WASHINGTON: The US Federal Reserve might hint at a rate cut this week, although it’s expected to hold off until September for any actual decrease. The Fed is cautious about lowering rates too soon, fearing it might lead to higher inflation again.
Many experts think the Fed will stay put in July despite inflation slowing and the economy growing. They believe the Fed will likely start cutting rates in September, with further reductions possible later in the year.
The Fed has kept its key rate at 5.25-5.50% for a year to manage inflation. Higher rates make borrowing costlier for consumers and businesses. Fed Chair Jerome Powell might set the stage for a September rate cut in the upcoming July meeting and at a central bankers’ event in Jackson Hole.
While most expect the first cut in September, some are cautious and predict it might be delayed until December. Futures traders are confident that a rate cut will happen by mid-September.
If the Fed does cut rates in September, it could attract political attention as the US presidential election heats up. Former President Trump has criticized Fed Chair Powell, suggesting he might not reappoint him if elected. Powell insists that rate decisions are based on economic data, not politics.
Analysts anticipate at least two rate cuts this year, with the possibility of another cut in December. However, Fed policymakers had initially planned three cuts for 2024 but have since reduced that to one.
