Yesterday, September 17, 2025, at about 2:00 p.m. EST, following its latest Federal Open Market Committee meeting, the U.S. Federal Reserve announced a reduction of its benchmark interest rate (the federal funds target range) by 0.25 percentage points^.1

When Was the Last Rate Cut?:

The last time the Fed cut rates was in December 2024. That was the most recent rate reduction before this new cut.²

Why Did the Fed Say They Were Willing to Cut Now?

The Fed cited several reasons for this move:

• A weakening in the labor market: signs of slowing hiring or job growth have raised concern about rising unemployment risks.¹
• Economic risks that seem to be tipping somewhat toward the downside; in Fed Chair Jerome Powell’s words, this was a “risk management” cut¹
• They want to support employment growth without undermining progress in bringing down inflation. Inflation remains above target, so the Fed needs to balance its dual mandate of stable prices and maximum sustainable employment.²
• Pressure from economic indicators (e.g. slowing business investment, softening demand) that suggest borrowing costs are starting to weight, especially for sensitive sectors¹

What is the New Fed Rate?

The federal rate has been lowered to a target range of 4.00 to 4.25%.²

What Does this Interest Rate Cut Mean for Businesses & Commercial Real Estate Owners?

The rate cut has several implications:

1. Lower Borrowing Costs

• Loans are likely to become cheaper: commercial loans, lines of credit, and refinancing of existing debt may see somewhat reduced interest rates.
• For commercial real estate (CRE) owners, this can reduce interest expenses on variable rate mortgages or loans or make refinancing more appealing.

2. Easier Access to Capital

• Businesses may find it somewhat easier to invest in expansion, maintenance, or new projects because financing is less costly
• CRE developers and property owners could accelerate projects or revisit ones put off due to earlier higher financing costs

3. Higher Valuations (Potentially) but Mixed Risks

• Lower rates tend to increase real estate valuations since capitalization (cap) rates often move inversely to interest rates. Cheaper financing improves the net operating income vs debt service ratio.
• On the other hand, demand in some markets may remain weak or other costs (construction, property taxes, insurance) may still constrain margins, so improvements won’t be uniform.

4. Margin for Risk & Tight Credit Conditions

• Although rates are lower, credit conditions (lending standards) may still stay tight in may sectors, especially for riskier credit profiles. So some businesses and CRE owners may not fully benefit if banks remain cautious.
• Entities that locked in higher cost debt will have some relief moving forward but past financing deals aren’t changed retroactively.

5. Signs of More to Come

• The Fed signaled possibility of additional cuts through the remainder of the year, depending on labor and inflation data. That creates some expectation among businesses and CRE holders to plan for lower rates ahead.¹

Bottom Line

This 0.25% rate cut is the first since December. The Fed acted now largely because employment growth is softening and economic risk is increasing, and they feel they can afford to ease a bit without losing control of inflation. For businesses and commercial real estate owners, this means a modest easing in financing costs and a somewhat more supportive environment — though not a game-changer overnight. How much benefit ends up depends on how quickly rates fall further (if they do), how credit flows, and specific local market conditions.

1 (Reuters)

2 (Investopedia)