rising interest rates could pinch freight carriers and put industrial realestate transactions on pause executives say but tighter policy might help if it succeeds in slowing the inflation that is driving up the cost of projects “if there’s any one sector that really needs inflation to get under better control it is the industrial sector” said kevin thorpe chief economist at realestate services firm cushman  wakefield the federal reserve on wednesday announced it would raise interest rates by 075 percentage point and fed chairman jerome powell said the central bank could follow the largest interest rate increase since 1994 with more rapid hikes this year daniel son head of global banking at us bank oversees its supplychain finance business he said the rising financing costs will also raise inventory carrying costs adding to stresses in supply chains—if companies carry less inventory to tamp down costs “when interest rates go up then there’s a correlation that inventories actually go down” when companies can’t pass along those higher costs to their customers he said inventory costs were already elevated as retailers and manufacturers sought to bring in goods to refill depleted stocks as supplychain logjams tied up orders on the water and at congested ports the logistics managers’ index a monthly survey of supplychain managers showed inventory costs about 33 higher in may than they were in the same month in 2020 the higher rates will also raise borrowing costs for logistics operators and carriers and could lead some industrial realestate investors to put off decisions on new construction executives said the increased cost of money could have a big impact on lightlycapitalized trucking companies that operate on thin margins said jeff carlson vice president of global sales and marketing at freightpayment company cass information systems inc “you could actually end up with a reduction on available trucks down the road if you start to lose a lot of carriers” mr carlson said the tighter money policy comes as freight carriers are already wrestling with higher fuel prices adding costs that smaller operators have trouble passing along to customers gregg healy executive vice president and head of the industrial services group in north america at realestate service provider savills plc said higher financing costs could also cool investor interest in what recently has been a redhot market for industrial real estate mr healy who is based in southern california said he is not seeing warehouses change hands in some parts of the region even as overall distribution space remains tight “there’s a pause because you have investment groups which are looking at their own debt stack and they’re saying ‘ok what are opportunities for reward here what’s the risk that might be out there as well going forward’” mr healy said the rate hike will also affect calculations on realestate projects said ken simonson chief economist at the associated general contractors of america a trade group representing builders higher borrowing costs mean some projects such as warehouses will “no longer pencil out” mr simonson said financing costs “along with rapidly rising construction materials and labor costs will outrun the potential rental income” he added but the fallout on infrastructure projects such as highway construction will be generally minor he said since much of their financial backing comes from state and federal funding “many types of construction are relatively insensitive to this increase infrastructure and longlived manufacturing and power projects for instance” mr simonson said