Real Impact: What the September 2025 Fed Decision Means for Rental Housing

Real Impact by Chandan Economics explores how cornerstone data releases influence interest rate forecasts and reshape the rental housing sector's outlook.

Last Updated: September 17th, 2025

What Happened:

The Federal Reserve cut the benchmark Federal Funds rate by 25 basis points on September 17^th, inching toward accommodation with just one official dissenting in favor of a larger, 50-basis-point cut.

Interestingly, the Fed’s latest Summary of Economic Projections — released alongside today’s rate decision — lowers next year's interest rate forecast while raising its inflation forecast.

Compared to projections made in June, the median forecast for the Federal Funds rate was lowered by 30 basis points for 2025 and 20 basis points for 2026. Meanwhile, the 2026 PCE inflation projection was raised from 2.4% to 2.6%, while keeping the final 2025 projection at 3.0%.

At the same time, the 2025 growth forecast was revised up from 1.4% in June to 1.6%, and officials upgraded the 2026 forecast from an expected 1.6% to 1.8%.

On balance, the committee is signaling that it expects to move forward with cuts despite lingering price pressures.

Impact on Interest Rates:

Futures-market-based interest rate forecasts shifted more dovishly in reaction to the new projections from the Fed. One day before the FOMC meeting, there was just a 69.2% chance that the Fed would cut rates by 75 basis points by the end of the year from its pre-September level.

Following the decision and new projections, there is now a 92.0% chance of 75 basis points in total cuts this year.

What it Means for Rental Housing:

The increasingly dovish outlook for rate cuts is a welcome sign for developers and builders; however, there is an increasing dispersion in the 2026 interest-rate projections made by FOMC members. The level of uncertainty in the monetary policy forecast warrants caution when positioning one's outlook based on the latest projections.

Inflation remaining elevated heading into next year means that developers may need to stay vigilant about input costs. However, in Jerome Powell's post-meeting press briefing, he upheld the current consensus among officials that tariff-induced inflation pressures are likely a one-time impact, and that projections around the level of impact are shifting downward.

Looking ahead, job market performance and the evolving GDP trend will be the primary factors in shaping the interest rate outlook.