The Federal Reserve held its benchmark interest rate steady at its latest meeting this week, maintaining rates at a range of 4.25% to 4.5%. This marks the second consecutive rate pause as the Feds take it slow amid an unpredictable economic landscape that’s being formed by policy shifts from the new Administration. Fed Chair Jerome Powell justified the pause during a news conference, stating, “We do not need to be in a hurry to adjust our policy stance, and we are well-positioned to wait for greater clarity.”
The Fed’s Rate Outcome Was Driven by Uncertainty With Tariffs in Focus
Powell touched on the fact that uncertainty is causing the economic outlook to be unclear, referencing Trump Administration policy changes that affect trade, immigration and regulation. Regarding this, Powell explains, “Uncertainty around the changes and their effects on the economic outlook is high. We are focused on parsing the signal from the noise.”
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A major part of this uncertainty is being caused by tariffs, mostly because they’re recognized as a key driver of inflationary pressures, especially with early data suggesting that higher duties on imports may temporarily push prices upward. This has caused the Fed to raise its forecast for inflation to 2.7%, up from 2.5% earlier this year. “Inflation has started to move up now, we think, partly in response to tariffs, and there may be a delay in further progress over the course of the year,” Powell said.
The uncertainty or uneasiness is understandable given the Administration has also shaken financial markets with its tariffs on steel and aluminum, with additional levies planned for April.
What’s Trump’s take on all this? His Truth Social post sheds light on his stance, which contrasts with the Federal Reserve’s position: “The Fed would be MUCH better off CUTTING RATES as U.S. Tariffs start to transition (ease!) their way into the economy. Do the right thing.”
Future Rate Cut Predictions
A larger number of policymakers now expect the Federal Reserve to follow through with two rate cuts this year, possibly ending 2025 at 3.9%. However, Capital Economics deputy chief North America economist Stephen Brown shares a view of doubt on these projections, “Although the FOMC stuck to its median projection for two interest rate cuts this year, some officials now share our view that further loosening is unlikely and we continue to think that Fed officials are underestimating the extent to which tariffs are likely to push up inflation.”
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Federal Reserve to Closely Monitor Economic Activity in the Months Ahead
While any effects from tariffs are expected to be short-lived, the Fed is still being cautious about making decisions that could harm economic activity in the long run. As the Trump Administration continues to introduce new economic policies, including more tariffs, the Fed will closely watch their impact on inflation, labor markets, and overall economic growth, and this will be critical in determining whether the current rate freeze will continue or not.
If you’re waiting for the Feds to cut interest rates to make a move on an investment such as a rental property, you’ll want to reconsider. The economy is unstable, and with that brings uncertainty as to what will happen with rates as well as the housing market.
Waiting will only cause you to lose out on equity gains and cash flow. In addition to this, many investors are currently waiting for a rate drop as well, which will cause the market to flood if everyone makes their move simultaneously – it will undoubtedly create bidding wars and cause property prices to rise.
If you’d like to speak with someone about making a rental property purchase happen now, schedule a call with our team. We’re a full-service investment company that takes care of all the steps, big and small, to easily place a new construction rental into your investment portfolio.
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