As far as real estate investors are concerned, there’s more bad news than good from the latest Federal Reserve meeting.
The bad news is that interest rates will remain the same. The good news is that inflation is down (from 3.4% last month to 3.3% in May). Now, it’s surely a matter of time—possibly in July or September—until the Fed follows in the footsteps of the Bank of Canada and the European Central Bank and begins to cut rates.
As most homebuyers and investors are only too aware, the Fed has opted to hold the federal funds rate steady for almost a year in response to elevated inflation and better-than-expected economic performance. By keeping rates as they are, the Fed is attempting to pull off a delicate balancing act and nail a soft landing by lowering inflation just enough to avoid a recession and then lowering rates to stimulate the economy. Should the Fed cut rates too quickly, they fear they will spark inflation again.
The fact that inflation remains more than a percentage point higher than the Fed’s target of 2% has many investors wondering if the Fed’s stance will result in any rate cuts this year. In its recent announcement, the Fed stated there will now be one rate cut. A drop of 25 basis points for mortgage holders is marginal and won’t move the needle much on most people’s loans. However, it could be the start of something significant next year and into 2026.
The First Rate Cut Could Come in September
“This [the lower inflation number] was a very encouraging number,” Laurence Meyer, a former Fed governor…