Hospitality Investing News - Southwest March 2025

Labor market and inflation conditions support rate hold. Ongoing job creation, a low unemployment rate by historical standards and inflation persistently in the upper-2 percent bound are likely to dissuade the Federal Reserve from reducing the overnight lending rate at its next meeting in March. Following 100 basis points of cuts last year, the Fed left their benchmark rate unchanged in January. While not a part of the institution’s official discourse, the potential inflationary implications of a broad trade dispute between the U.S. and its partners may also be influencing the Federal Open Market Committee to hold rates flat for the immediate future. Although not as conducive to investment activity as further reductions, greater clarity on the near-term outlook for short-term interest rates may enable more commercial real estate investors to finalize their decisions. How these economic factors affect longer-term interest rates, such as the 10-Year Treasury, will also play a role in commercial real estate transaction activity and whether it shifts to the upside.