Federal Reserve Maintains Policy Rate
- The Federal Reserve decided to keep rates steady at 4.25%–4.50% during its March meeting, choosing to wait for more data before making changes.
- Economic growth is now expected to slow to 1.7%, while inflation is projected to
- rise slightly to 2.7% by the end of the year.
- The Fed still expects to cut rates twice in 2025, but this depends on how inflation
- and the job market develop over the next few months.
Liquidity Boost: Balance Sheet Runoff Slows
- Starting in April, the Fed will reduce the pace of its balance sheet runoff, cutting monthly Treasury redemptions from $25 billion to $5 billion.
- Mortgage-backed securities will continue to runoff at $35 billion per month.
- This adjustment is meant to help stabilize long-term interest rates and improve
- overall market liquidity.
Our Thoughts
- Higher debt costs persist, but forward guidance gives investors more optimism.
- Slower balance sheet runoff may help support property values and ease pressure
- on cap rates, especially in more competitive markets.
- Despite talk of future rate cuts, operators should maintain conservative debt
- assumptions in underwriting. Fixed rate debt should still be considered as a
- viable option, until there is more clarity surrounding interest rate movement.
