September 16, 2026
The Federal Reserve raised its benchmark interest rate by 0.25 percentage points today, bringing the federal-funds target range to 3.75%–4.00%. The decision was unanimous and represents the Fed’s first rate increase since 2023.
More important than the increase itself, the Fed signaled that interest rates may remain elevated and could move higher before policymakers are comfortable that inflation is returning to the 2% target.
Why the Fed Raised Rates
The Federal Open Market Committee described the economy as surprisingly resilient. Consumer spending remains healthy, capital investment is strong, unemployment has changed little, and economic activity continues to expand at a solid pace.
That resilience gives the Fed room to focus on inflation, which remains stubbornly above its target. In explaining the increase, the Fed stated that the action was intended to produce a more timely return to 2% inflation. The vote was 12–0.
Energy prices and geopolitical uncertainty have added to the inflation concern. Rather than treating those pressures as entirely temporary, the Fed appears determined to prevent them from becoming embedded in broader prices and inflation expectations.
Another Increase May Be Coming
The Fed’s updated projections point to a year-end federal-funds rate of approximately 4.1%, suggesting one additional quarter-point increase before the end of 2026. Sixteen of the 18 participating policymakers projected at least one more increase.
The median projection also keeps the rate near 4.1% through the end of 2027. That is a meaningful shift from the June projection, when policymakers anticipated a year-end 2026 rate of approximately 3.8% and a 2027 rate of 3.6%.
In other words, this was not merely a one-time adjustment. The Fed is telling markets that borrowing costs may remain higher for longer than previously expected.
The Economic Forecast
The Fed’s projections describe an economy that continues growing despite elevated interest rates:
- 2026 GDP growth: 2.3%
- 2026 unemployment: 4.1%
- 2026 PCE inflation: 3.7%
- 2026 core PCE inflation: 3.4%
- Projected year-end federal-funds rate: 4.1%
The basic message is that inflation remains too high, but the economy and employment market appear strong enough to absorb additional monetary tightening.
What This Means for Commercial Real Estate
For commercial real estate, today’s decision is another setback for borrowers waiting for materially cheaper financing.
The Fed does not directly determine commercial mortgage rates. Those rates are influenced by Treasury yields, lender spreads, property risk, and loan structure. Nevertheless, a higher policy rate — and the expectation that it will stay elevated — affects nearly every part of the lending market.
Borrowers should anticipate:
- Continued pressure on floating-rate loans;
- More difficult refinancing for loans originated at lower rates;
- Conservative lender underwriting and debt-service coverage requirements;
- Additional pressure on property values where capitalization rates have not fully adjusted;
- Wider gaps between buyers’ and sellers’ pricing expectations; and
- More opportunities involving loan maturities, distressed ownership, and recapitalizations.
Long-term borrowing costs remain particularly important. Following today’s announcement, the 10-year Treasury yield was still near 5%. That means even if the Fed pauses after one more increase, commercial mortgage rates are unlikely to fall quickly unless longer-term Treasury yields also decline.
The Snohomish County Perspective
Snohomish County’s underlying growth, industrial base, and relative affordability remain positives. However, local properties are not insulated from national credit conditions.
Owners with strong occupancy, manageable leverage, and fixed-rate debt should generally be able to weather this environment. The greatest vulnerability will likely be among owners facing near-term maturities, significant vacancies, unfinished capital projects, or loans underwritten when borrowing costs were substantially lower.
At the same time, tighter credit conditions may create opportunities for disciplined buyers. Properties that remain fundamentally sound but have an overleveraged ownership structure or an approaching loan maturity could become attractive acquisition or recapitalization candidates.
Owner-user transactions may also remain active, particularly where SBA financing and the long-term benefit of controlling a business location outweigh the immediate interest-rate cost.
Our Take
Today’s increase is not catastrophic, but it is clearly unfavorable for commercial real estate in the near term. The more significant development is the Fed’s projection that rates may remain around current levels through 2027.
The market has spent several years expecting meaningful rate relief just over the horizon. Today’s announcement challenges that assumption. Buyers should underwrite conservatively, owners should examine upcoming maturities early, and investors should avoid basing an acquisition on the expectation that inexpensive debt will soon return.
And now comes my rant: THIS. IS. INSANITY. According to the Fed, “economic activity is expanding at a ‘solid pace’. While uncertainty remains elevated, in part to geopolitical developments, domestic spending remains resilient.” Let me sum this up for you, and this is not meant to be political whatsoever….frankly, we try to remain as neutral as possible but will call out ANY policymaker that we believe is acting against the best interest of this Country and therefore our community….. THE IRAN WAR is the “GEOPOLITICAL DEVELOPMENT” leading to higher energy costs…. this is not inflation based on demand…it’s based on artificial crap fully within the control of our Government. The sad reality is anyone with half a brain who keeps an eye on the real estate markets sees 1) the market softening; and 2) inventory increasing with not enough buyers to absorb. Simply put, our Fed Chair Kevin Warsh (who happened to receive $100M upon signing on as Fed Chair from an undisclosed source (see congressional testimony)) is either a complete idiot or trying to deflate the market. Perhaps that’s the goal, but to hide behind artificial inflation is infuriating as an outsider.
For more information on Everett commercial real estate, consider contacting a Snohomish-based commercial real estate broker.
For brokerage, leasing, and investment support across Snohomish and King County, visit www.weitzcommercial.com or email Scott@weitzcommercial.com / Nathan@weitzcommercial.com.
Regards,Trusted Advisors. Local Knowledge. Lasting Relationships. Weitz Commercial is a full-service commercial real estate firm focused on helping clients navigate opportunities and solve problems.
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