The US Federal Reserve announced on March 19 that it will hold the benchmark lending rate at 4.25% to 4.5% range, citing the need for a “wait-and-see” approach regarding key market indicators.
The latest market figures show a steady domestic market, but forward-looking confidence is waning as GDP projections fall and consumer confidence shrinks.
In February, the unemployment rate remained low at 4.1%, and CPI came in at 2.8%. Nonfarm payroll employment also rose by 151,000, below the 168,000 seen last February. In addition, consumer spending declined by 0.2% ($30.7 billion) in January, largely due to a reduction in motor vehicle and parts consumption.
More Information Needed
Despite recent trade tensions and the on and off tariff policies enacted by the Trump Administration, Fed Chair Jerome Powell stated that the “net effect” of trade policy will be the key factor when evaluating interest rates. Cost increases to Americans from tariffs placed on foreign trading partners is seen as a one-time price increase, unless a series of tariff hikes are introduced. These cost increases may also be offset by cuts in government spending, tax cuts, and deregulation.
The decision to hold interest rates steady comes as further evaluation is needed and not to overreact to recent volatility. Powell highlighted that the economy remains mostly healthy and that the US is “well positioned to wait for greater clarity.”
Impact on Construction
Tariffs have already caused prices for major commodities to spike; aluminum futures (LME Aluminum Premium Duty Paid US Midwest) have risen by around 70% since the start of 2025. Hot rolled coil steel prices are also surging, and lumber prices are around 15% higher than 12 months ago.
According to research conducted by Home Innovation Research Labs, the average single-family home constructed in the US uses 2,200 square feet of softwood plywood, 6,800 of OSB, and roughly 15,000 board feet of framing lumber. Approximately one quarter of steel and half of all aluminum used in the US is imported, with Canada and Mexico supplying a significant amount of both materials. Domestic aluminum production is miniscule, and cost increases will drive major infrastructure project costs upwards.
Most analysts anticipate the US Federal Reserve to make a minimum of two rate cuts in 2025, with demand for more rising as hostile trade policy creates volatility in markets and drives consumer confidence down. BTY’s construction experts have advised on residential, commercial, and infrastructure projects across the US with technical due diligence and proactive project monitoring for decades. This expertise has proven to be invaluable to our clients, especially in times of uncertainty. Connect with a member of our team to learn more about market conditions and how tariffs will affect your projects moving forward.
