Fed: Unchanged for Jul, while Powell says rate cuts could come “as soon as” Sep – UOB Group
02.08.2024, 10:07

Fed: Unchanged for Jul, while Powell says rate cuts could come “as soon as” Sep – UOB Group

The Federal Reserve (Fed) left rates unchanged in Jul as widely expected, Powell puts Sep rate cut on the table assuming conditions are met, UOB Group economist Lee Sue Ann notes.  

Risk to delay cuts further is now better balanced

“The Fed in its 30/31 Jul 2024 Federal Open Market Committee (FOMC) meeting, unanimously agreed to keep the target range of its Fed Funds Target Rate (FFTR) unchanged at 5.25%-5.50%. This was widely expected and marked the eighth consecutive pause. The Fed also voted unanimously to keep the interest rate paid on reserves (IOER) balances unchanged at 5.40%.”

“The significant change in the Jul monetary policy statement (MPS) was the shift in the Fed’s focus to the dual mandate instead of just on inflation. Powell’s subsequent commentary was viewed as dovish, putting a Sep rate cut on the table, if inflation cools in line with expectations, and the solid labor market conditions are maintained.”

“After keeping the FFTR steady at 5.25-5.50% in the Jul FOMC, we continue to hold the view the Fed will subsequently start to ease monetary policy in late 3Q, where we factor in 50 bps of rate cuts for the remainder of 2024, (i.e. two 25- bps cuts, one each in Sep and Dec FOMC). The risk for the Fed to delay cuts further if the inflation descent is stalled again is now better balanced by the evident cooling of the labor market.”

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