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The Federal Reserve kept the policy interest rate unchanged Wednesday at 5.25%-5.5% at its July Federal Open Market Committee (FOMC) meeting, with the statement that inflation has seen further recent improvements toward the Fed’s 2% goal.
Despite these improvements, policymakers did not suggest that an interest rate reduction is imminent, emphasizing the need to continue relying on economic data.
The statement's opening paragraph, similar to June’s, notes that recent indicators show economic activity expanding at a solid pace. Job gains have moderated, and the unemployment rate has risen slightly but remains low. While inflation has decreased over the last year, it remains somewhat elevated.
The Fed reiterated that the risks to achieving its employment and inflation goals have moved toward a better balance over the last year.
Regarding forward guidance, the Committee said it would carefully assess incoming data, the evolving outlook and the balance of risks before making any adjustments to the target range for the federal funds rate. The FOMC said it does not foresee reducing the target range until there is greater confidence that inflation is moving sustainably toward 2%.
Fed Chair Jerome Powell‘s press conference, scheduled at 2:30 p.m., will as always be closely watched by market participants to gauge for any hints on a September rate cut and his assessment about the latest economic data.
Markets are fully pricing in a September interest rate cut, assigning a 90% chance for a 25-basis-point move and a residual 10% chance of an even larger rate cut.
Minutes after the July FOMC statement was released, stocks held their session gains and the dollar saw a slight recovery.
Jerome Powell and Wall Street illustration. Photo: Federalreserve and Flickr.