US | A rate cut “could be on the table” at the September meeting

The Fed is finally explicitly acknowledging that risks are broadly balanced: it is now “attentive to the risks to both sides of its dual mandate,” rather than “highly attentive to inflation risks.”

Key points

• Key points:
• The Fed turned more dovish, but avoided surprising the market and instead chose to leave the policy rate at its 5.25-5.50% target range for the eighth meeting in a row.
• The dovish tweaks of the statement were reinforced by Powell, who said that a rate cut “could be on the table as soon as the next meeting in September.”
• With more confidence that inflation has likely resumed its downward trend, the Fed will try to drive the economy through the path of a soft landing.
• Financial markets reacted strongly to today’s Fed hints that the start of the rate cut cycle is most likely just around the corner.
• FOMC participants will likely use the upcoming Jackson Hole’s forum to convey more definitive signals around the increased chances of a September rate cut.

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