Federal Reserve Pauses Rate Hike as Inflation Slows

The Federal Reserve left the U.S. interest rate unchanged in late September, leaving the main policy rate range of 5.25% to 5.5%, citing an easing of economic conditions while also acknowledging inflation is still higher than its 2% target.  The Fed is waiting to see if its historic series of rate hikes over the last 18 months continues to get inflation under control.  The Fed cited, “The economy is in solid shape, with job gains slowing and tighter credit conditions likely to slow economic activity and stem inflation.” 

In August, the Bureau of Labor Statistics said prices for consumers were up 3.7% from the same period last year.  That’s above the 2% annual level the Fed Says it wants to see, however, is a big change from last year’s peak of 9.1%.  The future of the Commercial Real Estate Market is intricately linked to developments in interest rates and the market’s corresponding adjustments. 

The full repercussions of these changes are anticipated to become apparent in early 2024, shaped by the continual modifications in both interest and cap rates, along with the overall cost of capital.