The Federal Open Market Committee (FOMC) decided to keep interest rates unchanged at 5.25% to 5.5% for the eighth consecutive meeting. While the Fed did not indicate any imminent rate cuts, both the FOMC and Federal Reserve Chair Jerome Powell communicated a more optimistic outlook compared to previous meetings. Powell noted that significant progress has been made on inflation and expressed confidence in moving toward a sustainable reduction to the 2% target. With inflation easing and unemployment increasing, the real estate industry is growing hopeful that interest rate reductions may soon occur.
During a recent press conference, Federal Reserve Chair Jerome Powell indicated that no decisions have been made regarding future meetings, including one planned for September. He stated that while the committee is approaching a point where a policy rate cut may be appropriate, they are not there yet. A possible rate cut in September is contingent on inflation decreasing as expected, economic growth remaining strong, and stability in the labor market.
Powell emphasized that the Fed’s decisions will rely on a comprehensive review of data, not solely inflation figures, as they work to balance their dual mandate of maintaining stable prices and maximum employment. The personal consumption expenditures price index showed a year-over-year increase of 2.5% in June, signifying a downward trend but still above the Fed’s target.
The Federal Open Market Committee (FOMC) noted that job gains have slowed, and the national unemployment rate reached 4.1% in June, the highest since November 2021. An increase in unemployment might prompt the Fed to lower rates to mitigate recession risks, suggesting a shift in focus from inflation to broader economic stability.
Cushman & Wakefield’s CEO, Michelle MacKay, expressed optimism about upcoming rate cuts, predicting they would stimulate activity in the commercial real estate market. Initially responding quickly to rate cuts, the market could experience a significant increase in completed transactions at the end of 2024 and early 2025 as more cuts occur. Experts believe that once the Fed cuts rates, market participants will start to anticipate subsequent cuts, influencing asset pricing across various sectors.
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