Fed Holds Rates Steady as Policymakers Eye Emerging Risks

Fed Holds Rates Steady as Policymakers Eye Emerging Risks

The FOMC maintained the federal funds rate at 3.50% to 3.75% at its April meeting, though the decision exposed disagreements within the Committee. While one governor pushed for a 25-basis-point cut, three regional presidents voted to maintain rates but resisted including an “easing bias” in the announcement. Despite a resilient economy and a steady 4.3% unemployment rate, inflation remains a persistent headwind. Headline PCE climbed to 3.5% in March because of rising energy costs, while core PCE, excluding the volatile food and energy categories, sat at 3.2%, hampered by ongoing tariffs in the goods sector. Both metrics are above the 2% target.

“The economic outlook remains highly uncertain, and the conflict in the Middle East has added to this uncertainty,” Fed Chair Jerome Powell said. “In the near term, higher energy prices will push up overall inflation. Beyond that, the scope and duration of potential effects on the economy remain unclear, as does the future course of the conflict itself. We will continue to monitor the risks to both sides of our dual mandate. We are well positioned to determine the extent and timing of additional adjustments to our policy rate based on the incoming data, the evolving outlook, and the balance of risks. Monetary policy is not on a preset course, and we will make our decisions on a meeting-by-meeting basis.”

Powell’s term as chair will end on May 15, but he announced that he plans to continue to serve as Governor for a time to be determined. Kevin Warsh’s nomination as the new Fed chair was advanced out of the Senate Banking Committee Wednesday morning, and he is expected to be confirmed by the full Senate.

Robust Investment Sales Activity Continuing into 2026

“Even as hopes for a rate cut evaporate amidst macroeconomic factors, the momentum we saw in the commercial real estate market last year has carried into the new year and financing remains available for every asset class,” said Matt Dzbanek, Senior Director in the Capital Services Group.

Across New York City, the first quarter saw robust investment sales activity with $6.8 billion in dollar volume in Q1 2026, up 4% year-over-year and 50% above Q1 2024, across 543 transactions, according to GREA’s New York City All Asset Investment Sales Report Q1 2026.

Of the total, $2.4 billion was in the multifamily sector, up 11% from Q1 2026 and up 73% from Q1 2024, and $1.6 billion in the development sector, up 26% year-over-year and 127% from two years ago.

A Tale of Two Markets

“In New York City’s multifamily market, it’s still very much a tale of two cities for free market and rent stabilized assets,” Dzbanek said. “When we have a free market building in a good location, we’re getting up to 20 independent offers from banks, agency lenders, CMBS lenders and even private credit funds that want to compete for that asset.”

He continued, “On the flip side, when we run a process for rent stabilized assets, agency lenders, CMBS players and some banks are taking a hard look at the number of rent stabilized units in each building as well as the violation count and collections history. However, we are actively issuing term sheets for these assets.”

In the development sector, New York City’s limited housing inventory is driving increased lender interest in these assets, according to Dzbanek.

“For every development deal we finance, we have a deep bench of lenders eager to enter the space,” he said. “They view New York City as a premier destination for capital. As supply and demand housing imbalances persist, we expect to see a significant uptick in condo construction, something we didn’t see 12 to 18 months ago, as well as new rental development.”

Recent New York City Financing Activity

Underscoring the steady flow of capital in the current market from unique lenders, recent closings by the Capital Services Group include the following refinance and acquisition loans:

• An $11.8 million condominium inventory loan for a 20-unit newly constructed residential condo project in Upper Manhattan. The 9.5% interest-only loan from a private lender featured an 18-month term at 70% loan-to-value. The refinance loan allowed the borrower to cash out at 20% above the bank construction loan, unlock funds, and secure additional proceeds and reserves to complete the condo development, providing an 18-month runway to bring units to market and manage the sellout process with greater control.
• A $1.8 million acquisition loan for a free market mixed-use property with three units in Carroll Gardens, Brooklyn. Terms of the five-year loan from a boutique community bank included a 5.8% rate and 70% LTV.
• A $1.55 million bank loan to refinance a 4,125/SF, six-unit, mixed-use free market property in East Williamsburg, Brooklyn. Terms of the five-year loan included a 6% interest rate and 55% LTV.
• A $5.5 million condo construction loan to finance a 24-unit, 21,000/GSF project in Queens is scheduled to close with a private lender eminently.

Looking Ahead

Refinancing requirements are expected to dominate the 2026 landscape. Mortgage Bankers Association data shows that 17% of outstanding commercial and multifamily mortgages nationwide, totaling approximately $875 billion, are scheduled to mature this year, maintaining high levels of financial pressure on the market.

Five- and 10-year treasuries have seen 60 bps swings in the last 60 days. Therefore, Dzbanek advises clients against waiting on the sidelines for rates to drop. Given that the closing process can span four to five months, he emphasizes starting immediately to ensure borrowers are positioned to capitalize on favorable rate movements as they occur.

Dzbanek remains confident that the lending community will provide the necessary liquidity for borrowers both acquiring and refinancing commercial assets this year.

“Assuming macroeconomic fluctuations stay fairly flat, and treasuries don’t see major spikes, we expect the second half of this year to be very strong on the financing side,” Dzbanek said. “We’re seeing an increased appetite from borrowers looking to lean into the market and renewed interest from lenders looking to put money to work”

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