Federal Reserve officials have been hinting for months that cuts to its benchmark interest rate could be coming.
The hinting may just about be over.
Federal Reserve Chair Jerome Powell on Wednesday cited continued progress toward lower inflation rate as a reason the Fed could mark its first rate cut in four years.
But not yet.
The Fed kept its key interest rate unchanged – they’re at a 23-year high of 5.3% — with Powell indicating that first cut could come as soon as the Fed’s next meeting, set for Sept. 17-18.
“We’re getting closer to the point at which it’ll be appropriate to reduce our policy rate,” Powell said, “but we’re not quite at that point.”
A rate cut by the Fed is unlikely to have much immediate impact because it is largely expected by financial markets, the Associated Press reported. But such cuts should reduce borrowing costs for consumers and businesses, including mortgage and auto-loan rates.
The Fed said in a statement Wednesday that “job gains have moderated” and acknowledged that the unemployment rate has risen. The focus on both inflation and employment is a major shift after several years of Fed officials focusing exclusively on combatting rising prices.
“They’re ready to cut, just as long as we don’t get an inflation surprise between now and September, which we won’t,” Mark Zandi, chief economist at Moody’s Analytics, told the AP. “Better late than never.”
