Powell: It Is Reasonable to Expect Rate Cuts Soon, Possible Discussion in September

The Fed continues to hold steady, paving the way for a rate cut in September, with a new focus on employment risks in addition to inflation.

The Fed's decision statement now refers to inflation as "somewhat elevated," making "some further progress" in reducing inflation, employment growth "somewhat slowed," and the unemployment rate remaining low but "somewhat rising." It no longer states it is "highly attentive to inflation risks," but rather focuses on the risks to its dual mandate of employment and inflation. It reiterates that it is not appropriate to cut rates until there is more confidence in reducing inflation, and the risks to employment and inflation remain more balanced.

Powell stated that with the labor market cooling and inflation rates falling, the risks of achieving employment and inflation targets continue to balance out. He said that at the September FOMC monetary policy meeting, a rate cut could be an option if inflation data supports it, with the FOMC possibly choosing to cut rates as early as September. He revealed that the general view of the FOMC is that it is approaching an appropriate time for rate cuts but has not yet fully reached that point.

The "new Fed journalist" said the Fed has cleared the way for a rate cut in September, for the first time in two years treating the employment and inflation targets more equally. This major shift means that inflation may no longer be an obstacle to rate cuts. Some analysts said the decision was slightly less dovish than expected and did not express greater confidence in reducing inflation.

The Fed's signal of a rate cut led to rises in US stocks, Treasuries, oil, gold, and the yen, with market expectations for a rate cut increasing.