OAN Staff Abril Elfi
5:02 PM – Wednesday, July 31, 2024
While maintaining interest rates at their highest point in over 20 years on Wednesday, the Federal Reserve made a suggestion that lower borrowing costs may soon be implemented by policymakers due to slight recent improvements in inflation.
The widely anticipated decision kept interest rates where they have been since last July, in the range of 5.25% to 5.5%.
Following their two-day meeting in Washington, Fed policymakers released a statement that had undergone several significant revisions. The officials’ description of inflation was “somewhat elevated,” which is a significant departure from their earlier designation of “elevated.”
Additionally, the statement revealed that central bank officials are paying more attention to employment and inflation risks than they are to inflation risks alone.
“The Committee judges that the risks to achieving its employment and inflation goals continue to move into better balance,” the statement said. “The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.”
However, policymakers also added verbiage in the statement that suggested they need “greater confidence” inflation is coming down before easing policy.
In their next meeting set for September 17th -18th, investors are still pricing in a 100% chance of a rate reduction.
Fed Chair Jerome Powell said that even though no decision has been made regarding the September meeting, it is possible that officials would cut rates if the economic data showed inflation continuing to ease.
“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,” Powell said. “If that test is met, a reduction in our policy rate could be on the table as soon as the next meeting in September.”
Policymakers’ sharp increase in interest rates in 2022 and 2023 was meant to purportedly “slow down the economy and reduce inflation.”
The question of when to release the brakes is currently troubling officials. Even though inflation decreased in April, May, and June of 2024, they still had intentions to cut rates at least three times. However, these plans have always been consistently postponed.
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