While the Federal Reserve opted to leave interest rates unchanged at 4.25%–4.5%, all attention now turns to September, where a potential policy shift could shape the rest of the year—particularly for real estate markets.

Holding pattern continues:

As expected, the Fed paused rate changes amid lingering economic unpredictability. Although Fed Chair Jerome Powell emphasized that no final decisions have been made, markets are already pricing in the likelihood of two rate cuts by year-end.

Rare dissent within the Fed:

In a notable break from recent consensus, two members of the Federal Open Market Committee opposed the decision to keep rates steady—marking the first such internal disagreement since 1993. Despite this, the Fed’s own projections still point to a pair of 25-basis-point cuts before year-end. Economic shifts in inflation and employment could be the deciding factors.

Real estate players watch closely:

Industry leaders are hopeful that a September rate reduction could breathe new life into slower housing segments. Elevated borrowing costs have tamped down residential activity, though overall transaction volumes have held up.

Geopolitics muddy the waters:

Uncertainty surrounding international trade policy—especially under a potential second Trump administration—is complicating the Fed’s outlook. While the economic effects of tariffs haven’t fully surfaced, early signs show businesses cutting output or absorbing higher costs, trends economists say can’t continue indefinitely.

CRE remains resilient—for now:

In his latest comments, Powell described nonresidential real estate activity as “mostly stable,” citing encouraging momentum in markets such as Chicago and Boston. However, volatility in trade and construction costs could dampen future development if uncertainty persists.

Bottom Line:

All eyes on September. With two key rounds of inflation and jobs data set for release before the next Fed meeting, policymakers will soon have more clarity. For commercial real estate, the hope is that interest rate relief comes before broader uncertainty puts a freeze on growth.