The Federal Open Market Committee’s last monetary policy meeting was held in July, where the interest rates were kept unchanged at 4.25% to 4.5%. The Federal rates have been kept unchanged since December 2024.
What led Federal Open Market Committee (FOMC) members to refrain from cutting rates in July will be revealed on August 20. The minutes of the FOMC meeting held on July 29-30 will be published on Wednesday at 2 pm ET.
Two members of the FOMC voted for a rate cut in July. Michelle Bowman and Christopher Waller, two FOMC members who dissented at the last meeting, will speak at a Wyoming blockchain conference, most likely touching upon the reasons why a rate cut is required.
September Rate Cut Probability
The next FOMC meeting is on September 16-17, when the summary of economic projections carrying the dot plot will also be announced.
83% of interest rate traders predict a 25-basis-point reduction in the federal funds rate during the upcoming FOMC meeting on September 16-17.
Inflation and Jobs
Inflation is trending lower but not yet within the Fed’s target range and looking sticky. In July, the Consumer Price Index (CPI) remained at 2.7%, the same as June, but the core CPI jumped to 3.1% — up from 2.9% the previous month.
Also, Goldman Sachs economists predict a 3.2% increase in core personal consumption expenditures by 2025, primarily due to tariffs as businesses pass on costs to consumers.
Even more alarming were the results of the Producer Price Index (PPI) for July, the gauge of what producers pay for goods.
The July PPI surged 0.9% in July, way past estimates of 0.2%. The 12-month PPI skyrocketed to 3.3% in July, up from 2.3% in June and above estimates of 2.5%. It was the largest increase in the PPI since February. The core PPI jumped to 3.7% in July, up from 2.6% in June.
The July jobs report showed anemic growth with only 73,000 jobs added. This itself could propel the US Fed to lower rates, as a healthy labor market is the other side of the Fed’s mandate.
Going Forward
The FOMC meeting is still a month away, and there is still a lot of data to come out before then. Most notably, the PCE report for July will be issued at the end of August. Further, the jobs report for August will come out in early September. Another bad jobs report could prompt the FOMC to lower rates, even if inflation ticks up.
Fed Chair Jerome Powell is slated to speak on Friday at the annual Jackson Hole Economic Symposium, which is hosted by the Federal Reserve Bank of Kansas City. This event, in Jackson Hole, Wyoming, is considered one of the most important events of the year, featuring a gathering of world economic leaders.
Powell is expected to address inflation, labor markets, and rates during his address, possibly providing insights into his position following the release of recent data.