The Federal Reserve minutes from their late-July meeting offered a telling snapshot of where monetary policy is headed. Most policymakers leaned toward treating inflation as the bigger threat than the labor market—even as signs of softening employment started to creep into the data.

The backdrop here is President Trump’s tariffs, which are not just a political story but an economic one. Tariffs raise input costs, and businesses don’t just eat those—they pass them through. That’s why we just saw the sharpest spike in wholesale inflation in three years. The Fed knows this, and while they held rates steady in the 4.25%–4.5% range, the minutes make clear they’re more concerned about inflation running hot than they are about jobs cooling.

For anyone building, investing, or financing real estate deals, this is not just academic. Rising input costs hit construction directly—steel, lumber, imported equipment, you name it. Add higher-for-longer borrowing costs, and you’re staring at tighter margins and projects that only pencil if you’ve got creative capital stacks and disciplined underwriting.

Howard Marks put it bluntly this week: stocks are in “the early days” of a bubble. He’s not screaming panic—he’s just pointing out what anyone in the markets can see: valuations are stretched, and we haven’t had a real correction in 16 years. He compared today’s moment to the late 1990s when the market fell in love with tech stocks and Greenspan coined the phrase “irrational exuberance.” That same exuberance is creeping into real estate too—especially in gateway markets where cap rates remain disconnected from rising costs of capital.

So where does that leave us?

As a developer and investor, I read the Fed’s signals with a builder’s eye. Inflation risks mean financing won’t get cheaper in the short term, and tariffs mean our materials and supply chains will stay under pressure. Projects that survive in this environment will be the ones backed by strong fundamentals, conservative leverage, and investors willing to hold through volatility.

Markets always cycle, and corrections clear out excess. If the Fed is right and inflation is the more pressing risk, we’re heading into a period where capital discipline separates winners from everyone else.