It’s all but official: Interest rate cuts are happening on Sept. 18. “The time has come for policy to adjust,” Federal Reserve Chair Jerome Powell said this morning at the Kansas City Fed’s Jackson Hole retreat. This isn’t all that surprising. All the economic data from the last few weeks has clearly indicated a weakening job market and slowing inflation. The nearly 30% downward revision to the jobs created in the year leading to March shook the market this week, as it showed the labor force has been significantly weaker — and for longer — than previously thought. But still, Powell is famous for equivocating, so such a simple, bold statement is a rare gift to investors famished for relief from high interest rates. So what now? Honestly, maybe not much. Whether the cut is 25 basis points or 50 will have some impact. The majority of investors are pricing in a 25-bps cut, but if the August jobs report comes in particularly weak on Sept. 6 or the personal consumption expenditures index on Aug. 30 or consumer price index on Sept. 11 show dramatic slowdowns, the Fed could listen to the calls for a larger cut and for more of them through the rest of the year. Psychologically, knowing a cut of any size is coming will give investors more confidence, and we all know how large a role optimism and certainty play in the real estate market. But even a 50-bps reduction isn’t going to drastically change the financials of most deals. Some projects right on the edge of penciling out will be able to cross that line, sure. But there’s a lot going on with real estate fundamentals across property types that is limiting returns. “The broader problem is that people are waiting. It's like a mirage,” The Lynd Group CEO Adam David Lynd told Bisnow. “They think there's water, and they're going to keep walking towards lower interest rates. And when they get there and they are lower, they're going to find out that that's not even the real culprit.” One argument goes that CRE investors have become too reliant on interest rates to make deals work. When rate cuts were slower to materialize this year, there was a push for investors to divorce themselves from this obsession and focus instead on finding properties with the right demand and then putting in the elbow grease to manage that deal correctly to get returns. And, indeed, investors have started to act even without a move from the Fed. Still, cheaper debt sure makes it all a lot easier, and this moment is long-awaited. So throw on this LCD Soundsystem track and let it wash over you: “The time has come, the time has come, the time has come, the time has come.” — Mark F. Bonner, Kayla Carmicheal, Catie Dixon and Jay Rickey Not getting The First Draft in your inbox? Click here to sign up. Got any feedback or want to send us a mailbag letter? Email firstdraft@bisnow.com. | 
