Fed holds rates steady for 8th time

The Federal Reserve headquarters

The US Federal Reserve announced today, July 31, it will hold interest rates steady for the fifth time this year and eighth consecutive time, though officials hinted at optimism that rates could be cut later this year.
 

This is the ninth time the US Federal Reserve has kept interest rates unchanged since the beginning of the current tightening cycle, which started in March 2022 and during which interest rates were raised by 5.25%.

Policy makers indicated in their statement that inflation is approaching the target (2%), which may allow for a reduction in interest rates soon, but they did not provide clear indications on the timing of the potential reduction.

They maintained their warning about ongoing concerns regarding economic conditions, although this aspect has seen some further progress is needed before it would be possible to reduce interest rates.

The Federal Open Market Committee's (FOMC) statement said the risks to achieving its employment and inflation goals continue to move into better balance.

Inflation has eased over the past year but remains somewhat elevated. In recent months, there has been some further progress toward the FOMC’s 2% inflation objective.

The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. The Committee is strongly committed to returning inflation to its 2% objective.

Investors are eagerly awaiting the press conference of Federal Reserve Chairman Jerome Powell shortly, hoping to support their expectations regarding the start of interest rate cuts in September and to indicate the central bank's success in controlling inflation.

Prior to the meeting that started on Tuesday and concluded today, the futures market indicated a 100% probability that policy makers would begin cutting interest rates at the next September meeting.