The US Federal Reserve has decided to keep interest rates unchanged, but has hinted at the possibility of a rate cut in September, as inflation levels are aligning with the central bank’s target of 2%. The Federal Open Market Committee, after a two-day meeting, maintained the benchmark overnight interest rate between 5.25%-5.50%, but suggested a rate cut at the upcoming meeting in September. This move comes as inflation has decreased in recent months, with the central bank acknowledging that inflation is now just “somewhat elevated.” The Federal Reserve is closely monitoring both sides of their dual mandate, which includes maintaining maximum employment along with stable prices.
The Fed has indicated that it may lower borrowing costs before inflation reaches the 2% target, in order to account for the time it takes for monetary policy to impact the economy. Despite the solid pace of expansion in the economy and the low unemployment rate, the central bank is cautious about potential risks and is considering a rate cut in September to ensure sustainable inflation growth towards their target.
Fed Chair, Jerome Powell, will be holding a press conference to provide more insights on the latest statement and the economic outlook. The unanimous approval of the new policy statement suggests that confidence is growing towards a rate cut in September, aligning with market expectations. The Federal Reserve’s proactive measures aim to address inflation concerns and support economic growth.
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