The Fed’s George has said that commercial real estate could be a potential asset bubble. The commercial real estate market is a potential asset bubble that “bears watching,” said Kansas City Fed President Esther George earlier this year. George was pushing for the United States central bank to “stay the course” and gradually raise interest rates.

George joined the Fed in 1982 and served much of her career in the Division of Supervision and Risk Management. She began by becoming a commissioned bank examiner and eventually served for ten years as the District’s chief regulator. In that capacity, she was responsible for oversight of the District’s state-chartered member banks and nearly 1,000 bank and financial holding companies, as well as the Bank’s discount window and risk management functions.

Some real estate professionals are seeing pessimism in the economy, with a recession predicted in 2017. A survey of 400 people in real estate by PricewaterhouseCoopers (PwC) and the Urban Land Institute (ULI) revealed a drop in positive sentiment to 69 percent from 84 percent six months ago with current levels are at the lowest in two years.

Employment data has also been adding to the recession confusion because it is one of the underlying fundamentals. The Commercial Observer writes that the weak May jobs numbers are of great concern for commercial real estate nationally highlighting that last month, payrolls grew by just 38,000 jobs, far below the expected 162,000.

“In the long run, a failure to keep interest-rate policy in line with improving fundamentals can distort the allocation of capital toward less fruitful — or perhaps excessively risky — endeavors,” George stated in a speech to an economic forum in York, Nebraska. “My concern for some time has been that extending monetary policy too far beyond its scope of capability risks undesirable financial, economic and political distortions.”

“We have received four strong labor reports as well as data showing that inflation is moving higher” since the first Fed interest-rate hike in December, George stated. “I believe monetary policy should respond to these developments by slowly removing accommodation despite “what appears to be a more vulnerable global economy, and a domestic economy that appears to be slowing in the first quarter and is threatened by markets that are anxious, uncertain and volatile.”

Slow and gradual rate hikes remain the best policy, George also said. “Removing accommodation in small doses is consistent with the economy’s fundamentals, keeps policy accommodative while global and domestic risks play out, and does not preclude pausing or responding if downside risks materialize,” she stated.