🚨 Headline CPI rose +0.4% MoM and +2.9% YoY in August, with core at +0.3% MoM and +3.1% YoY. Despite the upside, Fed funds futures still price a 25 bps cut next week, as labor softness dominates. For CRE, lower funding costs remain possible, but tariff pass-through risks could keep exit cap rates elevated.

Loan Performance: Short-term easing could improve floating-rate coverage, but sticky inflation keeps spreads firm. Legacy loans with near-term maturities must still stress DSCR at >6.5% debt costs.

Demand Dynamics: Sticky CPI implies tenants continue facing elevated operating costs. For retail, tariffs may pressure margins. For multifamily, affordability remains challenged, limiting rent pass-through.

Asset Strategies: Exit underwriting should maintain cap-rate cushions. Owners may shift toward long-duration leases in inflation-resilient sectors (industrial, healthcare). Value-add office/retail faces higher exit risk if tariffs reinforce headline CPI.

Capital Markets: Curve inversion remains, but slope has eased. CMBS/CLO primary may tighten post-cut, but only modestly. Investors remain wary of structural inflation—limiting aggressive repricing of cap rates.

🛠 Operator’s Lens

🔭 The September cut is still likely, but markets may be overly confident about the speed of disinflation. Watch the PCE deflator and tariff-linked CPI components for persistence. Lenders will widen spreads if growth deteriorates, even as base rates fall. For CRE, a shallow path to 2026 rates implies muted cap-rate compression and continued refinancing friction.