Fed Holds Rates Steady for 2nd Time in a Row

The Federal Open Market Committee has voted to hold interest rates at a range of 3.50 to 3.75 percent. It’s the second meeting in a row where the FOMC has kept rates in that range, following three consecutive cuts at the end of 2025.

Wednesday’s announcement came as the conflict in Iran and the Middle East has introduced new economic uncertainty, pushing up oil prices and re-introducing the possibility of rising inflation. For now, though, the CRE sector may be relieved to have some consistency.

All members of the committee voted to hold rates steady, except for Stephen Miran, who voted to cut rates by a quarter of a percentage point. Miran was appointed by President Donald Trump last year.

“The implications of developments in the Middle East for the U.S. economy are uncertain,” Powell said in a press conference following committee’s announcement. While higher oil prices may lead to an uptick in inflation in the short-term, Powell noted, it is too early to determine what effect this could have in the long-term.

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“Stability in interest rates should help provide more visibility on the cost of capital for now, which should support a gradual pickup in transaction activity,” Uma Moriarity, senior investment strategist & global head of sustainability at CenterSquare Investment Management, told Commercial Property Executive. “However, volumes are likely to improve incrementally rather than sharply, as the market still works through the capital that’s stuck in the system.”

Development, she added, may still be challenged by higher financing and construction costs, which will constrain new supply. Rising energy costs due to the war may also impact the price of building new, according to Mark Roberts, managing director of research at Crow Holdings Capital.

“New construction has already subsided, and the marginal projects might get postponed,” Roberts told CPE. “If that occurs, it simply improves the prospects for development for better capitalized projects.”

The outlook for CRE

While the retail and industrial markets are holding steady, higher-than-desired interest rates continue to pose a challenge for the office sector, according to Moriarity.

“Holding rates steady improves capital markets across all sectors, but fundamentals—not rates—will continue to drive relative performance,” she said.

In the Fed’s Summary of Economic Projections, most officials maintained their expectations that interest rates would see at least one more cut this year by a quarter of a percentage point. Still, though, seven of the 19 members expected no rate reductions.

Roberts said he is expecting one more cut this year, while Moriarity noted that a cut would likely not come until late 2026 or early 2027. She noted that the timing is heavily dependent on the outcome of the Iran war and how long it lasts.

Powell’s term as chair is also due to end in May, though Trump’s nominee for the position, Kevin Warsh, has not yet been confirmed but may be more inclined to push for rate cuts. Republican Sen. Thom Tillis has said he will not vote to confirm Warsh until a Justice Department inquiry into Powell is dropped. While a federal judge recently threw out a subpoena of Powell, U.S. Attorney Jeanine Pirro said she will appeal the decision.