Breaking news… The Federal Reserve, in its July meeting, kept the policy rate unchanged in the range of 5.25-5.50%, in line with expectations, maintaining the highest rate in 23 years. The bank indicated that inflation is progressing towards the 2% target, opening the door for a potential rate cut at the September meeting.
The Federal Open Market Committee (FOMC), which sets the Federal Reserve’s monetary policy, kept the target range for the policy rate at 5.25-5.50%, in line with market expectations, and maintained the highest rate in 23 years for the eighth time.
In the statement made at the end of the meeting, it was noted that “some progress had been made towards the Committee’s 2% target,” while also setting the stage for a potential rate cut at the September 17-18 meeting, which is only seven weeks before the November 5 U.S. elections.
Key highlights from the statement following the Federal Open Market Committee’s two-day meeting in the U.S.:
– The Fed did not commit to a rate cut in September and reiterated that policymakers still need “more confidence that inflation is moving sustainably toward 2%” before lowering borrowing costs.
– Fed officials avoided any steps that could undermine their “data over politics” approach to monetary policy, despite the broad consensus that the steady decline in inflation in recent months signals the end of the inflation battle.
– The Fed stated that inflation was now only “somewhat elevated,” marking a significant decrease from the previous characterization of inflation as “high” during most of its fight against rising prices.
– Additionally, the Fed removed the phrase indicating they were “highly attentive to inflation risks,” replacing it with an acknowledgment that policymakers are now “attentive to risks on both sides of the dual mandate to promote maximum employment and stable prices set by Congress.”
– U.S. central bankers stated that it would be appropriate to lower borrowing costs before inflation returns to their target, to account for the time lag in how monetary policy affects the economy.
– According to the Fed’s latest policy statement, the economy has “continued to expand at a solid pace,” and while “job gains have moderated,” the unemployment rate “remains low.”
