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US Fed to indicate US economy set for interest rate cut
(MENAFN) The Federal Reserve is anticipated to signal that U.S. economic indicators and the overall outlook for the American Economy are aligning towards an interest rate cut in September following its two-day meeting on Wednesday, according to an expert. Martin Wurm, a director at Moody’s Analytics, stated to Anadolu that the Federal Open Market Committee (FOMC) is expected to offer a clear indication that conditions are favorable for rate cuts, although they may refrain from explicitly announcing a September cut.
Wurm emphasized that FOMC members typically leave room to adjust their decisions should unexpected developments occur. He pointed out that the FOMC will likely reiterate the optimistic remarks made by Fed Chair Jerome Powell and other board members over the past fortnight. According to Wurm, the FOMC is prepared to implement rate cuts even before inflation returns to target levels, with recent data suggesting an accelerated timeline for such measures.
The Fed's preferred inflation measure, the core Personal Consumption Expenditures (PCE) price index, remained stable at 2.6 percent annually in June, based on Commerce Department figures released on Friday. The core PCE price index saw a monthly increase of 0.2 percent in June, up from a 0.1 percent rise in May. The overall PCE price index, which includes food and energy prices, rose 2.5 percent year-on-year in June, slightly down from a 2.6 percent annual gain in May, and increased by 0.1 percent for the month, following no change in May.
Wurm remarked that June’s PCE deflator did not present any surprises, indicating that the trend of disinflation remains steady. During the second quarter, the PCE deflator increased at an annualized rate of 2.6 percent, down from 3.4 percent in the first quarter. Additionally, annualized core PCE inflation rose by 2.9 percent, compared to a 3.7 percent increase in the previous quarter.
Wurm noted that all relevant inflation categories are showing signs of slowing down. Prices for goods continue to decline, and inflation in services is decelerating. Housing services, in particular, rose at their slowest pace since mid-2021, indicating that critical shelter inflation is also consistently decelerating.
Wurm emphasized that FOMC members typically leave room to adjust their decisions should unexpected developments occur. He pointed out that the FOMC will likely reiterate the optimistic remarks made by Fed Chair Jerome Powell and other board members over the past fortnight. According to Wurm, the FOMC is prepared to implement rate cuts even before inflation returns to target levels, with recent data suggesting an accelerated timeline for such measures.
The Fed's preferred inflation measure, the core Personal Consumption Expenditures (PCE) price index, remained stable at 2.6 percent annually in June, based on Commerce Department figures released on Friday. The core PCE price index saw a monthly increase of 0.2 percent in June, up from a 0.1 percent rise in May. The overall PCE price index, which includes food and energy prices, rose 2.5 percent year-on-year in June, slightly down from a 2.6 percent annual gain in May, and increased by 0.1 percent for the month, following no change in May.
Wurm remarked that June’s PCE deflator did not present any surprises, indicating that the trend of disinflation remains steady. During the second quarter, the PCE deflator increased at an annualized rate of 2.6 percent, down from 3.4 percent in the first quarter. Additionally, annualized core PCE inflation rose by 2.9 percent, compared to a 3.7 percent increase in the previous quarter.
Wurm noted that all relevant inflation categories are showing signs of slowing down. Prices for goods continue to decline, and inflation in services is decelerating. Housing services, in particular, rose at their slowest pace since mid-2021, indicating that critical shelter inflation is also consistently decelerating.
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