US Fed Chair Jerome Powell.
US Federal Reserve Meet: Stay updated on the US Fed meeting today and the anticipated interest rates outcome. Learn how changes in the Fed’s policy may impact the economy and markets.
US Fed Meeting LIVE Updates: The US Federal Reserve on Wednesday decided to keep its benchmark interest rate unchanged at 5.25-5.50 per cent. This is in line with market expectations. The two-day meeting of the Federal Open Market Committee (FOMC), the rate-setting authority in the US, concluded on Wednesday. US Fed Chair Jerome Powell also hinted at a rate cut in September.
Addressing reporters post the FOMC decision, US Fed Chair Jerome Powell in his speech on Wednesday said, “Inflation has eased notably over the past two years”.
However, he added that reducing interest rates too soon may reverse the progress on inflation.
It will be important to see “the totality of data (jobs and inflation), the evolving outlook and the balance of risks or consistent with rising confidence on inflation and maintaining a solid labour market”, he added.
“If that test is met, the reduction of policy rate could be on the table as soon as the next meeting in September,” Powell added while hinting at a rate cut in September.
The next US Fed’s FOMC meeting will take place on September 17-18. The last interest rate cut in the US took place on March 15, 2020.
“In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 per cent,” the US Federal Reserve said in a statement on Wednesday.
On future rate decisions, it said that in considering any adjustments to the target range for the federal funds rate, the FOMC “will carefully assess incoming data, the evolving outlook, and the balance of risks”.
On inflation, the US central bank said it “has eased over the past year but remains somewhat elevated”. In recent months, there has been some further progress toward the Committee’s 2 per cent inflation objective.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals continue to move into better balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.
The US central bank has been holding the interest rates for the past one year since July 2023. Before that, between March 2022 and July 2023, the US Federal Reserve raised the interest rates by 525 basis points to control inflation, which hit a multi-decade high amid the Ukraine-Russia war and COVID restrictions.
A basis point is 100th of a percentage point.
However, now, the retail inflation in the US has fallen steadily closer to the Fed’s 2% target for the past several months. According to the latest data, yearly inflation in the US fell to 2.5% in July. The separate latest data showed that the US economy also grew faster than expected at 2.8 per cent in the second quarter solid gains in consumer spending and business investment. The Q2 GDP growth was double the 1.4% growth pace in the first quarter.
What Does It Mean for the Indian Markets, Gold Prices?
The status quo by the US Federal Reserve has already been factored in by the markets. However, the possibility of a rate cut in September will have a positive impact on the Indian market, which has been hovering near the magical 25,000 on Nifty for the last few days.
The possibility of a rate cut in September will cause gold and equity prices to rise, said Amit Goel, co-founder & chief global strategist, Pace 360.
