Chances of a September rate cut increase for Federal Reserve

The Federal Reserve just might cut interest rates in September. Recent economic data and comments from Jerome Powell have put expectations back on the map.

Labor market numbers have softened, and inflation seems to be under control. At least according to him. Powell did his routine testimony to the Senate earlier today and said:-

“The Federal Reserve remains focused on our dual mandate to promote maximum employment and stable prices for the benefit of the American people.” 

Over the past two years, America’s inflation has made progress toward Powell’s 2% goal. He believes the economy is still strong, and expanding at an impressive rate, though the growth so far this year has fallen short of what we saw in 2023.

Private domestic demand remains strong, of course, and consumer spending and capital investment have slowed down a bit. Residential investment has also picked up this year.

The unemployment rate rose slightly to 4.1% in June, with payroll job gains averaging 222,000 jobs per month for the first half of 2024, thanks to higher labor force participation and strong immigration. You know, the Democratic way.

Personal consumption expenditures (PCE) prices increased by 2.6% during the 12 months that came before May. Core PCE prices (excluding food and energy) are also up by like 2.6%. But going by monthly readings, the progress has been unimpressive. Powell told the Senate:

“In support of these goals, the Committee has maintained the target range for the federal funds rate at 5-1/4 to 5-1/2 percent since last July, after having tightened the stance of monetary policy significantly over the previous year and a half. We have also continued to reduce our securities holdings.”

The Fed continues to make decisions meeting by meeting. Powell repeated his statement that cutting rates too soon or too much will stall or even reverse the little progress he has made on inflation. 

And reducing it too late or too little will weaken economic activity and employment. He promises to keep on assessing data and come up with the best way to balance risks and steady growth.

Powell’s speech didn’t only ease the Congress. It spread to the crypto market. QCP Capital believes a softer CPI data will force Powell to cut rates in September, or immediately after the November election.

At press time, Bitcoin was worth $57,770, and Ether was worth $3,122.

Reporting by Jai Hamid