The cost of building things in the U.S. is still trending upward, and at a rate greater than overall inflation, Skanska executives said in a recent webinar.

Interest rates, tariffs and now diesel costs spiking amid the war with Iran can be expected to raise costs, the executives said in their 2026 briefing on Thursday.

“We think cost escalation in construction is going to outpace U.S. inflation, and fairly significantly,” said Steve Stouthamer, Skanska’s executive vice president for project planning.

Skanska’s composite cost index in the past year has risen 6.8 percent, which Stouthamer called “very significant.” Most markets will see inflation between 4 percent and 6 percent this year, he said.

Spiraling prices for diesel and regular fuel can be expected to reverberate through the construction industry, the executives said. On Monday, diesel averaged $4.91 per gallon in Oregon, up 66 cents in the past week, according to AAA.

Tariffs continue to boost costs, despite a U.S. Supreme Court ruling striking down some of the Trump administration’s levies on trade.

“It’s just the reciprocal tariffs that have been struck down — all of these other ones remain,” said Rob Cantando, Skanska’s director of strategic supply chain.

The duty paid on aluminum has risen 3.5 times since early 2025 when President Donald Trump first instituted a series of tariffs.

“This really shows how aluminum pricing has escalated in the U.S. above the rest of the world,” Cantando said, adding that it’s sending prices upward for curtain wall and storefront extrusions.

Copper and other building materials also remain elevated.

It’s not all bad news on costs, however. Manufacturers are beginning to catch up on demand for some building systems, including heating and cooling units.

“We are expecting lead times for HVAC equipment and electrical gear to fall this year, and that’s really due to expansions — (manufacturers) continuing to ramp up,” Cantando said. “There have been significant investments by many manufacturers in this area.”

Costs for plumbing fixtures, HVAC and electrical gear should begin to moderate due to the elimination of some tariffs, he said.

Activity in the construction industry is being propped up by massive tech projects — data centers and other tech-related megaprojects, driven by demand for artificial intelligence, data and cloud restructure.

Data center developers are expected to build 8 gigawatts of infrastructure this year, totaling 32 million square feet. In monetary terms, that’s a spend of an estimated $40 billion to $80 billion.

An estimated 50,000 to 75,000 electricians are working exclusively on data center construction, Skanska officials said.

“A few years ago, we had a number of regions in the country that could probably hide from what the data center impact was doing, but now that demand is spreading across the country to locations where there is power capacity (and) land availability,” Stouthamer said. “Most markets around the country are feeling the impacts of the significant growth in the data-center market.”

In contrast, traditional residential and commercial construction remain soft, the Sweden-based global construction giant reported last month.

“Interest rates have led to reduction in commercial work,” Stouthamer said.

Recovery in housing and other private sectors is likely to be gradual, hinging on further interest rate reductions, improved consumer demand and reduced input costs, Skanska stated in its winter 2026 report.

“More optimal conditions may not materialize fully until 2027, but even that is highly speculative,” the report stated.

Skanska officials recommended contractors forecast budgets to the midpoint of construction, not just the procurement stage. Other cost-conscious measures they recommended include having flexibility in project specifications, early planning with project partners and producing more frequent budget updates.

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The average rate for a 30-year U.S. mortgage edged higher for the third week in a row, though it remains close to its low point in 2025.

The average long-term mortgage rate ticked up to 6.26 percent last week from 6.24 percent the week before, mortgage buyer Freddie Mac stated. A year ago, the rate averaged 6.84 percent.

Four weeks ago, the average rate was at 6.17 percent — the lowest level in more than a year.

Borrowing costs for 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also inched up last week. The rate averaged 5.54 percent, up from 5.49 percent the week before. A year ago, it was 6.02 percent, according to Freddie Mac.

When mortgage rates rise, they reduce homebuyers’ purchasing power. The average rate for a 30-year mortgage has been stuck above 6 percent since September 2022, the year mortgage rates began climbing from historic lows.

That’s helped kept sales of previously occupied U.S. homes stuck at around a 4 million annual pace going back to 2023. Historically, sales have typically hovered around 5.2 million a year.

While sales have been sluggish this year, they received a boost this fall as mortgage rates eased. The average rate for a 30-year home loan has stayed below 6.4 percent since early September. Last month, home sales accelerated to their fastest pace since February.

Mortgage rates are influenced by several factors, from the Federal Reserve‘s interest rate policy decisions to bond market investors’ expectations for the economy and inflation. They generally follow the trajectory of the 10-year Treasury yield, which lenders use as a guide for pricing home loans.

The 10-year yield was at 4.10 percent at midday on Nov. 20. That’s down slightly from two weeks ago, but up from around 3.95 percent on Oct. 22.

Mortgage rates began declining this past summer ahead of the Federal Reserve’s decision in September to cut its main interest rate for the first time in a year amid signs the labor market was slowing. The Fed lowered its key interest rate again last month, although Fed Chair Jerome Powell cautioned that further rate cuts weren’t guaranteed.

Wall Street traders have reduced their bets that the Fed will cut its main interest rate at its next meeting in December, now giving it a roughly 44 percent probability, according to data from CME Group. That’s down from nearly 70 percent a few weeks ago, but better than the 30 percent chance before the release of the delayed September jobs report.

The central bank doesn’t set mortgage rates, and even when it cuts its short-term rates that doesn’t necessarily mean rates on home loans will necessarily decline.

Last fall, after the Fed cut its rate for the first time in more than four years, mortgage rates marched higher, eventually reaching just above 7 percent in January this year. At that time, the 10-year Treasury yield was climbing toward 5 percent.

Recent forecasts by economists at the National Association of Realtors and First American call for the average rate for a 30-year mortgage to drop to around 6 percent next year.

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August marched forward with a steady drumbeat of new highs, which was uncharacteristic for the month historically, and therefore a surprise to many investors. The S&P 500 rose 1.9 percent for the month, which included setting fresh records in the final stretch, including the S&P’s 20th record close of the year on Aug. 28. The Dow added 3.2 percent in August, and the Nasdaq gained 1.6 percent. The Nasdaq’s poorer performance was mostly weighed down by profit-taking in the semiconductor sector, after Nvidia’s blowout quarter of AI semiconductor chip sales failed to meet the market’s increasingly lofty expectations. Sometimes good news just isn’t good enough when stocks are priced for perfection.

Speaking of perfection, gold decided to join the party in earnest. The “barbarous relic,” as renowned economist John Maynard Keynes called it, touched $3,533 per ounce on Sept. 2, making fresh all-time highs as investors sought refuge from an increasingly uncertain world. When the 30-year Treasury bond flirts with 5 percent (as it did in early September) and questions swirl about central bank independence, even traditionalists start eyeing alternatives. Gold’s 42 percent year-to-date surge tells you everything you need to know about diminishing confidence in paper currencies, including in the world’s reserve currency, the U.S. dollar.

Never mind that gold pays no dividend, costs money to store, and has historically been a lousy investment over long periods. In uncertain times like these, it’s sometimes about return of capital rather than return on capital. When investors pay up for ballast during an equity rally, one should pay attention.

Under the surface, market breadth improved. Small caps finally showed some spark, with the Russell 2000 up about 7 percent in August, as investors looked for alternatives to the increasing price to earnings multiples of large cap growth stocks. That broadening mattered on days when AI hardware leaders slipped; it kept the tape resilient even as high-expectation names took a breather.

Nevertheless, market leadership still hinged on AI infrastructure. Nvidia’s $4 trillion in market value milestone reached in July set the tone coming into August. The market’s growth pulse held up enough, even as tech leadership wobbled on the last trading day of August.  The backdrop for markets making new highs has been earnings doing the lifting and continued confirmation of massive AI capital spending, not just multiple expansion. Around month-end, however, a mixed read-through from AI-linked earnings began to impact much of the tech sector, resulting in a tech sell-off on the first trading day after the Labor Day weekend. The lesson is as old as the tape: when expectations tower, even good news can be “not good enough.”

Rates, meanwhile, reminded everyone they’re still a main character in the valuation chapter, since they offer investors an alternative to cash and equities. The U.S. 30-year Treasury bond yield pushed toward 5 percent to start September, amid a heavy calendar of new issues to fund deficits and a global bond selloff related to concerns about U.S. Federal Reserve independence. When the long bond flirts with 5 percent, dependable cash flows matter more to traders and investors, and narratives about company growth prospects, less, often resulting in a rotation out of stocks and into bonds. Such a rotation brings money out of equities, lowering their prices, which then results in bond yields coming down, and a cycling back into equities as their returns again look more attractive. All asset classes continue to be fed by years of expansionary fiscal and monetary policies, fueling an excess supply of global liquidity.

The Federal Reserve’s annual late August retreat in Jackson Hole, Wyoming, typically offers global central bankers a chance to pontificate about esoteric monetary policy while enjoying some fly fishing. This year, it turned into political theater. A weaker than previously reported jobs report had led to the unprecedented firing of the head of the Bureau of Labor Statistics. In part due to this revised data, Federal Reserve Chair Jerome Powell signaled that rate cuts might finally be on the horizon, suggesting “the time has come for policy to adjust.” The market loved it, with the S&P jumping 1.5 percent that day. But the celebration was soon tempered by relentless political pressure on the Fed.

Which brings us to the latest elephant in the room: the attempt to remove Fed Governor Lisa Cook. President Trump’s move to fire Cook over unsubstantiated mortgage fraud allegations represents the first such attempt by a president to manipulate the Board of Governors in the Fed’s 111-year history. Cook, for her part, isn’t going quietly. She is suing to keep her job, arguing that unproven allegations don’t constitute “cause” for removal under the Federal Reserve Act. As this column is being written, the matter is tied up in the courts, where it belongs.

The markets have absorbed plenty of political theater this year, but this takes the cake. The Federal Reserve’s independence isn’t just some quaint tradition; it’s the bedrock of a sound global monetary system. Uncertainty about possible political manipulation of the debt markets, interest rates, the value of the U.S. dollar and liquidity caused global investors to start to look for alternative investments to U.S. Treasuries. And nervous markets are volatile markets.

The whole episode reminds one of another axiom: the market hates uncertainty. And in this situation, markets have uncertainty in spades.

With all this drama, you might think it’s time to head for the exits. Not so fast. Yes, we’re in uncharted territory with record valuations, political interference in monetary policy, and geopolitical tensions that would make a Cold War diplomat nervous. But that’s precisely when discipline matters most. The market has climbed a wall of worry for 16 years now, through pandemics, wars, banking crises, and more political drama than Shakespeare could have imagined. Those who stayed the course have been rewarded. Those who tried to time the market based on headlines have mostly been wrong.

The advice in this column remains boringly consistent: maintain a diversified portfolio of quality companies with strong balance sheets and sustainable competitive advantages. Volatile markets always provide opportunities. And don’t let politics drive your investment decisions. Markets do not move in straight lines, but they have rewarded discipline and time invested.

As for gold hitting new highs? Sure, it’s nice to see the gold bugs finally having their day. But remember, over the long term, stocks in growing, cash generating companies have trounced gold by a wide margin.

The road ahead will be bumpy. Between Fed independence under assault, valuations stretched, numerous and growing court challenges to White House edicts and a year of special elections promising more fireworks than the Fourth of July, volatility is virtually guaranteed. But volatility is the price we pay for long-term returns.

Stay invested. Stay diversified. The market will do what it does, regardless of what any of us think about it or politics. Excess global liquidity is still spiking the punch bowl. Our job is to stay the course and take advantage of opportunities when the market serves them up.

William Rutherford is the founder and portfolio manager of Portland-based Rutherford Investment Management. Contact him at 888-755-6546 or wrutherford@rutherfordinvestment.com. Information herein is from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Investment involves risk and may result in losses.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

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WASHINGTON — The Federal Reserve, one of the most powerful financial institutions in the world, is receiving a $2.5 billion renovation involving two of its office buildings.

The project has become an for the embattled chair of the Fed, Jerome Powell, as he weathers nearly incessant personal attacks from President Donald Trump.

Trump has been clear about what he wants from Powell, whom he appointed to lead the central bank in 2017: lower interest rates. Yet the Fed is intended to be an independent agency, and the Supreme Court has signaled that the president can’t fire Powell just because the Fed chair won’t cut rates as fast as Trump wants. But he might be able to do so “for cause,” meaning some kind of malfeasance or neglect. Trump last week suggested that the escalating construction costs could be grounds to fire Powell.

With that threat looming in the background, the Fed decided to open the site of its massive project to a few journalists.

A massive project is revealed

On July 24, Fed staff led a small group of reporters, photographers and television camera operators on an extensive tour of the active construction site that comprises the two 1930s-era buildings. The renovation began in 2022, and the Fed hopes to complete it in the fall of 2027.

By providing journalists — and, by extension, the public — such extensive access, the Fed clearly hopes that greater transparency will help beat back the criticism emanating from the White House. Trump toured the same site several hours after the reporters and then downplayed his threats to fire the Fed chair.

In June, Sen. Tim Scott, R-S.C., the chairman of the Senate Banking Committee, which oversees the Fed, suggested the rebuild has been extravagant, and includes “rooftop terraces, custom elevators that open into VIP dining rooms, white marble finishes and even a private art collection.”

Fed staff, who requested anonymity to discuss the renovation, showed reporters what they said are future conference rooms that are sometimes used for meals, not “VIP dining rooms.” An elevator is being upgraded to increase accessibility to people with disabilities. And some white marble finishes were added at the insistence of a local commission (including several Trump appointees), the staff noted.

The journalists walked around dumpsters and pipes and evaded front-end loaders, while occasionally straining to hear the explanations of Fed staff over the sounds of drilling, cutting and hammering. Approximately 700 to 800 workers are involved in the project across two shifts each day. Reporters visited the roof of the Fed’s main headquarters, the Marriner S. Eccles building, which has sweeping views of the Lincoln Memorial, the National Mall and parts of downtown Washington.

Fed staff said the roof would not have “rooftop terraces” but instead would include grass and other plants as part of a “green roof” that would reduce cooling costs and stormwater runoff. There had been plans for a seating area, but that aspect was removed because it appeared to be an amenity.

Fed staff breaks down costs

The staff sought to highlight the many costs they said were largely out of their control: blast-resistant windows and other security upgrades, modern electronics and HVAC systems, and historic preservation efforts that led to the use of more marble.

The workers also used plywood extensively to protect stairs and many wall coverings, which Trump singled out as too costly.

“You saw the protection of plywood,” Trump told reporters after his tour. “I mean, that was a lot of money just to protect it for a period of time. I would have done it very gingerly and easily and not have to spend millions of dollars on protection.”

It is clearly a massive project. The Fed has shut down a street that runs between the two buildings. Underneath will be a part of a parking garage, as well as a tunnel connecting the two renovated buildings. After the project the Fed will be able to house more of its 3,000 employees in the two buildings and reduce its rented office space, officials said.

After his own tour, Trump appeared to lower the temperature around the project, at least for now, in a post on his social media platform Truth Social: “The cost overruns are substantial but, on the positive side, our Country is doing very well and can afford just about anything — Even the cost of this building!”

Should Powell lead the charge to cut the Fed’s short-term interest rates soon — economists say it could happen in September — that could appease Trump. And after that, you may never hear about the Fed’s renovation again.

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