
The Federal Open Market Committee (FOMC) held its meeting this week, which resulted in interest rates being left unchanged following three consecutive rate cuts that took place under the Biden-Harris Administration. This leaves rates at their current range of 4.25% to 4.5%, with the Feds pointing to persistent inflationary pressures for the pause. While inflation has declined, it’s still above the Fed’s 2% long-term target, but other economic uncertainties play a part in the rate freeze as well.
Rate Pause Said to be Based on the Economic Landscape
The FOMC noted that economic activity continues to grow at a solid pace, and the unemployment rate has stabilized at historically low levels, reflecting resilience in the labor market. The committee brought up its commitment to a dual mandate of achieving maximum employment and stabilizing inflation over the long run.
Some see it differently, though; David Rosenberg, Rosenberg Research, makes this clear by stating, “We think the Fed is going to end up being on the wrong side of the forecast. Job gains are far less strong than has been characterized in this statement. All these job gains are in part-time employment and hiring rates have absolutely plummeted. The backlog of continuing claims has been on a discernible upward path and the consumer surveys have revealed a substantial loss in labor market confidence.”
Related Article: Media Reported “Blockbuster” Jobs Report While Americans Struggled to Find Work
Trump Demanded That Interest Rates Be Lowered
Powell’s responses during the press conference reveal he wants to make it perfectly clear that the Fed remains independent from political influence. It was most obvious when asked to respond to President Donald Trump’s demand for lower interest rates. As Powell responded, “I’m not going to have any response or comment whatsoever on what the president said. It’s not appropriate for me to do so. But the public should be confident that we will continue to do our work as we always have, focusing on using our tools to achieve our goals and really keeping our heads down and doing our work and that’s how we best serve the public.”
Powell also addressed concerns regarding new immigration policies and their effects on employment rates, as well as the uncertainty of tariffs and other new policies: “We don’t know what will happen with tariffs, with immigration, with fiscal policy and with regulatory policy. We’re only just beginning to see, and actually are not really beginning to see much. And I think we need to, we need to let those policies be articulated before we can even begin to make a plausible assessment of what their implications for the economy will be.”
Related Article: Year-End Fed Rate Cut Sets Incoming Presidency Up for High Inflation
Financial Markets’ Reaction to the Fed’s Pause
Financial markets didn’t show much response to the Fed’s decision to pause interest rates, given that the outcome had been anticipated. The S&P 500 declined slightly by 0.4%, while the Dow Jones Industrial Average fell by 0.2% during afternoon trading.
Analysts such as Seema Shah from Principal Asset Management are commenting on the situation, “Fed is simply trying to respond to the data and the new administration’s policies as they unfold. At times like these, when government policy — particularly tariff policy — is so uncertain, they do not have a forecasting edge. Keeping policy rates on hold until a clear direction starts to emerge is sensible.”
Next Steps for Investors Before the Fed’s March Meeting
The central bank’s meeting in mid-March will be an important time when it comes to changes to interest rates. But for now, the Federal Reserve states they are staying cautious and focused on managing the changing economy.
With the new administration hitting the ground running and making drastic changes in only the first week, the economic landscape could change rapidly. That said, it’s unexpected what March will hold for the economy and interest rate changes. For investors, this means continuing to monitor economic indicators from the Fed for potential future rate shifts.
Real Estate Investors Urged to Buy Before Next Fed Meeting
Along with the next Fed meeting being held this March, spring will also be arriving, and with that typically comes the busiest season for the housing market. Real estate investors are encouraged to buy now before a possible dip in rates occurs this March.
A drop in rates during the spring buying season could become a problem for investors seeking out affordable rental properties. It’s essential to buy before the next rate drop to avoid a rapid rise in housing prices due to high demand and bidding wars for a limited supply of available homes.
Related Article: Home Affordability Crisis – Lowest Level in Nearly Two Decades
If you’d like to take action and invest in a cash flowing rental property before the market floods this spring, feel free to contact Morris Invest. We’re a full-service real estate company that can easily place a new construction property in your portfolio. We take care of all the steps, making it simple for you to invest before the busy housing season begins. In the meantime, you can head over to our Morris Invest & SDIRA Program Overview page to get a better idea of what we do for our clients.
Before you go, dive into the following video – Secure Your Future in a Turbulent Economy: