The US Federal Reserve appears ready to implement the first interest rate cut of the year in September, according to the minutes of the last policy committee meeting, on July 30 and 31.
During the meeting, a “vast majority” of officials said “it would likely be appropriate to ease policy at the next meeting” should conditions remain unchanged.
“Several observed that the recent progress on inflation and increases in the unemployment rate had provided a plausible case for reducing the target range 25 basis points at this meeting or that they could have supported such a decision,” the minutes revealed.
The document also some policymakers would have been willing to reduce borrowing costs at last month’s gathering. Finally, the committee settled for maintaining its benchmark interest rate unchanged in the 5.25%-5.50% range on July 31, but opened the door to a cut come September. The Fed has held interest rates steady at this level, the highest in over two decades, since July 2023.
However, the recent reports pointing to a slowdown in the US job market have increased the calls for a cut in borrowing costs. During the July meeting, “a majority of participants remarked that the risks to the employment goal had increased, and many participants noted that the risks to the inflation goal had decreased,” the minutes showed.
If the Fed announces a rate cut in its next meeting, it would mark the first time it has done so since the onset of the pandemic in 2020. In that case, the reduction would come just weeks before the US presidential election.
