Powell Says A Cut Could Be On The Table At The Next Meeting In September

On July 31, 2024, Fed released FOMC Statement. The central bank decided to leave the federal funds rate unchanged at 5.25 – 5.50%.

In the statement, Fed noted that there has been some further progress towards its 2% inflation target. The central bank also stated that it would not be appropriate to reduce the target range until it had gained greater confidence that inflation was moving sustainable towards the inflation target.

During the press conference, Powell was asked whether he was ready to start cutting rates as markets already expected that Fed would cut rates in September. Powell noted that if data met expectations, a cut could be on the table as soon as the next meeting.

To meet Fed’s expectations, inflation should decline, economic growth should remain relatively strong, while the labor market should remain at roughly the same level.

Powell highlighted ongoing gradual normalization of labor market conditions and noted that Fed planned to maintain a balance between inflation and economic growth.

During the press conference, Powell often talked about Fed’s dual mandate of maintaining price stability and maximum employment. He said, that labor market at this point was not an inflationary source and that he did not want to see deterioration in labor market conditions.

Overall, Powell’s comments were dovish. Not surprisingly, U.S. Dollar Index pulled back as traders reacted to his comments, while SP500 tested session highs. At this point, the market is almost sure that Fed will start the rate cut cycle in September.

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