Federal Reserve holds rates, says “time is drawing near” for cuts

The Federal Reserve kept its policy rate unchanged at 5.25 to 5.5%. The 110 economists surveyed by Bloomberg — and 96% odds of holding steady implied by the market — were right.

The statement accompanying the decision contained some minor tweaks, the most important of which was this change: “the Committee is attentive to the risks to both sides of its dual mandate.”

In June, this sentence showed a more singular focus on inflation: “the Committee remains highly attentive to inflation risks.”

A more pronounced concern about both of its dual mandate goals (maximum employment and price stability), rather than just inflation, was the closest thing to a hint in the statement that lower rates might be on the way soon.

During the press conference, Powell intimated that unless the inflation data between now and September was hotter than expected, a reduction in rates at that time would likely be on the table.

Elsewhere, the assessment of inflation in the policy statement was downgraded from “elevated” to “somewhat elevated,” while similarly job gains have “moderated” rather than “remained strong.”

“This was a baby step on the way to a September rate cut," writes Omair Sharif, founder of Inflation Insights. “I expect that further good news on the inflation front in July should set up the Chair to deliver a more meaningful signal that a rate cut in September is very likely.”