Fed Chair signals potential interest rate cut in September

(MENAFN) US Federal Reserve Chair Jerome Powell indicated that a potential interest rate cut could be considered for the central bank's September meeting, contingent on continued positive data. Speaking at a press conference following the Fed's two-day monetary policy meeting, Powell emphasized that the decision will depend on whether the overall data, evolving economic outlook, and risk balance align with rising confidence in controlling inflation while maintaining a strong labor market.

Powell stated, "The question will be whether the totality of the data, the evolving outlook and the balance of risks are consistent with rising confidence on inflation and maintaining a solid labor market." He added that if these conditions are met, a reduction in the policy rate might be feasible as early as the September meeting.

On Wednesday, the Federal Reserve decided to keep the federal funds rate unchanged at its current target range of 5.25 percent-5.5 percent, which remains the highest level in 23 years. Powell noted that recent inflation readings from the second quarter have increased the Fed’s confidence, and further positive data would enhance this confidence. After peaking at 9.1 percent in June 2022, annual consumer inflation in the US dropped significantly to 3 percent in June 2023. This represented a slowdown from May’s inflation rate of 3.3 percent, showing a minor decline of 0.1 percent in June.

Powell also highlighted that the Federal Open Market Committee (FOMC) will make decisions on a meeting-by-meeting basis, balancing the risk of reducing policy restraint too soon or too much, which could undo progress on inflation, against the risk of acting too late or too conservatively, which could weaken economic activity and employment. He reiterated, "If we do get the (macroeconomic) data that we hope to get, then a reduction in our policy rate could be on the table at the September meeting."

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