URGENT: Powell hints at potential Sept. cut

US Federal Reserve Chair Jerome Powell suggested that a rate cut could be possible as early as September if the economic conditions align with the central bank’s goals

The Fed has currently left interest rates unchanged, but Powell emphasised the possibility of a change soon.

“The broad sense of the committee is that the economy is moving closer to the point at which it would be appropriate to reduce our policy rate,” Powell stated.

He added that the decision will hinge on whether the data and economic outlook continue to show confidence in inflation control and a strong labour market.

“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 said. “If that test is met, a reduction in our policy rate could be on the table or as soon as the next meeting in September.”

Powell noted that recent inflation data from the second quarter has boosted the Fed’s confidence, but more positive data will be necessary before making a decision.

“The second-quarter inflation readings have added to our confidence and more good data would further strengthen that confidence,” he remarked.

Additionally, Powell highlighted the Fed’s focus on both sides of its dual mandate—controlling inflation and ensuring employment.

He acknowledged the recent rise in unemployment and its implications for the labour market. “As the labor market has cooled and inflation has declined, the risks to achieving our employment and inflation goals continue to move into better balance. Indeed, we are attentive to the risks to both sides of our dual mandate,” Powell explained.

As the September meeting approaches, all eyes will be on the economic data to see if it supports a potential rate cut.

Attribution: Federal Reserve’s FOMC Press Conference July 31