Relief Meets Reality: Fed Cuts Rates, But Powell Says A Potential Pause Is Ahead Article originally posted on HERE on October 29, 2025 The Federal Reserve cut interest rates for the second time in as many months, easing monetary policy just as commercial real estate markets snap back to life. But Chairman Jerome Powell said members of the central bank had widely different views on what to do moving forward. Wednesday’s widely expected decision offers a bit of clarity as the government shutdown drags into its fifth week and the White House digs in on the trade war that kicked off in April. But it upended a growing expectation that a rate cut at the Fed’s December meeting was practically guaranteed. The vote to cut rates was divided, with all but two members supporting the 25-basis-point cut that puts the federal funds rate between 3.75% and 4%. Stephen Miran, who was appointed by Trump and joined the Federal Open Market Committee last month, voted to cut the federal funds rate by 50 basis points. Jeffrey Schmid of the Federal Reserve Bank of Kansas City, a member of the FOMC with rotating voting rights on rate decisions, voted to keep rates flat. It was the third straight meeting with disagreement on the course forward among Fed officials, but the first where the result represented the middle path, with one member supporting a pause on rate relief and another a 50 bps cut. “In the committee’s discussions at this meeting, there were strongly differing views about how to proceed in December,” Powell said at a press conference after the decision was announced. “A further reduction in the policy rate at the December meeting is not a forgone conclusion — far from it.” Powell said there was a growing chorus of Fed members who wanted to pause the cycle of monetary easing, and he told reporters more than once that a rate cut at the end of the year wasn’t guaranteed. “For some part of the committee, it’s time to maybe take a step back and see whether there really are downside risks to the labor market or see whether, in fact, the stronger growth that we’re seeing is real,” he said. The yield for 10-year Treasury bonds, used to price all types of commercial real estate debt, had fallen below 4% ahead of the Fed meeting but jumped during Powell’s press conference as he poured cold water on widespread assumptions that investors would get another rate cut in December. Bond yields similarly slid ahead of last month’s Fed meeting before rebounding in the weeks following the first rate cut of the year. Wednesday’s move of more than 9 basis points was especially active for the generally slow-moving index. “The 10-year Treasury breaking below 4% is a momentary gift: Financial conditions are loose enough for borrowers to favorably refinance and mitigate interest rate risk,” Chris Stanley, banking industry practice lead at Moody’s Analytics, said in an email. Investors also sold off stocks as Powell signaled that the central bank could pause its rate relief, although they bounced back as the chairman declined to answer a reporter’s question about whether equities were overpriced and whether rate cuts were to blame. The Dow Jones Industrial Average and S&P 500 closed down after being in positive territory all day, while losses on the Nasdaq weren’t enough to push it into negative territory. Powell, who has faced bruising political attacks as President Donald Trump and his allies push for rate cuts, and the rest of the FOMC have a mandate to maintain maximum employment and stable prices. The central bank is facing headwinds on both fronts and is operating with less insight into the economy than it usually has on hand. The move to cut rates signaled that the central bank’s view of the economy had fundamentally shifted. “For a very long time, the risk was clearly of higher inflation, and that has changed now,” Powell said, pointing to steep revisions to jobs data in September that erased 911,000 jobs gains from prior years. The government shutdown that began Oct. 1 delayed the latest consumer price index report by roughly two weeks, but the CPI print eventually put inflation at 3%, up 30 basis points from the prior month. The pace of price growth jumped less than economists forecast, but it is well off the Fed’s longtime 2% target and moving in the wrong direction. Powell said long-term inflation trends remain anchored to the central bank’s 2% target, even as prices increase in the near term. The Fed chairman said tariffs were driving up the price of goods, but shelter inflation had moderated significantly after a pandemic-era explosion, a trend he expects will continue. He said the central bank’s operating premise remained that tariff-related inflation would be a transitory, one-time increase to prices. “We’re absolutely committed to returning inflation to 2%,” Powell said. “That’s a credible commitment, and there should be no question that that’s where we’re going.” The shutdown also stopped the Bureau of Labor Statistics from releasing a September employment report, and the agency hasn’t collected any data in October. A model released this week from the Federal Reserve Bank of Chicago put unemployment at 4.3% in September, effectively unchanged from the prior month but up 20 basis points annually. Inflation hawks argue that the Fed is moving too quickly to ease interest rates and risks further fueling inflation, a position Powell suggested had been adopted by some FOMC members during this week’s meeting. Stanley, the Moody’s banking industry analyst, said the Fed’s decision was a “tactical error,” with short-term rate relief offset by rising costs and volatility across the yield curve driven by swings in trade policy from the White House. “The 10-year Treasury below 4% is an opportunity created by data uncertainty; borrowers must capitalize on this fleeting dip to lock in long-term debt,” he said. Commercial real estate transaction volume was already accelerating ahead of the Fed decision. Sales across sectors totaled $42B in September, up 19% from the prior year, according to MSCI Real Assets. Office sales were up 42% at the halfway point of the year, and U.S. office vacancy declined in the third quarter for the first time since 2019 as companies execute on postpandemic strategies and older buildings are converted to apartments. With Wednesday’s decision, the Fed has cut the target federal funds rate by 150 basis points over the last 12 months. The cumulative effects of the shift in monetary policy are making their way through capital markets, said Dan Berman, managing partner in the real estate practice at Herbert Smith Freehills Kramer. “The Fed’s decision to cut rates builds on the momentum we’ve seen growing across the market in recent months,” he said. “Financing conditions continue to ease, pricing has stabilized, and investors are approaching opportunities with a clearer sense of value.”