The U.S. Federal Reserve is maintaining its benchmark lending rate, ignoring pressure from President Donald Trump to reduce borrowing costs.
The Fed held the rate at a target range of 4.25% and 4.5% as expected, saying uncertainty about the economy has increased and that it "judges that the risks of higher unemployment and higher inflation have risen."
Commercial real estate and financial professionals said the Fed's decision gives the U.S. central bank time to sort through the outcome of policy developments before deciding whether to cut rates. The Trump administration has had a shifting policy on adding tariffs on goods from other countries, and U.S. stocks have had wide swings as investors try to adjust to changes in policy and trade negotiations with other countries. The move isn't expected to hinder the property market.
"It appears that the Fed's bias for now to keep rates steady could keep capital costs relatively stable and not act as a major tailwind" for commercial real estate in the near term, said CoStar Group's chief U.S. economist, Christine Cooper.
"There is a growing awareness among investors that the major structural changes taking place to our economy — from domestic manufacturing to immigration to a contraction in government — will take time to unfold," Marion Jones, principal and executive managing director of U.S. Capital Markets at Avison Young, told CoStar News via email. "Real estate sentiment is focused more on resolving issues with major trading partners to prevent a larger recession, rather than on a Q2 rate decrease, though many would welcome the rate cut."
Inflation, unemployment concern
Federal Reserve Chair Jerome Powell said at a press conference after the decision that the larger-than-anticipated tariff increases announced so far by the Trump administration could weaken the economy.
"If the large increases in tariffs that have been announced are sustained, they are likely to generate a rise in inflation, a slowdown in economic growth and an increase in unemployment," Powell said.
Darrell Crate, chief executive officer and director of real estate investment trust Easterly Government Properties, told CoStar News on Wednesday ahead of the Fed's decision that he thinks the commercial real estate industry is well-positioned for rates to stay where they are.
In March, the Fed also kept the rate the same. Soon after, in a biannual report, the Fed said commercial real estate markets showed signs of stabilizing prices and fundamentals.
It added that aggregate prices measured in inflation-adjusted terms were stable since the November report "after falling significantly" in 2022 and 2023.
The U.S. central bank's continued wait-and-see approach follows Trump pushing for the Fed to bring down the interest rate. The president has also not been shy in calling for Powell to be replaced, saying on the Truth Social social media site last month that "Powell's termination cannot come fast enough!" He later said he had no intention of firing him, the Associated Press reported.
Powell said during the Wednesday press conference that public pressure does not affect the Fed's decision-making.