Fed keeps interest rates steady. But cuts aren’t far off.
Progress on inflation means central bankers may be ready to trim rates as soon as September.
The Federal Reserve is poised to cut interest rates for the first time since the pandemic's onset, with a highly anticipated rate reduction likely as early as September. Fed Chair Jerome H. Powell conveyed this message on Wednesday, stopping just shy of confirming a rate reduction while indicating that progress was imminent. The Fed has previously indicated that it requires additional time and data to ensure that inflation is moderating and job growth is occurring at a sustainable pace. Wall Street and households alike are now eagerly anticipating this shift in monetary policy.
According to Powell, the decision will hinge on inflation and employment data, as well as the balance of risks. The Fed's cautious approach stems from its previous missteps, including its delayed response to surging inflation following the pandemic. Nonetheless, the Fed has achieved the remarkable feat of curbing inflation without triggering a recession or significant job losses. The economy has demonstrated resilience, with solid growth and a labor market that continues to create jobs.
The upcoming presidential election adds another layer of complexity, as the candidates' economic platforms differ significantly. The Fed's actions after September may be influenced by the election outcome, as the candidates' fiscal policies could impact the economic trajectory. Despite the anticipation surrounding the timing of the rate cut, the Fed's primary focus remains on effectively managing inflation while supporting the labor market and broader economy.
According to Powell, the decision will hinge on inflation and employment data, as well as the balance of risks. The Fed's cautious approach stems from its previous missteps, including its delayed response to surging inflation following the pandemic. Nonetheless, the Fed has achieved the remarkable feat of curbing inflation without triggering a recession or significant job losses. The economy has demonstrated resilience, with solid growth and a labor market that continues to create jobs.
The upcoming presidential election adds another layer of complexity, as the candidates' economic platforms differ significantly. The Fed's actions after September may be influenced by the election outcome, as the candidates' fiscal policies could impact the economic trajectory. Despite the anticipation surrounding the timing of the rate cut, the Fed's primary focus remains on effectively managing inflation while supporting the labor market and broader economy.