FOMC Keeps Rates Unchanged, Shifts to Neutral Stance

The Federal Open Market Committee (FOMC) again held the federal funds rate in a range of 5.25%-5.50% on Wednesday, as widely expected. The Committee has kept rates steady at the last eight consecutive meetings to bring inflation back to the central bank’s 2% target.

The FOMC statement is expected to strengthen expectations for looser monetary policy, as officials emphasized both that inflation is declining and that they are increasingly focused on the labor market’s health. “The economic outlook is uncertain, and the committee is attentive to the risks to both sides of its dual mandate,” the Fed said in its statement, replacing previous language that said the Fed was “highly attentive to inflation risks.”

The statement also largely repeated prior language saying the FOMC doesn’t expect to cut rates “until it has gained greater confidence that inflation is moving sustainably toward 2%.”

The Federal Reserve has held interest rates at a 23-year high for over a year to combat inflation and rising expenses. However, recent data, including weaker hiring and wage growth, has given the central bank reason to loosen monetary policy.

Market pricing now indicates with near certainty that the Fed will cut interest rates when it meets on September 17-18. Expectations, as measured by the CME’s FedWatch Tool, anticipate three cuts by the end of the year.