Following 10 consecutive interest rate hikes, the Federal Reserve has paused increases, at least for the time being. After the last 25 basis point spike, the target range remain 5 percent to 5.25 percent.
This decision was anticipated by most as recent bank failures and recession concerns caused anxiety throughout the economy, including among multifamily developers, investors and operators.
Following the Federal Open Market Committee’s meeting, Fed Chairman Jerome Powell explained that this decision was rooted in economic data and the need to assess the economy’s reaction to previous rate increases.
“In light of how far we’ve come in tightening policy, the uncertain lags with which monetary policy affects the economy and potential headwinds from credit tightening, the committee decided to maintain the target range for the federal funds rate at 5 to 5.25 percent and to continue the process of significantly reducing our securities holdings,” Powell said during a press conference Wednesday.
This pause largely comes as a relief to the industry as multifamily faces the impacts of previous interest rate hikes: a bid-ask spread, declining development activity, a supply-demand imbalance and debt maturities for troubles assets, among other concerns.
While the pause is welcomed by many in the financial sector, Powell noted that further rate increases later in the year are likely, as inflation remains well above the Fed’s goal of 2 percent.
“Nearly all committee participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year,” Powell told reporters.
