A Note from the Founder 03.24.2025

Zachary Urow April 22, 2025

Federal Reserve Maintains Policy Rate

  • The Federal Reserve decided to keep rates steady at 4.25%–4.50% during its March meeting, choosing to wait for more data before making changes.
  • Economic growth is now expected to slow to 1.7%, while inflation is projected to
    rise slightly to 2.7% by the end of the year.
  • The Fed still expects to cut rates twice in 2025, but this depends on how inflation
    and the job market develop over the next few months.

Liquidity Boost: Balance Sheet Runoff Slows

  • Starting in April, the Fed will reduce the pace of its balance sheet runoff, cutting monthly Treasury redemptions from $25 billion to $5 billion.
  • Mortgage-backed securities will continue to runoff at $35 billion per month.
  • This adjustment is meant to help stabilize long-term interest rates and improve
    overall market liquidity.

Our Thoughts

  • Higher debt costs persist, but forward guidance gives investors more optimism.
  • Slower balance sheet runoff may help support property values and ease pressure
    on cap rates, especially in more competitive markets.
  • Despite talk of future rate cuts, operators should maintain conservative debt
    assumptions in underwriting. Fixed rate debt should still be considered as a
    viable option, until there is more clarity surrounding interest rate movement.