How the Fed’s rate decisions will affect commercial real estate going forwards

Nearing the Federal Open Market Committee’s (FOMC) Sept. 19–20 meetings, the business world is concertedly gauging whether the Federal Reserve will keep the target federal funds rates level at 5.25 percent to 5.5 percent, or if it will once again raise rates in its continuing effort to dampen inflation.

In the past 12 months, the Fed has raised its policy rate by 300 basis points and has “substantially reduced the size of [its] securities holdings,” said Jerome Powell, the Fed’s chairman, during his recent remarks at the Jackson Hole Symposium in Wyoming, the annual gathering of economists hosted by the Federal Reserve Bank of Kansas City. The increase in rates has tightened lending conditions in the United States, drying up investment and affecting economies across the globe.

Corresponding with the rise in interest rates has been a rise in Treasury yields. These interest-rate and Treasury yield increases put a damper on the amount