The Fed left its benchmark rate unchanged, but opened up to a possible first cut as early as September. After two days of meeting, policymakers voted unanimously to keep the US central bank’s benchmark interest rate between 5.25% and 5.50%, the Fed said in a statement, keeping the cost of money at a 23-year high. But speaking to reporters in Washington shortly after the decision was published, Fed Chairman Jerome Powell said of the next meeting in September: “No decision has been made but we do not exclude“a cut, “we will watch the labor market report carefully.” So everything “will depend on the data, but the data makes us confident. Growth expectations remain reasonably solid and if the data fails to meet confidence then we will decide differently.”
In any case, Powell added, in recent months “inflation has fallen significantly” and this “makes us confident that We are on a sustainable path towards the 2% goal“. “The general sense on the committee is that the economy is approaching the point where it will be appropriate to reduce our policy rate,” the Fed’s number one said. However, an initial interest rate cut of half a point “is not something we are thinking about right now,” he said in response to a specific question.
One thing is certain, Powell assured, the Fed will not be influenced by politics: “We never use our tools to support or oppose a party or a politician or a policy outcome,” Powell said. “The Fed has set the stage for easing in September, provided the next two inflation reports do not provide cause for alarm,” he wrote. Pantheon Macroeconomics Chief Economist Ian Shepherdson in a note after the announcement of the decision.