The Federal Reserve decided to lower its benchmark interest rate by 50 basis points on Wednesday, September 18th, marking the first rate cut since March of 2020. The federal funds rate range stayed steady at 5.25%-5.5% from July of 2023 until now when they were lowered 50 basis points to a range of 4.75%-5%.
Higher interest rates are typically a response by the Federal Reserve to rising inflation. When inflation is falling and economic growth is slowing, the Federal Reserve typically lowers interest rates to stimulate the economy. Inflation peaked at 9.1% in June of 2022 and caused the following 11 consecutive rate hikes. Inflation is currently down to 2.5% and although the Federal Reserve is targeting an inflation rate below 2%, they are confident inflation is continuing on a downward trend.
This most recent decision to cut rates was also likely due to the slowing job market. High interest rates discourage investments in businesses, which can lead to decreased hiring of employees.
It is important to note that multifamily interest rates are tied to the 10 year treasury rather than the Federal Funds rate, as explained in my last article Positive Outlook for Multifamily Interest Rates, but they typically follow the same trend. Experts expect two more rate cuts of 25 basis points to end 2025 and 125 basis points of rate cuts in 2025. Please reach out to see how this may affect your real estate portfolio!
SVN Cornerstone Multifamily Team
Jordan Lester, CCIM, MBA joined SVN Cornerstone as a Commercial Real Estate Broker in 2022. Jordan specializes in advising clients with the acquisition and disposition of multifamily investment properties. With a primary focus in Spokane County and an expert understanding of the latest market trends, Jordan is committed to maximizing his client’s financial goals to achieve their real estate objectives. Jordan began his real estate career as a broker’s assistant for three years with SVN Cornerstone, which gave him valuable knowledge and experience to jumpstart his career as a broker. To get in touch with Jordan, email jordan.lester@svn.com or call 509.496.6922