The Federal Reserve delivered another 25-basis-point rate cut this week—its second in as many months—bringing the Fed Funds target range to 3.75%–4.00%. With inflation softening and employment growth stalling, the move was widely anticipated; CME FedWatch had pegged the odds at 97.8%. Still, markets were taken aback by Chair Powell’s unexpectedly hawkish tone, which dampened expectations for another rate cut in December.

Economic Overview

• Inflation: September CPI rose 0.2%, slightly below August’s 0.3%, bringing annual inflation to 3.0%—a touch under forecasts.

• Employment: Job creation continues to slow sharply, with estimates ranging from 15,000 to 50,000 new jobs in September. Unemployment remains around 4.3%.

• GDP Growth: Q2 GDP was revised upward to 3.8%, rebounding from –0.5% in Q1, largely due to declining imports after tariff-related inventory build-ups early in the year.

• Treasury Yields: The 10-year Treasury has hovered near 4.00% for nearly two weeks, closing at 4.07% post-Fed meeting. The 5-year sits at 3.72%, with the forward curve largely flat through 2026.

Rate Trends and Market Outlook

Markets appear steady following months of Treasury volatility. SOFR fell to 3.98%, reflecting expectations for further easing by 2026, when short-term rates could drop below 3%. Despite Powell’s comments, futures still imply a 75% probability of another 25-bps cut in December and a 58% chance of one in January.

Subprime credit stress lingers beneath the surface, with investors watching for potential write-downs among banks and private equity players. Any widening losses could prompt the Fed to act more aggressively to sustain growth.

Real Estate Capital Markets

CRE borrowing rates have continued to edge lower, rekindling transaction activity across stabilized and transitional assets. The market remains liquid, with diverse sources of capital competing for deals.

Market Pulse

Despite geopolitical and fiscal uncertainty—including a government shutdown that has delayed official labor data—capital availability remains healthy. The combination of easing rates and competitive spreads is expected to sustain momentum into year-end. Multifamily, retail, and hospitality assets are leading deal flow, while selective office financing is reemerging.