The Federal Reserve raised its benchmark interest rate by a quarter point on Wednesday to a target range of 3.75-4 percent, its first increase since 2023. The Federal Open Market Committee (FOMC) voted unanimously, a sharp turn from July when three officials dissented in favor of a hike. (Cushman & Wakefield, Sept. 17)

Fed’s Decision

• The FOMC voted 12-0 to raise the target range by 25 basis points, citing economic activity expanding at a solid pace, resilient domestic spending, strong productivity growth, robust capital investment, and job gains keeping pace with the workforce. (Federal Reserve | Implementation Note, Sept. 16)

• Chair Warsh said this summer’s readings do not show underlying inflation trends meaningfully improving, putting 12-month total PCE inflation at roughly 3.6 percent in August, with too many categories still running above 3 percent. (Opening Statement, Sept. 16)

• Repeating a point from Jackson Hole, Warsh said he would be “hard-pressed to describe broad financial conditions as restrictive,” a view he said the Committee widely shared. (Opening Statement, Sept. 16)

• The Summary of Economic Projections put median real GDP growth at 2.3 percent this year, total PCE inflation at 3.7 percent falling to 2.3 percent next year, and unemployment steady near 4.1 percent. (Projections | Opening Statement, Sept. 16)

Housing and CRE Outlook

• The 10-year Treasury breached 5 percent on Sept. 15, and the 30-year topped 5.4 percent, both the highest since 2007. Most permanent commercial mortgages price off Treasury benchmarks rather than the federal funds rate. (Scotsman Guide, Sept. 16)

• Lenders report that higher debt service costs are reducing loan proceeds and widening the gap between buyers and sellers, requiring sponsors to contribute more equity. Deal structures are adapting, with more cash-in refinancings, recapitalizations, and loan sales as lenders grow less willing to extend. (Commercial Observer, Sept. 16)

What to Watch

• The FOMC next meets Oct. 27-28, followed by Dec. 8-9. With the median projection pointing to one more increase this year, attention will remain on both meetings for signs of when the Fed could make its next move. (Federal Reserve Calendar)

• Nearly $983 billion of U.S. commercial real estate mortgages are estimated to mature in 2027. Sustained higher long-term yields would increase refinancing costs as those loans come due. (RER Policy Priorities, Capital & Credit)

RER will continue to advocate for policies that strengthen capital markets, preserve access to credit, and support the capital formation needed to drive long-term economic growth.