Federal Reserve sees progress with inflation, hinting that a rate cut is near
FILE-The Federal Reserve building is seen in Washington, D.C. (Photo by Chip Somodevilla/Getty Images)
The Federal Reserve says progress has been made in reducing inflation to its 2% target, a sign that the central bank may move closer to cutting its key interest rate for the first time in four years.
Fed Chair Jerome Powell said Wednesday that if inflation continued to cool, "a rate cut could be on the table in the September meeting," the Associated Press reported.
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The Federal Reserve wants to keep rates high enough for long enough to suppress inflation, which has fallen to 2.5% from a peak two years ago of 7.1%.
According to the AP, the agency also wants to avoid keeping borrowing costs so high that it triggers a recession. So far, it is on track for a "soft landing," in which inflation falls to 2% without a recession.
Three Democratic senators, led by Elizabeth Warren from Massachusetts, urged Powell in a letter to cut interest rates. Citing the letter, the AP noted that a failure to lower borrowing costs soon could suggest the Fed is "giving in to bullying" and would itself be a political move.
Last week, the federal government reported that yearly inflation dipped to 2.5% in July, the AP noted, citing the Federal Reserve's preferred inflation measure. This is down from 2.6% in June and the lowest since February 2021, when inflation began to rise.
Meanwhile, the unemployment rate increased by almost a half-percentage point this year to a still-low 4.1% and hiring has slowed. Powell and other Fed officials have highlighted they are increasingly focused on the risk that the job market could falter, another reason markets expect rate cuts soon.
The Associated Press contributed to this report. This story was reported from Washington, D.C.