Fed Holds Interest Rates Steady at Powell’s Last Meeting as Fed Chair
How the central bank moves forward under a new chair is unclear.
The Federal Open Market Committee has once again decided to hold the federal funds rate at 3.5 to 3.75 percent, where it has been since December. The move comes during an unusually tense time for the economy and for the Federal Reserve itself.
Top of mind for the Fed is U.S. inflation. The rate remains higher than the Fed wants, especially in light of the rapid rise in energy prices due to the disruption of global energy markets caused by the war with Iran.
In maintaining the federal funds rate, the Fed’s statement reiterated its dual goals—full employment and low inflation—and said it is “attentive to the risks to both sides of its dual mandate.”
The statement also noted that “developments in the Middle East are contributing to a high level of uncertainty about the economic outlook.”
The central bank’s decision wasn’t unanimous this time. One member of the FOMC wanted to lower interest rates, and three others objected to language in the Fed’s statement, though they approved of maintaining rates at the current level.
The annualized rate of U.S. inflation spiked to 3.3 percent in March, marking the highest level since May 2024 and a sharp increase from 2.4 percent in both February and January. The rise was driven primarily by higher energy costs, which were up 12.5 percent on average.
On a monthly basis, consumer prices rose 0.9 percent, the largest increase since June 2022, following a 0.3 percent gain in February. Core inflation—which excludes food and energy—also increased moderately, to an annualized rate of 2.6 percent.
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As yet, the inflation rate for shelter hasn’t joined the upward bounce in prices. According to the Bureau of Labor Statistics, shelter costs grew 3 percent year-over-year in March.
Inflation has been higher than the annualized target rate of 2 percent since the aftermath of the pandemic, but after the rate cooled somewhat, the central bank cut rates a few times, totaling 175 basis points. As recently as the summer of 2025, the rate was 5.25 percent to 5.5 percent.
The other part of the central bank’s dual mandate is full employment. The Bureau of Labor Statistics reported recently that the U.S. labor market gained 178,000 jobs in March, an improvement from the loss of 92,000 jobs in February.
Even so, the labor market is static: Both the unemployment rate, at 4.3 percent, and the number of unemployed people, at 7.2 million, changed little in March. Those measures also changed little over the year, the BLS said.
Sunset on Powell’s term
Beyond the longer-term impact of the war on the economy, an added layer of uncertainty is about the central bank itself. Federal Reserve Chairman Jerome Powell’s term ends on May 15, capping eight years in the position. His replacement, Kevin Warsh, had confirmation hearings before the Senate Banking Committee last week. The Senate Banking Committee advanced Warsh’s nomination to the full Senate earlier today, voting 13-11 in favor along party lines.
The nomination had been stalled by blowback from a formal investigation of the chairman by U.S. Attorney Jeanine Pirro over alleged cost overruns related to the renovation of the Fed’s headquarters in Washington, D.C. Powell himself criticized the investigation as politically motivated, following the president’s pressure on him to cut rates.
Sen. Thom Tillis (R-N.C), had said he would block Warsh’s nomination until the Justice Department resolved its investigation. On Friday, Pirro said her office was dropping the investigation. On Sunday, Tillis said he will move forward with the nomination.
At the April 29th press conference, Powell stated that he plans to stay at the central bank as a governor, following the end of his term.
During his opening statement at the hearings last week, Warsh asserted the importance of the Fed’s independence, but also said the central bank should not stray “into fiscal and social policies where it has neither authority nor expertise,” though he did not name any such policies specifically.
The uncertainty’s effects on multifamily
Investors aren’t expecting radical change in any case. “The Fed’s decision to hold rates steady was expected by the vast majority of real estate investors, who continue to remain optimistic for a cut or two by year end,” said Marion Jones, principal & managing director of U.S. Capital Markets at Avison Young. “Should rate cuts materialize later this year, they would accelerate deal flow, particularly in multifamily and help reignite transaction volume across sectors.”
Other experts have more bearish assessments of the current macroeconomic situation and its effects on multifamily. “Housing remains stuck in a painful stalemate: limited supply keeps prices high and elevated mortgage rates keep buyers sidelined,” said George Ratiu, The National Apartment Association’s vice president of research. “Sellers, in turn, are reluctant to cut enough to restore affordability, and the result is a market with fewer deals, slower activity and an affordability crunch that monetary policy cannot quickly fix.”
This is a developing story. Check back later for more updates.
