Fed Poised to Hold Rates, Hint September Cuts: Inflation Nears Target

The Federal Reserve is expected to hold interest rates steady but signal possible cuts in September as inflation nears the central bank's 2% target. Policymakers are cautious yet optimistic, with data showing inflation easing and economic growth steady. Notably, political dynamics may influence future decisions.

The Federal Reserve is poised to keep interest rates steady at this week's policy meeting but may hint at potential cuts in September, as inflation edges closer to the 2% target.

Policymakers are cautiously optimistic, with recent data showing a significant easing in price pressures and economic growth holding steady. In June, the Fed's preferred inflation gauge rose by 2.5%, down from a peak of 7.1% in 2022. The core inflation measure, excluding food and energy, is also trending toward the 2% goal.

Analysts believe this shift in economic indicators might prompt the Fed to adjust its inflation description from 'elevated' to 'moderately elevated,' signaling a stronger commitment to addressing disinflation. Notably, political factors loom, with the impending U.S. presidential race and legislative scrutiny potentially influencing the Fed's timeline and decisions.

(With inputs from agencies.)