The Federal Open Market Committee (FOMC) held the federal funds target range steady at 4.25% to 4.50% on Wednesday, as widely anticipated, during its first meeting of 2025. This decision marks a departure from three consecutive rate cuts, which collectively lowered the target range by 100 basis points since September.

Fed’s Decision

• Chair Fed Jerome Powell indicated that inflationary trends are headed in the right direction. The Fed maintained its assessment that the risks to its dual mandate—promoting a strong labor market and controlling inflation—remain “roughly in balance.” (ConnectCRE, Jan. 29)

• The country's inflation rate remains somewhat elevated above the Fed’s target of 2%. In projections released at last month’s meeting, most officials signaled they expected the Fed to lower rates in the year ahead, but were less certain over how many times the central bank would cut.

•  Most of them penciled in two rate cuts this year, down from four cuts in projections released last September, assuming progress in lowering inflation continued. (CoStar, Jan.29) (WSJ, Jan.29)

Looking Ahead

• Powell highlighted that future decisions will be guided by “real progress” in bringing inflation down toward the Fed’s target or “some weakness” in the labor market. (ConnectCRE, Jan.29) 

• President Donald Trump’s plans to cut taxes, impose hefty tariffs on key imports and deport millions of immigrants who lack permanent legal status have generated unusual uncertainty about the course of the economy, inflation and interest rates. (USAToday, Jan. 27)

• Thomas LaSalvia, Moody’s head of commercial real estate economics, told CoStar News in an email that “all eyes are now shifting away from Fed action and towards economic consequences of new administration policies." He added that "moving forward, the extremity of those policy actions will be more influential on economic health.” (CoStar, Jan.29)

Pressure From The White House

• Trump says he will “demand” lower interest rates in a virtual address last week to the World Economic Forum in Davos, Switzerland.

• When asked about the comments, Powell, sought to stay above the fray. “I’m not going to have any response or comment whatsoever on what the president said. It’s not appropriate for me to do so,” he said. “The public should be confident that we will continue to do our work as we always have, focusing on using our tools to achieve our goals.” (USNews, Jan.27)

• In the wake of the Fed’s interest rate announcement, President Trump took to Truth Social: “Because Jay Powell and the Fed failed to stop the problem they created with Inflation, I will do it by unleashing American Energy production, slashing Regulation, rebalancing International Trade, and reigniting American Manufacturing, but I will do much more than stopping Inflation, I will make our Country financially, and otherwise, powerful again!” (TheHill, Jan.29)

What to Watch: Tariffs

• White House Press Secretary Karoline Leavitt told reporters today President Trump plans to move forward with a 25% tariff on imports from Canada and Mexico starting tomorrow, and an additional 10% tariff on Chinese imports. (USA Today, Jan. 31)

• Howard Lutnick, Trump's Commerce Secretary Nominee, told the Senate during his confirmation hearing this week, that he advised Trump to impose country-by-country tariffs to restore trade "reciprocity" and vowed to tighten restrictions on China’s access to advanced AI technology. (Reuters, Jan. 29)

• These tariffs could have significant repercussions for the U.S. economy, including housing affordability. Any tariffs on imported materials like steel, aluminum and lumber are likely to drive up costs for developers and impact efforts to address the housing shortage. (Roundtable Weekly, Jan. 24 | Nov. 27)

The Roundtable will continue to track coverage on interest rates and tariffs, and the implications for commercial real estate.