Inflation’s Impact on Cap Rates

Consumer prices are rising at the fastest pace seen in the last four decades, and the Federal Reserve is battling inflation and responding with increasing interest rates. According to Trading Economics, as of May 2022 the current inflation rate is 8.5 percent. Energy prices increased 32 percent, with gas rising 48 percent and fuel oil skyrocketing 70.1 percent. Food prices are up 8.8 percent, the largest increase since May 1981. However, cap rates are still compressing across every asset type. For the remainder of 2022, experts predict a modest increase in cap rates.