Five Questions With: James Rizzo

James Rizzo is senior vice president and regional manager of commercial banking for Rockland Trust.
James Rizzo is senior vice president and regional manager of commercial banking for Rockland Trust.

James Rizzo is senior vice president and regional manager of commercial banking for Rockland Trust. In that role, he manages a sales and lending team that covers Rhode Island, as well as southeastern Massachusetts. In an interview with the Providence Business News, he discussed the impact of the recent decision by the Federal Reserve to raise interest rates.

PBN: The interest rate increase, of 0.25 percent, was modest but signals a change in policy. What has been the immediate impact?
RIZZO:
The increase hasn’t had any material impact on the demand for commercial loans so far as long-term interest rates have not followed the increase in short-term rates.
PBN: So, developments looking to move forward, are they still trying to move ahead?
RIZZO:
The developments that we have reviewed continue to move ahead as planned. That said, if the Fed begins to signal strongly that interest rate increases are truly imminent, I would expect that developments that have longer timelines will be impacted. What is interesting though is that the Fed Funds Futures markets are only reflecting a 45 percent chance of a rate increase in January. The next Fed meeting is in January. Historically, the FFF market has reflected at least a 65 to 70 percent chance of an increase when rates actually moved.
PBN: How has this affected Providence in particular?
RIZZO:
I don’t think that the 25 basis point increase has affected development in Providence at all. If a project was impacted by a 25 basis point increase in interest rates, a bank probably shouldn’t probably be entertaining the request. A project shouldn’t be that interest rate sensitive.
PBN: Does this signal that every year we will have interest rate increases, if the economy is considered on solid ground?
RIZZO:
It’s very difficult to tell based on recent history. There are indicators that are reflecting a fairly stable U.S. economy, such as the current employment rate, but the global economy is fraught with risk. We’ve even seen a successful hedge fund decide to wind down because they were not comfortable with the quality and the reliability of the data coming from China and India. Based on the reliance of the U.S. economy on the global economy, it will continue to be very challenging to forecast the movement of U.S. interest rates.
PBN: What do you advise clients when they ask about this?
RIZZO:
They should be mindful of interest rate increases so we expect them to model their projects assuming an increased interest rate scenario. Through interest rate sensitivity analysis, we can jointly determine where the project may arrive at a breaking point.

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