After the Fed’s Big Move on Interest Rates, What’s Next?
The 50-basis-point rate cut announced by the Federal Reserve last week could be followed by more cuts in the months to come.
The Federal Reserve today announced a 50-basis-point rate cut, likely the first of several. While it was all but certain that this Federal Open Market Committee meeting would result in a decrease to the Federal Funds Rate, by how much remained in question.
From March 2022 to July 2023, the Fed issued 11 rate increases, bringing the Federal Funds Rate to a range of 5.25 to 5.5 percent. Since then, that range has remained at a decade-high peak as the Central Bank has paused further action.
Some anticipated that this week’s FOMC meeting would result in a cut by a quarter percentage point. But today, as the result of the more bullish move, the range stands at 4.75 to 5 percent. Fed Chair Jerome Powell attributed this decision to progress made on inflation, cooling job gains, easing nominal wage growth, a rise in GDP in the first half of the year that is expected to remain solid and resiliency in consumer spending in the FOMC press conference following the announcement.
“Longer-term inflation expectations appear to remain well anchored as reflected in a broad range of surveys of households, businesses and forecasters, as well as measures from financial markets,” Powell said.
Multifamily experts had been expecting such a move. But some are on the fence about whether it’s too little, too late, to ease the stress in the multifamily market.
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With banks still hesitant to lend, thin margins on investments and looming debt maturities, one cut might not be enough. Yet others are hopeful that this move will improve market sentiment and get more deals flowing.
As inflation more closely approaches the Fed’s 2 percent goal, many anticipate two further cuts to round out the year. Powell indicated that the outcome of the last 2024 FOMC meetings would be based on future data and economic indicators.
“We are not on any preset course,” Powell noted. “We will continue to make our decisions meeting by meeting. We know that reducing policy restraint could hinder progress on inflation. At the same time, reducing restraint too slowly could unduly weaken economic employment.”
