The Fed is keeping interest rates unchanged again.
However, Fed Chair Jerome Powell hinted at a potential interest rate cut soon. "If conditions are right, a rate cut could happen as early as the September meeting," he said to journalists. "The general sentiment among committee members is that the economy is approaching the point where it would be appropriate to lower our rates." Inflation is "significantly" decreasing.
The Fed has been raising interest rates since March 2022 to combat inflation, but since July 2023, they have kept the interest rate range unchanged. In June, the inflation rate fell by 0.3 percentage points to 3.0 percent. While this is a notable decrease, it is still far from the targeted inflation rate of two percent. The Federal Reserve has already hinted at rate cuts for this year, but they also aim to avoid reigniting inflation.
A rate cut in September, ahead of the November presidential election, could also spark political debates, as the U.S. central bank aims to avoid any appearance of political bias. Former President Donald Trump, who nominated the Fed chair, has repeatedly criticized him and threatened not to renominate him if he wins the election again.
Powell, however, emphasized on Wednesday that the Fed would never use its tools to support or oppose a political party or politician. "We would never try to make decisions based on the outcome of an election that hasn't happened yet," he said. This is a line, he added, "that we would never cross."
The Federal Reserve's consideration of a rate cut could impact the economic narrative leading up to the November presidential election in the United States. Despite former President Donald Trump's criticisms of Chair Powell, the Fed maintains its commitment to making decisions based on economic conditions, not political affiliations, within the United States.
