Jerome Powell’s Hint at a Rate Cut Could Be Good News for CRE Borrowers

Federal Reserve Chairman Jerome Powell signaled potential forthcoming interest rate cuts Friday, citing uncertain economic conditions that might necessitate a shift in the Federal Reserve’s hawkish stance combating inflation.

In prepared remarks during an address at the Fed’s annual retreat in Jackson Hole, Wyo., Powell said sudden changes to trade, immigration and tax policies in Washington have created challenges for meeting the central bank’s dual mandate of stoking high employment with low inflation.

While Powell stressed that interest rates are 100 basis points lower than they were a year ago when he spoke in Jackson Hole, enabling the Fed to “proceed carefully” with changes, he said an adjustment may be needed. The Federal Reserve Open Market Committee (FOMC)’s next monetary policy decision is scheduled for Sept. 27. 

Our policy rate is now 100 basis points closer to neutral than it was a year ago, and the stability of the unemployment rate and other labor market measures allows us to proceed carefully as we consider changes to our policy stance,” Powell said. “Nonetheless, with policy and restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.” 

After Powell spoke in Jackson Hole last year, it was followed three weeks later by a half-point cut and then two more quarter-point reductions to end 2024. The FOMC has hit the pause button at all five of its 2025 meetings so far, causing President Donald Trump to demand lower interest rates and threaten to fire Powell before the chairman’s term expires in May 2026.

Prior to last year’s interest rate cuts, the Fed under Powell implemented 11 hikes out of 12 meetings between March 2022 and July 2023, resulting in increased commercial real estate distress for floating-rate loans. The central bank’s benchmark rate now sits between 4.25 percent and 4.5 percent, compared to new zero borrowing conditions as recently as 2021. 

Powell did not address Trump during his remarks, but did stress the importance of the Fed independence from political pressures when making monetary policy decisions.

“FOMC members will make these decisions based solely on their assessment of the data and its implications for the economic outlook and the balance of risks,” Powell said. “We will never deviate from that approach.”

Andrew Coen can be reached at acoen@commercialobserver.com.