Federal Reserve policymakers held interest rates steady for their third consecutive meeting of 2026, as they prepare for a change in leadership.
The meeting Wednesday likely marked Fed Chairman Jerome Powell's last session as chair. The Senate is moving forward to confirm Kevin Warsh as his replacement, and Warsh would assume the seat of current fed governor Stephen Miran. In a rare move, Powell said he intends to remain on the board as a governor for a period of time due to coming under legal fire from the Trump Administration.
The decision to hold rates steady passed by an 8-4 vote. Miran dissented, favoring a 25-basis-point cut, as he has at every meeting since joining the Fed last September. Beth Hammack, Neel Kashkari and Lorie Logan also dissented but for a different reason. They support holding the target range for the federal funds rate steady but opposed including language in the policy statement that suggested rates could ease.
The vote leaves the benchmark rate at 3.5% to 3.75%, with persistent inflation and uncertainty over the conflict’s economic toll cited as reasons to stay put.
Higher oil prices and supply chain disruptions linked to the Iran war have added pressure on policymakers still trying to bring inflation back to the Fed’s 2% target.
The national average gasoline price stood at $4.21 a gallon as of April 27, according to the U.S. Energy Information Administration. That's down slightly from an early‑April peak but still roughly a dollar higher than before the war began.
Speaking at his final press conference as chair, Powell said, “People are not saying that we need to hike now,” adding that monetary policy is “pretty close to the neutral rate,” or a level that neither stimulates nor restricts the economy.
He said some colleagues’ view policy as closer to the upper end of neutral estimates, leaving room for a rate cut, while he has long placed the neutral rate between 3% and 4%.
Inflation data underscore that tension. The consumer price index rose 3.3% in March, the highest since April 2024, driven by a nearly 19% spike in gasoline prices. Core inflation, which strips out food and energy, rose 2.6% year over year.
Powell said the labor market is not currently a source of inflation, adding that those risks were more pronounced when the job market was overheating during the pandemic.
Asked whether higher oil prices could bleed into core inflation in the coming months, Powell said, “those prospects are real,” and that the Fed would have to “wait and see.”
Powell also said the number of officials favoring more neutral language in the policy statement has “increased,” describing the discussions as “vigorous,” though still short of a majority.
Elsewhere, the Bank of Canada on Wednesday kept its policy interest rate unchanged at 2.25% and signaled it is in no rush to move rates so long the economy performs as expected.
Commercial real estate watchers await a cut
As the Fed patiently sifts through the noise and signals of energy shocks, tariffs and other economic uncertainties, commercial real estate experts said they were unsurprised by the central bank standing pat.
"While this stage of the cycle can feel as though the recovery is moving in slo-mo, we are witnessing a trend of capital migrating into core and core-plus strategies,” Marion Jones, a principal and executive managing director of U.S. Capital Markets with Avison Young, said in a statement. “Should rate cuts materialize later this year, they would accelerate deal flow, particularly in multifamily and help reignite transaction volume across sectors.”
While some told CoStar News the commercial real estate finance sector had mostly already factored in the current rate levels, others emphasized a flat rate environment alone does not unlock the capital markets.
“For [commercial real estate], a hold is better than a surprise hike, but it is not the same as relief,” Cary Goldman, the founder and managing partner of Chicago-based private equity firm Timber Hill Group, said in a statement. “The industry still faces a cost of capital that is meaningfully higher than the low-rate period many assets were acquired under. That continues to affect refinancing proceeds, lender sizing, debt yields, [debt-service coverage ratio] tests, and cap rate assumptions,” he continued.
The base case remains one to two cuts this year, but the timeline is becoming more uneven and less predictable, according to Ryan Severino the chief economist and head of research at investment group BGO. Others, however, predicted another outcome. J.P. Morgan Global Research said in a blog post the Fed is slated to likely continue holding rates steady for the rest of 2026, before hiking 25 basis points in the third quarter of 2027.
Sentiment shows moderated optimism
A report released earlier this month by the commercial real estate development association NAIOP found the commercial real estate industry expects slightly improving conditions over the next 12 months, but many in it are less optimistic than they were back in the fall.
According to the survey, which had a total of 266 respondents from 237 distinct companies participate, developers and building owners continue to rank local economic conditions and interest rates as the two most important factors influencing development decisions. However, favorability scores for both conditions declined meaningfully from September 2025.
The answers were collected in March.
“The impact of AI on office occupancy is my biggest concern along with interest rates not coming down and construction prices continuing to go up slightly. Rent is not keeping up,” an unnamed survey participant said.
Most respondents said they expect to be most active in either industrial or multifamily real estate during the next 12 months.
Powell said at the press conference there is an "insatiable demand for data centers" and that there is "a lot of business investment going into building data centers, and every reason to think that continues."
Housing recovery on hold
There are signs any recovery in the housing market may be delayed. Brad Case, chief residential economist at Homes.com, said the spring home buying season is being tested by the volatility in mortgage rates and heightened uncertainty stemming from the Iran war.
“The homes market is in the middle of its spring buying season, but the big jump in mortgage rates during March has put it in some danger,” Case said, adding that many buyers and sellers are choosing to delay decisions rather than commit amid uncertainty.
While the Fed doesn’t set mortgage rates directly, it controls short-term rates that banks charge each other. Its policy signals can influence longer-term borrowing costs and buyer psychology.
Wednesday’s decision to hold interest rates unchanged “shouldn't have any significant effect on the homes market,” Case said. “At most, that could prompt homebuyers to become slightly more aggressive in their incentives, to reduce their own uncertainty by getting inventory off their books. But I don't think the Fed's decision is likely to affect mortgage rates.”
Powell stays on as board governor
Powell made it clear that he plans to stay on the board for now, a position he can hold through January 2028. He cited concerns for what he described a “series of legal attacks” on the Fed.
“I worry that these attacks are battering the institution and putting at risk the thing that really matters to the public, which is the ability to conduct monetary policy without taking into consideration political factors,” Powell said
He added that he felt that he has “no choice” but to stay. It's not unprecedented. After Fed chair Marriner Eccles — who gives his name to the Fed’s building in Washington, D.C. — resigned as chairman in 1948, he remained on the board as a member until 1951. Past Fed chairs have typically left the board when their terms ended.
Powell had previously indicated he would remain at the Fed until the Justice Department finished its investigation, a milestone reached last week. His four‑year term as chair expires May 15, with Warsh, a former Fed governor nominated by President Trump, expected to be confirmed ahead of the Fed’s June meeting.
The Justice Department probe focused on the Fed’s $2.5 billion renovation of its Washington headquarters, after cost estimates rose from $1.9 billion. A federal judge later ruled the investigation was an improper attempt to pressure the central bank. U.S. Attorney Jeanine Pirro last week dropped the probe and referred the matter to the Fed’s inspector general, which had previously found no wrongdoing.
Powell said, "I will leave when I think it is appropriate to do so,” making clear that his decision is tied to concerns about the Fed’s independence from political pressure. He reiterated he wants certainty the investigation is “well and truly over.”
He said his intention in remaining on the board is not to interfere with his successor, suggesting that he plans to keep a low profile as a governor. “There’s only ever one chair of the Federal Reserve Board."
Powell congratulated Warsh on advancing out of the Senate Banking Committee vote Wednesday. He said he expects Warsh to be confirmed and sworn in then elected by his colleagues to serve as chair of the Federal Open Market Committee. “This is an important step forward, and I wish him well as that process continues,” Powell said.
He added that Warsh has the “capabilities and skills” to build consensus, something Powell described as essential for a Fed chair given how decision‑making is shared across the central bank.
Asked whether he believes Warsh would stand up to political pressure from the administration, Powell pointed to Warsh’s testimony at his Senate hearing last week and said he’ll “take him at his word.”