Fed Doesn’t Budge on Interest Rates
The decision came despite some recent pressure from the current administration.
The Federal Reserve Open Markets Committee has once again decided that there will be no adjustment of the benchmark federal funds rate, following its July 30 meeting. Rates have been at a range of 4.25 percent to 4.5 percent since December.
“The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent,” the FOMC said in a statement announcing the decision.
The decision was not, however, unanimous, with two members of the 12 members on the board, both appointed by President Trump, who “preferred to lower the target range for the federal funds rate by one quarter of a percentage point at this meeting.”
The policy statement did mention that U.S. economic growth “moderated in the first half of the year,” which might mean lower rates at a future meeting, provided the trend continues, but the statement gave no hint that that would actually happen. There are three more FOMC meetings this year.
The announcement was expected, with CME Group noting on Tuesday a nearly 97 percent probability that rates would not move, as implied by 30-Day Fed Funds futures prices.
The non-action indicates that the Fed continues to be cautious, despite calls for lower rates, and noises from the White House about replacing Fed Chairman Jerome Powell when his term ends in the spring of 2026. Trump originally appointed Powell in 2018, and President Joe Biden appointed him for a second term.
The FOMC stressed the importance of data when it comes to making interest rate decisions, as it always says, and that the central bank will not lose sight of its dual mandate. The dual mandate is to seek an inflation rate of 2 percent, along with maximum U.S. employment.
The latest annual inflation rate, as measured by the Consumer Price Index, was 2.7 percent in June. As for employment, the headline unemployment rate was 4.1 percent in June, slightly higher than it has been since the end of the recession.
The current federal funds rate is historically low, since it spent much of the period from the 1960s to the 1980s higher than it is now. For much of the 21st century, however, the rate has been relatively low, including a good bit of the 2010s nearly at zero, in response to the Great Financial Crisis, and in the early 2020s, before pandemic-inspired inflation inspired the Fed to push rates up quickly in 2022.
Interest rates and multifamily loans
“For the real estate market to fully recover, it needs the Federal Reserve to cut rates,” law firm HSF Kramer Partner, Real Estate, Andrew Charles told Multi-Housing News. “However, the real estate industry by itself is not what drives the Fed’s decision, so it’s unlikely given the economic climate that there will be any significant movement in the short term.”
Throughout the remainder of 2025, there are still a significant number of real estate loans that are facing maturity, and with rates being where they are, that will create a very challenging refinancing environment, Charles points out. This is especially true for those borrowers who last financed their property when rates were significantly lower.
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“As a result, I think we’ll still experience instability, and the trend toward necessary recapitalizations, preferred equity deals, and, in the worst-case scenario, potential foreclosures will continue in the near term,” Charles said.
There will be pockets of real estate assets that defy the current economic climate, he notes. But there will continue to be distressed property situations alongside the success of some trophy assets in major markets.
Interest rate uncertainty means a growing reliance on alternative financing, Zack Simkins, managing director at Vaster, a private lender specializing in residential and commercial financing, told MHN.
“Investors and developers are increasingly turning to creative debt and equity structures, as well as private credit, to gain short-term flexibility and execution speed,” Simkins says. “With traditional banks and institutional lenders pulling back amid uncertainty, these alternatives are stepping in to fill the gap and drive continued deal flow in a conservative environment.”
While cutting interest rates may seem like the obvious lever to stimulate growth and improve market sentiment, the real shift will come from a broader pricing rebalance, Simkins says.
“As asset values begin to reflect true supply and demand fundamentals—alongside rising construction costs and insurance premiums—we expect to see over-leveraged properties and unstable income-producing assets pushed out of the market,” Simkins says. “This necessary recalibration will help establish a more sustainable foundation and signal the beginning of a recovery in an otherwise frothy environment.”
