Fed Holds Interest Rates, Signals Imminent Cut

Fed Holds Interest Rates, Signals Imminent Cut

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The FOMC voted unaniminously to
Fed Chair Jerome Powell addressing journalists after announcing the Fed Funds rate would remain unchanged. Screenshot by Therese Fitzgerald

The Federal Reserve announced its decision yesterday to hold the Fed Funds Rate at 5.25 to 5.5 percent, while offering hope for a rate cut in September.

The hold was not a surprise, given the Fed’s reluctance to pronounce inflation defeated and move to a less restrictive monetary policy. Most pundits were forecasting a September cut, anyway. But, with Core PCE inflation rising at 2.6 in June (the Fed’s target is 2 percent), and the job market tightening, rate watchers were kept guessing until the last minute.

Recent data on inflation and the job market have given the 19 members of the Federal Open Market Committee confidence, Powell said, but they “voted unanimously” to wait for more good data before making a cut.


READ ALSO: Is the Fed Ready to Commit to a Cut?


When the Fed does make a cut, he said, it will be based on satisfactory readings from both sides of the Fed’s dual mandate: stable prices and maximum employment.

“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,” said Powell at a press conference after the announcement. “If that test is met, a reduction in our policy rate could be on the table as soon as the next meeting in September.”



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