US Fed holds rates steady as construction prices rise

The exterior of the US Federal Reserve building in Wasington, D.C., US. Image: Adobe Stock

The decision, announced following the Federal Open Market Committee’s latest meeting, was expected by most analysts.

The announcement involved some historic intrigue, however, as two Fed governors, Christopher Waller and Michelle Bowman, dissented in favour of lowering rates; a rare move that suggests some division among officials of the central bank.

In its statement, the Fed noted continued economic growth and inflation remains above its 2% target. Still, the Fed signalled it was concerned about easing policy too soon and reiterated that future moves would depend on new and incoming data.

Keys for construction

The rate hold will keep borrowing costs between banks higher than desired by the industry, particularly affecting developers reliant on loans for new projects. Elevated borrowing rates also weigh on commercial real estate, housing, and public-private partnerships, where financing plays a central role in project viability.

At the same time, the industry is facing pressure from rising input costs. US tariffs on steel and aluminium from countries such as China, India and Brazil are contributing to higher material prices. Combined with inflation-linked cost escalations across fuel, labour, and components, contractors may see reduced margins on existing contracts or see fewer than expected construction starts.

The Fed meets again in mid-September. 

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