The Fed in 2026

As we turn the calendar toward 2026, the Fed is at a key crossroads: inflation has eased from its peak, but the labor market remains uneven and economic growth is modest. According to recent Fed economic projections, the midpoint for the federal funds rate by end-2026 is expected to be around 3.4 %.

Barron's

Other forecasts—including from private banks—expect the Fed to enact two or more rate cuts in 2026, possibly bringing the rate toward the 3.0-3.25% range.

Reuters

Trading Economics

With that backdrop, here is how the unfolding Fed scenario might cascade into the rental market and what landlords should plan for.

1. Borrowing Costs, Refinancing & Investment Activity

If the Fed begins cutting rates, the cost of borrowing for new acquisitions or refinancing existing rental properties could drop. For landlords, this becomes a potential opportunity: refinancing at lower rates can free up cash flow, enabling improvements, expansion, or even buying more units. On the flip side, if rate cuts are delayed or smaller than expected (because of sticky inflation or weak labor markets), borrowing costs remain elevated—squeezing margins, especially for property owners with adjustable debt or recent purchases.

2. Demand for Rentals vs. Homeownership

Lower interest rates generally make homeownership more affordable, which could entice some renters to buy. That shift could reduce rental demand in certain markets. However, many forecasts still project mortgage rates staying above 6% for a while, even if the Fed’s short-term rate drops.

CBS News

 For landlords, that means rental demand may remain strong for the time being—and could even increase if homeownership remains out of reach for many.

3. Inflation, Operating Costs & Rent Growth

Even as the Fed cuts, inflation may not instantly collapse. Costs such as property maintenance, insurance, taxes and utilities often lag and may continue to rise. Landlords will need to keep these cost pressures in mind. If rental demand is strong and supply remains constrained, landlords may have more leeway to raise rents—especially in well-located or high-quality units.

4. Supply Side Impact & Competitive Pressure

If borrowing becomes cheaper and developers reinvest in multifamily housing, supply could pick up. That could moderate rent growth in some markets. For landlords, this suggests the need to stay competitive—maintaining quality, service and amenities can help differentiate properties in a more crowded marketplace.

5. Planning for Uncertainty

The biggest takeaway: the path ahead remains uncertain. The Fed’s own projections show wide confidence intervals around the interest-rate outlook.

Federal Reserve

 Landlords should build flexibility into budgets, debt service planning and capital improvements. Whether the Fed cuts sooner, later or less deeply than expected will matter.

For 2026, many see the Fed moving toward lower rates—but the pace and magnitude remain unsettled. For landlords, this could be a favorable environment: potential lower financing costs, sustained rental demand and operational cost pressures. But staying prepared for shifts—with careful debt strategy, cost monitoring and tenant­-retention efforts—will be key. In short: keep a close eye on Fed signals, because what happens at the top will ripple down to your rental business.