

“If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes,” Powell told lawmakers.

The Federal Reserve’s main interest rate now hovers around 4.5%, compared with near zero a year ago, resulting in borrowing costs for many loan types that are now their highest in 15 years. The Fed is looking to bring annual inflation from its current 6.4% down to 2%, and some analysts predict further rate hikes could send the economy into a recession.

Stock markets responded immediately to Powell’s comments with selloffs in early trading hours. The Dow Jones Industrial Average closed Tuesday down 530 points or about 1.6% for the day, with the S&P 500 dropping 1.5% and the Nasdaq Composite falling 1.2%.

Mall Visits Decline

Shoppers remain resilient in the face of high inflation, but U.S. mall visits declined in February from year-earlier levels, according to retail traffic analytics firm Placer.ai.

Visits dropped 6% from February 2022 at indoor malls, declined 2% at open-air “lifestyle” centers and were down 6.7% at outlet malls, analysts reported this week. These annual declines followed year-over-year increases for all three property types in January, the first time that happened since July 2022.

The analytics firm tracks foot traffic data from more than 300 retail centers nationwide. The bright side for mall landlords is that visits have been trending up in recent weeks, comparing favorably though still lower than the pre-pandemic early weeks of 2020.

“Visits to malls, though down year-over-year compared to 2020, aren’t too far off of ‘normal’ levels,” Placer.ai analysts said in a March 6 statement. “If 2023 proves to be more of a year like 2019 as opposed to 2020, malls should be sitting pretty — though navigating a challenging economic outlook could be tricky, too.”

The mall traffic numbers arrive after the latest Commerce Department data showed disposable personal income rising 2% in January from the prior month as personal spending increased 1.8%, even though annual inflation remained near a 40-year high at 6.4%.

Office Attendance Holds Steady

Office attendance for 10 large cities held steady for the week ended March 1, matching the prior week’s average of 50.1% of pre-pandemic levels, according to the latest tracking by Kastle Systems.

The security technology firm’s weekly “Back to Work Barometer,” based on anonymous keycard data from clients’ office properties, also stayed close to the pandemic high of 50.4% reached in the week ended Jan. 25.

Office attendance has generally been trending up since the start of the year but remains below 50% of pre-pandemic levels in most major U.S. cities. Many workers are now in the office for at least part of the week under employer requirements.

The latest numbers showed Austin, Texas, hitting a pandemic high of 68.1%, followed by Houston at 61.8%, Dallas at 54.3% and Chicago at 50.4%. Five of the 10 barometer cities posted increases from the prior week, with the other five showing declines.

Source: www.CoStar.com