The Federal Reserve chose to maintain current interest rates at the same level since last July, despite calls from economists and policymakers to implement a cut. (AP News, July 31 | Axios, July 31)

Fed's Decision

• Fed chair Jerome Powell emphasized the need for data-driven decisions, indicating that future rate adjustments will hinge on economic indicators. (Washington Post, July 31)

• During the June meeting, Fed officials released their Summary of Economic Projections report, which showed that policymakers penciled in just one rate cut this year, down from the three initially estimated at the start of the year. (RW, June 14)

• After the decision, Powell said, "a reduction in our policy rate could be on the table as soon as the next meeting in September." (Barrons, Aug.1)

• In June, Senators Elizabeth Warren (D-MA), Jacky Rosen (D-NV), and John Hickenlooper (D-CO) wrote to Powell, urging the Fed to cut the federal funds interest rates from a two-decade-high of 5.5 percent, citing that high interest rates are increasing the costs of housing and insurance, and exacerbating the housing supply crisis. (Letter)

• In their letter on housing prices, they emphasized that “The country is already facing a severe housing shortage, and the Fed’s refusal to bring down interest rates is exacerbating this shortage and driving higher inflation rates…Lower mortgage rates would encourage more people to sell their homes, which would in turn increase housing supply, decrease prices, ease the costs of renting, and ultimately increase homeownership.”

CRE Markets

• With interest rates unchanged at a 23-year high, the commercial real estate sector faces significant challenges, particularly in financing and investment, as higher rates increase borrowing costs and reduce demand for development.

• Higher interest rates and the pandemic-induced shift to remote work have left a lasting impact on office demand, prompting landlords to rethink space utilization.

• In a recent interview with Bloomberg Television, RER board member Owen Thomas (BXP) discussed the transformation of the office market and the need for innovation and adaptability in the face of changing tenant needs and market conditions. (Watch interview)

The Fed’s next meeting is scheduled for September 17-18, 2024.