The Federal Reserve just delivered its second straight quarter-point interest rate cut, lowering short-term borrowing costs into the high-3-percent range for the first time in three years.
In a 10-2 vote, the Federal Open Market Committee (FOMC) reduced its benchmark rate by 25 basis points to a range of 3.75%–4.0%, without signaling whether additional cuts are on the horizon. The decision follows five consecutive pauses earlier in 2025 and three rate cuts in late 2024, after rates held between 5.25% and 5.5% from July 2023 through September 2024.
At his post-meeting press conference, Fed Chair Jerome Powell emphasized that another rate reduction in December is uncertain, despite projections from the Fed’s September “dot plot” suggesting one more cut before year’s end.
“In the committee’s discussions at this meeting, there were strongly differing views about how to proceed in December,” Powell said. “A further reduction in the policy rate at the December meeting is not a foregone conclusion. Far from it.”
The rate decision comes amid political turbulence, as President Donald Trump seeks greater control over the central bank while pressing for faster rate cuts. Trump has attempted to dismiss Fed Governor Lisa Cook, appointed by President Joe Biden to a term running through 2038, over allegations of mortgage fraud currently in court. He has also sought to remove Powell before his term ends in May 2026. The U.S. Supreme Court is scheduled to hear Cook’s appeal in January.
Meanwhile, the Fed continues to balance both sides of its dual mandate. Unemployment reached a four-year high of 4.3% in August, while inflation measured 3% in the most recent Consumer Price Index (CPI) report — the only release since Trump suspended Bureau of Labor Statistics publications after firing Commissioner Dr. Erika McEntarfer on August 1.
Powell acknowledged that the lack of reliable data could complicate the Fed’s policy decisions heading into December but reaffirmed the central bank’s 2% inflation goal.
CRE Outlook Strengthens
The Fed’s recent easing has already begun to stir activity across the commercial real estate sector.
“Deal volume has picked up since the September rate cut, with lenders showing renewed appetite for transactions and clearer valuations emerging,” said Jay Neveloff, partner and chair of U.S. real estate at HSF Kramer.
“The closer some lenders get to realizing they may need to enforce loans if restructurings fail, the more likely they are to start trading those loans,” Neveloff said. “I think 2026 is going to be a terrific year for transactions — some opportunistic, some painful.”
Steven A. Shoumer, co-chair of Blank Rome’s real estate practice, echoed the sentiment, noting a rebound in confidence among both borrowers and lenders as traditional banks cautiously re-enter the market alongside private lenders.
“We’re starting to see the more traditional banks — not going full bore, but beginning to come back with more opportunities,” Shoumer said. “They’re still being selective about assets and sponsors, but it’s a notable thaw from the last couple of years.”
Stephanie Wiggins, head of production, agency, and FHA lending at PGIM Real Estate, said she’s advising borrowers to lock in rates now as 10-year Treasury yields dip below 4%.
“Many multifamily owners are still opting for shorter-term deals that allow flexibility,” Wiggins said.
Wiggins noted that agency-backed loan pipelines are swelling, setting up a year-end surge in volume comparable to 2020–2021 levels as the investment sales market stabilizes.
“Across the agency lending community, lenders are reporting healthy pipelines as owner-operators buy into the optimism tied to falling rates and a ‘let’s win deals’ mentality at both Fannie and Freddie,” Wiggins said. “This fourth quarter will require all hands on deck as borrowers move quickly to strike while the iron is hot.”
Source: Commercial Observer
