The Federal Reserve cut its main interest rate by 25 basis points on Wednesday to a range between 3.50% to 3.75% following a two-day meeting.
The decision marks the central bank’s third rate reduction this year, following a quarter-point cut in September and October. The Fed is signaling another 25 basis points in 2026, according to Yahoo! Finance.
On Dec. 9, Fed officials began a two-day meeting divided over the best path for monetary policy, according to analysts and minutes of their most recent meeting. For the first time since 2019, three officials voted against a policy action, according to Yahoo! Finance.
Fed Governor Stephen Miran preferred a 0.5% reduction. At the same time, Kansas City Fed President Jeff Schmid and Chicago Fed President Austan Goolsbee voted to keep rates unchanged, according to the Federal Reserve’s press release.
Observers anticipated that the Fed would trim the main interest rate for a third straight time after the Bureau of Labor Statistics reported that inflation remained steady in September.
“Today’s 25-basis-point cut was widely expected, so the bigger story is what the Fed signals about the months ahead,” Michael Lee, a partner at commercial real estate services firm HKS Real Estate Advisors, told Multifamily Dive in emailed comments. “Recent data shows a cooling labor market, and this move reflects a continued risk-management approach.”
Multifamily reaction
The Fed’s decision to cut rates brought mixed reactions from the apartment industry. While today’s rate cut will offer modest relief, Lee said clarity and stability in long-term rates will truly unlock capital and deal flow.
“Short-term benchmarks will dip, but long-term rates remain elevated, and spreads haven’t narrowed enough to materially change lending conditions,” he said.
Tim Harris, senior vice president at apartment owner Rosewood Property Company, thinks the rate cut would boost investor confidence and market liquidity. “Lower interest rates reduce borrowing costs, which in turn makes new development and refinancing of existing properties cheaper,” he said in emailed comments.
The rate cut can also increase property values as cap rates fall, which could entice some owners to put their properties on the market, he said.
“The transaction volume picking up provides liquidity and movement of funds between parties, and increases property value confidence,” Harris said. “This confidence is extremely helpful to investors on all sides of the transactions in order for them to feel like they are making good decisions when they buy or sell a property.”
On the apartment development front, an interest rate cut should be helpful, according to Jamie Telchin, managing director of multifamily development at Hillpointe.
“Projects will be slightly easier to underwrite, and also, I feel, more importantly, it will continue to signify to the real estate market that things are improving, which hopefully will translate to increased activity,” Telchin said in emailed comments.
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