The US Federal Reserve decided to keep interest rates steady for the eighth meeting in a row, but hinted that rate cuts could be on the horizon. This decision was expected by investors and means that the federal funds rate will remain between 5.25-5.50 per cent, the highest level in 23 years.
While the Fed did not provide a clear timeline for interest rate cuts, it did acknowledge some progress towards its two per cent inflation target. Unemployment was described as low, and policymakers want to ensure that inflation is moving steadily towards the target.
During a press conference following the decision, Jerome Powell, the Fed chair, expressed growing confidence due to positive economic data. Analysts like Paul Ashworth from Capital Economics believe that a rate cut in September is likely based on the Fed’s statements.
Recent economic indicators, such as lower-than-expected inflation and a slight increase in unemployment, have fueled expectations for a policy easing. Despite strong GDP growth in the second quarter and stable inflation levels, concerns about the labor market and overall economic outlook persist.
Looking ahead, the Bank of England is set to announce its interest rate decision tomorrow, adding to market uncertainty. The global economic landscape remains complex, with central banks carefully navigating between supporting growth and managing inflation. As investors await further developments, the possibility of interest rate cuts in the near future is increasingly becoming a reality.
