Fed Holds Rates Steady Amid Trade Uncertainty, Impacting Commercial Real Estate Outlook

The U.S. Federal Reserve has opted to maintain its benchmark lending rate within a target range of 4.25% to 4.5% as it assesses the ongoing economic impact of trade disputes and inflationary pressures.

In its recent announcement, the Fed cited increased uncertainty surrounding the economic outlook, leading to a cautious approach. This decision has drawn reactions from commercial real estate professionals, who remain concerned about the effects of tariffs and trade conflicts on development projects.

Industry leaders report that rising costs for construction materials and labor, compounded by uncertainty over trade policies, are weighing on new investments and slowing overall activity. According to Marc Selvitelli, president and CEO of the commercial real estate development association NAIOP, the economic climate has added pressure to both current projects and future developments.

Federal Reserve Chair Jerome Powell acknowledged the difficulty in determining the extent to which tariffs contribute to inflation. During a press conference, Powell noted that the complexities of trade policies, immigration shifts, and fiscal changes make it challenging to predict their long-term impact.

Some economists caution that the economy may face a period of stagflation, marked by high inflation and sluggish growth. The Fed’s latest projections indicate a weaker economic outlook for the remainder of the year and into 2026, with slower growth, rising inflation, and a softening labor market.

Despite these concerns, policymakers have signaled their commitment to maintaining stability. Projections currently suggest rate cuts totaling 50 basis points both this year and next.