Federal Reserve Chair Jerome Powell said the “time has come” for the Federal Reserve to lower interest rates. Powell released a statement following the central bank’s monetary policy conference in Jackson Hole, Wyoming.
ConstructConnect Chief Economist Michael Guckes welcomed the message, saying, "On the commercial side, lower rates will help more projects in their early planning stage find a path to profitability, which will enable greater construction activity."
Monetary tightening began during the COVID-19 pandemic to counter inflation. The Federal Reserve raised interest rates by 4.25% in 2022 and 1% in 2023. Today, the benchmark Federal Funds Rate stands at 5.25 to 5.5%, unchanged since July 2023 (Chart below).
On the commercial side, lower rates will help more projects in their early planning stage find a path to profitability, which will enable greater construction activity.
Michael Guckes, Chief Economist, ConstructConnect
Chair Powell supported the announcement for rate cuts with the Fed's progress toward an inflation target of 2 percent and low unemployment. Price stability and a strong labor market remain the Federal Reserve's focus. Inflation stood at 2.5 percent for the past 12 months, and US unemployment was 4.3% through July.
Chief Economist Guckes sees the announcement as supportive for the construction industry. “Chairman Powell’s anticipated cutting of interest rates cannot come soon enough for both the residential and nonresidential segments of the construction industry," Guckes said. The effects of falling rates would be a relief, the economist noted, adding, “The heightened cost of financing any type of real estate, whether it be commercial or residential, in recent years has severely constrained construction activity.”
While the Fed Chair made clear the anticipated direction of rates, Powell added, “the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”
The next scheduled monetary policy meeting of the Federal Open Market Committee is September 17 and 18, 2024.
About ConstructConnect
Construction Starts Here™ at ConstructConnect, where our mission is to help the construction industry start every project on a solid foundation. A leading provider of software solutions for the preconstruction industry, ConstructConnect empowers commercial construction firms to streamline their workflows and maximize productivity. ConstructConnect operates as a business unit of Roper Technologies (Nasdaq: ROP), a constituent of the Nasdaq 100, S&P 500, and Fortune 1000.