New insights from Fed officials point towards likely interest rate cuts in September as a result of the Fed’s recent policy meeting. Minutes from the policy meeting held July 30-31 suggest that “if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting.”
Details from the meeting reveal that the Fed “unanimously voted” to keep rates steady between a range of 5.25% and 5.5%, the highest level in the last two decades. However, “several officials” saw good reason to proceed with rate cuts as hinted by Fed Chairman Jerome Powell in July.
Officials in favor of interest rate cuts highlighted inflation progress in the US, currently standing at 2% levels. The same officials stressed rising unemployment levels that demand immediate solutions, such as interest rate cuts. A persistent lull in the labor market “could transition to a more serious deterioration,” the minutes stated.
Wednesday’s policy minutes indicate the gravity of interest rate cuts in the US. Many Fed officials that lean against rate cuts cite examples of rival economies that suffered the adverse effects of a liquid market. However, the US case study demonstrates how interest rates pose a short-term monetary tool to jolt a crumbling economy suffering from rising unemployment. In light of these developments by the Fed, gold prices hit a record high of $2,520, reflecting market anticipation on rate cuts.
The Fed’s Jerome Powell will speak on the economic outlook on Friday at the central bank’s annual, high-profile conference in Jackson Hole, Wy.
