The Federal Reserve's Monetary Policy Report to Congress comes out twice a year. The first one for 2024 suggests a number of things. Two of note for the commercial real estate industry: CRE remains a factor in continued risk to the banking system and interest rates aren't coming down until the Fed has "greater confidence" that inflation is moving toward 2%.

Too bad that CRE hasn't hit bottom and while things came in as expected for the Fed's favorite metric for core inflation, the report still suggests everyone will be waiting for rate cuts. At least one former Fed economist, Claudia Sahm, has noted that July 31, 2024 is likely the earliest possible date for a rate cut. FOMC [Federal Open Markets Committee, which sets rates] votes on July 31, giving it six months of CPI, core PCE, and employment for 2024, he writes. "Six months is a nice, responsible-sounding number."

And it is, except that at the January 31 press conference after that FOMC meeting, Chair Jerome Powell seemed to indicate something longer than six months. Maybe 9 to 12 of "good" economic data. While the Fed didn't mention CRE as an explicit factor in inflation, shelter — multifamily rents and the rent equivalent for homeowners — has been a major force in inflation calculations. Supposedly a lagging metric, it has yet to begin a big drop in government figures. That is still likely to happen as rent growth has slowed and even moved in a negative direction in many metro areas.