To no surprise, the Federal Reserve has cut another quarter point off the federal funds rate. But then came two other announcements that triggered market angst — providing a good and bad news day for real estate.
There was also another sign of tensions among central bank members. Two voted against the decision, including Stephen Miran, who wanted to lower the rate by 50 basis points instead of 25 and Jeffrey Schmid, who wanted the federal funds target rate to remain steady. There were also two dissenters in the rate vote on the July 30 meeting, which was the first time in 30 years that two FOMC members voted against the majority.
“Today’s decision, with its conflicting dissents, is reminiscent of September 2019 when the Committee cut rates, but some wanted a more aggressive cut while others preferred no change at all,” Jeffrey Roach, chief economist for LPL Financial, wrote in a note.
The first of the two announcements came from Fed Chair Jerome Powell, whose statement on what might happen to rates in the year’s last FOMC meeting was as follows: “A further reduction in the policy rate at the December meeting is not a foregone conclusion.”
Markets did not welcome the news, as sell-offs in both equities and bonds occurred. The 10-year Treasury Note yield closed at 4.08%, adding 10 basis points to the 3.98% close on Tuesday, October 29. That is significantly higher than the 4.01% for January 2026 currently projected by Chatham Financial.
The 10-year yield provides the risk-free component used to set many longer rates, including mortgages. This may be a momentary reaction by investors who thought they would definitely see the Fed further reduce rates this year, but there is no way to know where the metric will move.
The second announcement was the decision to end the “reduction of its aggregate securities holdings” — which will stop the Fed’s balance sheet bond sell-offs on December 1.
“This is not a complete surprise but does signal their concern about the fragilities in the markets," Roach wrote.
But trying to understand longer-term directions by the Fed is even more fraught with difficulty now than usual.
As Dario Perkins, managing director of global macro at GlobalData, wrote today: “Think about the news since the last FOMC – basically one soft(ish) CPI report, a few more mindless trade skirmishes (followed by phoney ‘deals”) and a bunch of high-profile ‘credit cockroaches’. On the credit side, Powell didn’t seem unduly concerned. We concur – much of the recent commentary on this issue has been massively overblown.”
Following the market and its ultimate impact on CRE continues to be a game of wait-and-see.
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