Prior to the announcement of interest rates by the Federal Reserve on Thursday, Wall Street expected the Fed to hint at a rate cut in September at this meeting. However, in the FOMC statement on Thursday, the Fed only issued the most minimal reference to the rate cut in September.

Wall Street analysts and strategists have different views and understandings on the Fed's "unexpectedly dovish" statement, but generally believe that this is the Fed's management of investor expectations in order to have more room for action in the September rate decision.

Leo He, a trader at UBS Group, believes that this FOMC statement is undoubtedly more dovish than the statement in June, as the Fed changed its wording to say that they are now focusing on the two major tasks of inflation and employment, not just inflation.

The Federal Reserve maintained interest rates. In the policy statement, the Fed changed its wording to "The Committee is concerned about the risks to its dual mandate" of inflation and employment, while the previous wording was "The Committee remains vigilant against [the] inflation risk."

However, the Fed still insisted that "it is not appropriate to lower interest rates until there is more confidence that the inflation rate is sustainably moving toward 2%."

This statement is undoubtedly more dovish than the statement in June, as the Fed said they are now focusing on the two major tasks, but this is not a complete turn towards dovishness.

LH Meyer/Monetary Policy Analytics economist Derek Tang pointed out that the Fed has handled this situation very well:

The Fed's statement this time is quite balanced, capturing the easing of inflation and real economic concerns, and not fueling the flame for a rate hike in November.

If there are no unexpected events, a rate cut in September should still be possible. It is currently difficult to see what factors could prevent them from doing so.

Win Thin, global market strategist at BBH, said:"I think a lot of people hoped the Fed's attitude would be more relaxed, but the Fed didn't hint at a rate cut in September anyway. I think they will cut interest rates, but the dovishness of this FOMC statement is slightly lower than expected, which shows that the Fed wants to play it safe."

Ira Jersey, chief interest rate strategist at Bloomberg Intel, said: "Overall, the Fed's policy statement seems to be in line with our expectations, as it is balanced. The new wording "focus on the risks of inflation and employment" does not mean that a rate cut in September is imminent."

Anna Wong, chief economist at Bloomberg Economics, pointed out that the Fed may want to consider more economic data before sending a signal that a rate cut is imminent:

"There were very few red lines in this policy statement, but they conveyed an important message to investors: Fed officials are certainly not ready to lower interest rates in July, nor do they want to make investors believe that a 25 basis point rate cut in September is certain, not to mention that the market has recently been expecting a 50 basis point rate cut by the Fed."

Neil Dutta, chief economist of Renaissance Macro, said:"The wording of this FOMC statement was very cautious and balanced, which means that the Fed will have to make a more obvious wording shift in September. The minutes of the next meeting and the Jackson Hole Fed meeting in August will provide more information."

Ellen Zentner, economist at Morgan Stanley, said:"The FOMC statement shows that the characteristics of inflation and labor markets have undergone significant changes and emphasizes the risks of the dual mandate. The emphasis on cooling the labor market is a key shift towards a more balanced tone, and we believe this prepares the Fed for a rate cut in September."

Anna Wong, chief economist at Bloomberg Economics, pointed out that the Fed may want to consider more economic data before sending a signal that a rate cut is imminent:

"There were very few red lines in this policy statement, but they conveyed an important message to investors: Fed officials are certainly not ready to lower interest rates in July, nor do they want to make investors believe that a 25 basis point rate cut in September is certain, not to mention that the market has recently been expecting a 50 basis point rate cut by the Fed."

The new statement retains the hawkish measure of stating that they would prefer not to cut interest rates before increasing confidence in the path of inflation, which is a hawkish step. Nevertheless, by acknowledging the recent rise in unemployment and adding that they are now equally concerned with full employment, the FOMC has indeed left room for a rate cut in September.

"The policy statement contains very little red lines, but it sends an important message to investors: Fed officials are clearly not ready to cut interest rates in July, nor do they want investors to believe that a 25 basis point rate cut in September is certain, let alone that the market has recently been expecting a 50 basis point rate cut by the Fed."

"The new statement retains the hawkish measure of stating that they would prefer not to cut interest rates before increasing confidence in the path of inflation, which is a hawkish step. Nevertheless, by acknowledging the recent rise in unemployment and adding that they are now equally concerned with full employment, the FOMC has indeed left room for a rate cut in September."

We believe that the main reason they only hinted at a minimal interest rate cut is the large amount of data to be released before the September FOMC meeting: two inflation and employment reports, which may see significant changes in data. When Powell spoke at Jackson Hole at the end of August, it may have been the best time to clearly indicate a September rate cut, as he had already had one month of employment and inflation data.

Editor/ping