At last month's Federal Reserve meeting, discussions about the timing of interest rate cuts took center stage, with some U.S. central bankers eager to kickstart the debate. The extent of support for a rate reduction starting at the upcoming September 17-18 meeting will become clearer when the minutes of the July 30-31 meeting are released on Wednesday.
The Federal Open Market Committee (FOMC) left the benchmark overnight borrowing rate unchanged at 5.25%-5.50% in July, where it has remained since July 2023. However, officials introduced key policy statement changes that signaled the possibility of a rate cut next month. This expectation was reinforced by Fed Chair Jerome Powell, who remarked in his post-meeting press conference, "If we were to see inflation moving down ... more or less in line with expectations, growth remains reasonably strong, and the labor market remains consistent with current conditions, then I think a rate cut could be on the table at the September meeting."
The Labor Department's report of a sharp slowdown in payroll growth in July, coupled with a rise in the unemployment rate to a post-pandemic high of 4.3%, further fueled speculation about imminent rate cuts. This labor market softening led several Fed officials to indicate their readiness to consider easing rates in September. Minneapolis Fed President Neel Kashkari reflected this shift in sentiment, noting, "The balance of risks has shifted, so the debate about potentially cutting rates in September is an appropriate one to have."
During the July meeting, officials agreed to soften the language in their policy statement, signaling a balanced view of inflation and employment risks. This neutral stance lays the groundwork for a potential rate cut after more than two years of tightening credit. However, Powell also mentioned that some officials "examined the possibility" of cutting rates immediately, though the prevailing view was to wait until the next meeting, depending on incoming data.
As markets anticipate the Fed's next move, interest rate futures currently reflect a 100% probability of a September rate cut, with debate centering on the size of the cut—either a quarter or half a percentage point. Analysts will closely scrutinize the minutes to understand the scope and pace of the anticipated policy easing, as well as any forward guidance on the timing of rate cuts.
(Sourec:www.usnews.com)
The Federal Open Market Committee (FOMC) left the benchmark overnight borrowing rate unchanged at 5.25%-5.50% in July, where it has remained since July 2023. However, officials introduced key policy statement changes that signaled the possibility of a rate cut next month. This expectation was reinforced by Fed Chair Jerome Powell, who remarked in his post-meeting press conference, "If we were to see inflation moving down ... more or less in line with expectations, growth remains reasonably strong, and the labor market remains consistent with current conditions, then I think a rate cut could be on the table at the September meeting."
The Labor Department's report of a sharp slowdown in payroll growth in July, coupled with a rise in the unemployment rate to a post-pandemic high of 4.3%, further fueled speculation about imminent rate cuts. This labor market softening led several Fed officials to indicate their readiness to consider easing rates in September. Minneapolis Fed President Neel Kashkari reflected this shift in sentiment, noting, "The balance of risks has shifted, so the debate about potentially cutting rates in September is an appropriate one to have."
During the July meeting, officials agreed to soften the language in their policy statement, signaling a balanced view of inflation and employment risks. This neutral stance lays the groundwork for a potential rate cut after more than two years of tightening credit. However, Powell also mentioned that some officials "examined the possibility" of cutting rates immediately, though the prevailing view was to wait until the next meeting, depending on incoming data.
As markets anticipate the Fed's next move, interest rate futures currently reflect a 100% probability of a September rate cut, with debate centering on the size of the cut—either a quarter or half a percentage point. Analysts will closely scrutinize the minutes to understand the scope and pace of the anticipated policy easing, as well as any forward guidance on the timing of rate cuts.
(Sourec:www.usnews.com)
