Will Fed cut interest rates in September? This is what the experts say
The Federal Reserve’s next meeting will be held in the middle of next month, and with inflation heading towards its 2% target, will it cut interest rates?
Inflation has been cooling, with the rate pegged at 2.9% for the 12-month period leading up to July 2024. This was the lowest one-year hike since March 2021.
As the inflation rate heads steadily towards the Federal Reserve’s target of 2%, economists are optimistic the central bank will cut rates for the first time in almost four years when it meets next month.
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Why does the Federal Reserve cut interest rates?
The Federal Reserve takes this action primarily to stimulate economic growth and support employment during periods of economic weakness or uncertainty. The decision to lower rates is based on various economic indicators, with high inflation being the biggest consideration in recent months.
Recent numbers showed that while inflation is cooling, the hiring rate is slowing down and unemployment is inching up. Rising unemployment numbers are a significant concern for the Fed.
Cutting interest rates can help stimulate economic activity, which may lead to job creation and lower unemployment. When the labor market is weak, cutting rates can boost employment by encouraging businesses to expand and hire more workers.
These are among the factors being considered by economists as they make predictions about the Federal Reserve cutting interest rates.
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Will the Fed cut interest rates in September? This is what the experts say
A poll conducted by Reuters among economists indicates a majority believes the Fed will cut rates at each of the remaining three meetings of the year, with a third predicting only two cuts in 2024.
The latest data showed jobless claims settling back down to normal historical levels, with retail sales also performing better than expected.
Fed Chair Jerome Powell may drop some clues on Friday about how his organization views the economy and what it will do next, when he makes an important speech at the yearly conference of central bankers at Jackson Hole in Wyoming.