The Federal Reserve has decided to keep its benchmark interest rate unchanged, marking a full year since the cost of borrowing first reached a 23-year high. However, the central bank hinted at a potential rate cut in the coming months, according to a policy statement released on Wednesday (July 31). The Federal Open Market Committee (FOMC) will hold the federal funds rate in a range of 5.25% to 5.5%, its highest level in 23 years.
The Fed’s statement included a few significant changes in its outlook. It described inflation as “somewhat elevated,” a more moderate description than its June characterization as simply “elevated.” The central bank also emphasized its mandate to focus on full employment in addition to taming inflation.
Wall Street analysts interpreted the statement as opening the door to a rate cut at the Fed’s next meeting, scheduled for September 17-18. About 90% of economists expect the Fed’s first rate cut since 2020 to occur at this meeting, citing faster-than-expected easing inflation.
The Fed’s decision comes amid concerns about the nation’s labor market, which is showing signs of slowing down. Job growth has decreased to an average of 177,000 a month for the past three months, compared to a three-month average of 275,000 a year ago. The July jobs report will be released on Friday, with economists predicting payroll gains of 175,000 this month and the unemployment rate remaining steady at 4.1%.
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