- US hints at September interest rate cut
- At present it will maintain the current target range of 5.25%-5.5%
- The Fed has kept rates high to cool the economy and manage inflation, but now faces pressure to lower them
- Globally, other central banks are also navigating similar challenges
US hints at September interest rate cut
The US Federal Reserve may lower borrowing costs for the first time in over four years, as inflation cools and worries about the job market increase. Federal Reserve Chairman Jerome Powell hinted that a rate cut “could be on the table” at the central bank’s September meeting if current economic trends continue.
This week’s meeting saw officials debating a rate cut but ultimately deciding to maintain the current target range of 5.25%-5.5%, where it has been since last July. The Fed has kept rates high to cool the economy and manage inflation but now faces pressure to lower them to avoid a potential downturn.
Globally, other central banks are also navigating similar challenges. Some, like the Bank of Canada and the European Central Bank, have already reduced rates, while the Bank of England’s decision remains uncertain.
Powell emphasised that the Fed’s work on controlling inflation is “not done,” and the decision to hold off on a rate cut reflects a cautious approach. The US economy has slowed, with a slight rise in the unemployment rate to 4.1%, still low by historical standards. Inflation is approaching the Fed’s 2% target, standing at around 2.5% last month.
The Fed’s statement noted “moderated” job gains and rising unemployment, indicating more concern for the job market than previously. Some analysts believe a rate cut should happen sooner rather than later to mitigate economic risks.
The potential rate cut also has political implications, especially with the upcoming US presidential election. While some suggest a cut could politically benefit Democrats, Powell stressed that the Fed’s decisions are based solely on economic data, without political considerations.