At its meeting on August 1, 2024, the US Federal Reserve (Fed) made a decision on monetary policy and the current economic situation.
FED keeps interest rates unchanged for the 8th consecutive time
The US Federal Reserve (Fed) decided to keep interest rates at 5.25% - 5.5% in its recent meeting, marking the 8th consecutive time since the September 2023 meeting. They believe that this is an appropriate interest rate to continue supporting the economy in the current context. This decision was made after a careful assessment of key economic indicators, including:
- Unemployment Rate : Although the current unemployment rate is low, the Fed is concerned about signs of weakness in the labor market.
- GDP Growth : The US economy showed signs of slowing growth in the second quarter, adding to concerns about the sustainability of the economic recovery.
- Inflation : Inflation remains high, however, the Fed sees some signs that inflationary pressures may ease in the coming months.
However, in their post-meeting policy statement, Fed policymakers gave no clear indication that a cut was imminent. They remained concerned about economic conditions and stressed that more real progress on inflation was needed before cutting rates .
The Federal Open Market Committee (FOMC) – the Fed's policy-making body – said:
“Risks to the employment and inflation targets continue to shift towards a more balanced direction.”
“Inflation has moderated over the past year but remains relatively high,” the FOMC stressed.
“In recent months, there has been some progress toward the 2% inflation objective,” the FOMC said, a significant improvement from its June 2024 statement, when it noted only “modest” progress.
However, the Fed remained cautious about making specific commitments on rate cuts. They continued to emphasize:
“The Committee does not expect to reduce the target range for the federal funds rate until it is more confident that inflation is moving toward its 2 percent objective on a sustained basis.”
This shows that the Fed wants to rely on actual data to make decisions, instead of setting a fixed path.
Remarks by Fed Chairman Jerome Powell
In his post-meeting remarks, Fed Chairman Jerome Powell highlighted several key points:
- Economic situation assessment :
- Powell said the US economy is in a period of adjustment, with many uncertainties affecting the growth outlook.
- He noted that the labor market remains strong but there are signs that job growth is slowing.
- Concerns about inflation :
- Powell acknowledged that inflation remains a major problem and pledged that the Fed would continue to work to bring inflation back to its 2% target.
- While the current monetary measures have started to take effect, it will take time to see the full impact, he said.
- Future strategy :
- The Fed Chairman stressed that the Fed will continue to closely monitor economic indicators and is ready to adjust policy if necessary.
- The Fed will use all available tools to support the economy and ensure financial stability, he said.
- Message to the market :
- Powell urged investors and businesses to remain cautious and prepare for all possible scenarios.
- He also affirmed that the Fed will be transparent and clear in its decisions and announcements to ensure market confidence and stability.
The speech of Fed Chairman Jerome Powell and the decision to keep the Fed's interest rate unchanged on August 1, 2024 sent a clear message about the Fed's prudence and commitment to controlling inflation and supporting the economy. In the coming time, investors, businesses and consumers will continue to monitor the Fed's moves to adjust their strategies and plans in accordance with the current economic situation.
Financial markets are eagerly awaiting the Fed’s next move, with many investors expecting a rate cut in September, and even predicting two more cuts in November and December.
