Economists Anticipate a September Rate Cut: Insights from Fed Officials
Fed officials remain cautious about committing to a September rate cut despite easing inflation, with market eyes on upcoming comments from Fed Chair Jerome Powell.
Key Highlights
- Economists are forecasting the Federal Reserve's next moves, but officials remain noncommittal about rate cuts.
- Several central bankers commented publicly post-inflation report but stopped short of confirming a September rate cut.
- Market participants await Fed Chair Jerome Powell's upcoming remarks for clearer direction.
Recent economic indicators have not prompted Federal Reserve officials to publicly endorse a rate cut in the upcoming September meeting.
Following new inflation data revealing the slowest annual price rises since March 2021, several central bankers have spoken out. This data has strengthened expectations among economists that the Fed will reduce the fed funds rate soon and sparked discussions on the potential size of the cut.
Despite this, Fed officials have not detailed how these figures are shaping their rate decisions.
What Are Fed Officials Awaiting?
The Federal Reserve has maintained the fed funds rate at historic highs for over a year to curb spending and control inflation. With inflation easing from its 2022 peak, many experts believe it is time to relax restrictive monetary policies.
However, central bankers emphasize the need for confidence that inflation is sustainably approaching the 2% annual target before initiating rate cuts, to avoid reigniting inflationary pressures.
In public remarks in Louisville, Kentucky, St. Louis Fed President Alberto Musalem noted that inflation trends appear favorable, describing the timing for rate reductions as "approaching," though he stopped short of confirming September plans.
Some Officials Express Openness to September Rate Cuts
Atlanta Fed President Raphael Bostic told the Financial Times he is "open" to cutting interest rates at the September Federal Open Market Committee meeting, aligning with Fed Chair Jerome Powell's recent statements.
Similarly, Chicago Fed President Austan Goolsbee remained noncommittal in a Bloomberg News interview, suggesting that weakening labor market conditions might prompt the Fed to consider rate reductions.
Philadelphia Fed President Patrick Harker did not address interest rate policies during a recent economic data conference.
While Fed officials have been reserved this week, market observers anticipate more clarity from Chair Powell’s speech at the upcoming Jackson Hole Economic Symposium.
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