Rate Cut Could Be on the Table at the September Meeting, Fed Chair Powell Says.

A rate cut could be on the table as soon as September, if inflation continues to progress toward the Federal Reserve's 2% goal, Federal Reserve Chair Jerome Powell said at his post-monetary policy decision press conference.

In the labor market, supply and demand have come into better balance and have returned to about where they were before the pandemic — "strong, but not overheated," he said.

Earlier today, the central bank's Federal Open Market Committee kept its benchmark rate at 5.25%-5.50%, a level that it has stayed at since July of last year.

The second quarter's data has strengthened confidence that inflation is heading sustainably toward the Fed's 2% goal, he added. It's waiting for additional data to further strengthen that confidence before the FOMC reduces the federal funds rate target range.

"We have made no decisions about future meetings, and that includes the September meeting," he said.

The FOMC kept its rate at a restrictive level to keep demand in line with supply and reduce inflationary pressures, he said.

"Although Powell did not commit to a September cut or provide forward guidance, it’s clear that the Fed is imminently close," said Yimin Xu on behalf of Investing Group Leader Cestrian Capital Research. "The Fed likely judges the next meeting to be ideal because they feel the downtrend in inflation data has been high quality and broad-based, while the labor market softening is still part of a normalization process."

3:18 PM ET: Digital currency has implications for payment systems, and the Fed has staff researching that. There's not much going on in terms of a central bank digital currency, Powell said. "We're keeping up with developments in that," but the Fed doesn't have plans to create one. With that question, the press conference concluded.

3: 15 PM ET: The Fed needs to be careful about forecasting. For example, most forecasters were surprised by the strength of the economy in the past year. "Nobody has great vision deep into the future," Powell said.

3:13 PM ET: The judgment of the committee is the time of a cut "is drawing near" and could be in September. The data doesn't show an economy that is overheating or a sharply weakening economy, Powell said.

3:11 PM ET: There were some who favored moving rates down at this meeting, but "the overall sense" at the FOMC was to keep rates unchanged at this one.

3:09 PM ET: The FOMC hasn't been thinking about a 50 basis point rate cut when it does cut.

3:05 PM ET: Powell said the Fed doesn't project who will win the presidential election when making rate decisions. Again, he asserts that no decisions have been made about future meetings. Fed tools will not be used to support any political party, he added.

3:03 PM ET: The Nasdaq rises 3.2%, the S&P 500 +2.0%, and the Dow +1.1%. The 10-year Treasury yield fell 3 basis points to 4.11%.

2:58 PM ET: Lags from policy moves have shown up in the last six months. And the Fed has to worry about the lags when cutting rates, as well. "I feel good about where we are," he said.

2:56 PM ET: The objective is to balance the risks of going too soon or going too late, Powell said. "There's no guarantee in this — it's a difficult judgment call." The FOMC had a "good discussion" for the case of moving at this meeting.

2:55 PM ET: The Fed policymakers will be looking at how the "totality of data" is affecting the balance of risks when making its decisions.

2:53 PM ET: "The upside risks to inflation have decreased as the labor market has cooled off," Powell said. "The time is coming where it begins to be appropriate to dial back" restrictive policy.

2:52 PM ET: 12-month core inflation is at 2.6%, substantially better than it was a year ago, he said. Still, the job of bringing down inflation isn't done.

2:50 PM ET: "You would think that policy rates would move down from here," but Powell didn't want to be specific on the pace of any rate cuts.

2:46 PM ET: All of the data points are pointing to the direction "that we want to go," and indicate a normalization of the economy, he said.

2:45 PM ET: "We're in a good place here," he said. "We're balancing these two risks." Powell noted that 4.1% unemployment is still a historically low level.

2:44 PM ET: "We're back to a closer-to-even focus" between the Fed's two goals of price stability and maximum employment. When inflation had surged, the central bank had to focus more on that side of its mandate. "We're back to conditions closer to 2019," which was not an inflationary economy, Powell said.

Update at 2:40 PM ET: "The path ahead will depend upon how the economy evolves," Powell said. Essentially, it "just a question of seeing more good data."