Fed Cuts Rates for 2nd Time
Multifamily execs saw the move coming, but its impact may take time to emerge.
In the middle of this eventful week, the Federal Reserve made news of its own on Thursday by announcing the second interest rate cut of the fall. This time, the decision was a 25-basis-point decrease.
In September, Fed Chair Jerome Powell announced the first cut to the Federal Funds Rate since rate increases began in March 2022. He attributed his decision to cooling job gains, easing nominal wage growth, a rise in GDP and perhaps most importantly, progress made on moving closer towards the Fed’s inflation goal.
Now, following the Federal Open Market Committee meeting today, the Federal Funds Rate stands at a range of 4.5 to 4.75 percent. Inflation is continuing to move closer to the central bank’s 2 percent target. Powell also noted easing labor market conditions and a generally low unemployment rate.
“Longer-term inflation expectations appear to remain well anchored, as reflected in a broad range of surveys of households, businesses, forecasters, as well as measures from financial markets,” Powell said during the Thursday afternoon press conference.
Before the Fed released its decision, multifamily experts weighed in on potential outcomes. While most agreed that a rate cut was in store, not all were on the same page about when and how the effects would be felt.
Directly impacting multifamily are the variables that led the central bank to cut rates again this month. Issues impacted by rates, as noted by experts earlier this week, also include interest expenses during construction, underwriting, business operations, cash flow and transaction activity.
The industry still waits to see what the new “neutral” rate environment will look like. While one more rate cut is expected before the year’s end, Powell said today that the Fed will make that decision based on economic indicators, and that there is no preset course.
“The Fed has been assigned two goals for monetary policy: maximum employment and stable prices,” Powell noted. “We remain committed to supporting maximum employment, bringing inflation sustainably to our 2 percent goal and keeping longer-term inflation expectations well anchored.”
