The Federal Reserve's statement did not provide specific details about its upcoming actions. However, according to Federal Reserve Chairman Jerome Powell, if staying put this time can lead to a &#34;rapid decline&#34; in inflation and keep the labor market &#34;consistent&#34; with its current level, then there is a high possibility of a rate cut at the next meeting in September.
However, for some economists, a rate cut in September may be too late.
In fact, there is a group of economists and investors who believe that even a rate cut in July would be too late. They argue that the Fed's preferred inflation gauge, the Personal Consumption Expenditures (PCE) index, has been hovering near the 2% target for months.
The latest data for June shows a 2.5% year-on-year increase in PCE, slightly down from 2.6% in May. The overall inflation rate, calculated by the Consumer Price Index (CPI), rose by 3.0% year-on-year in June. It is worth noting that the CPI in June decreased by 0.1% month-on-month, the first decline since May 2020.
The data presents a mixed and difficult-to-interpret situation, making the Federal Reserve particularly cautious. Lara Rhame, Chief U.S. Economist at FS Investments, said, &#34;The Fed's rate cuts will be precise, like fine-tuning, meaning they need to proceed cautiously under the right conditions.&#34;
Some economists believe that Powell's approach is too cautious. In a quarterly survey of economists by The Wall Street Journal, about 25% of respondents believe the Fed should cut rates at the current July meeting. It is worth noting that only 2% believe the Fed will actually do so.
Oscar Muñoz, Head of U.S. Macro Strategy at TD Securities, wrote in a report, &#34;The Fed's extra caution is because they want to ensure that inflation has indeed turned around, but this may come at the cost of unnecessary deterioration in the labor market.&#34;
On Monday, Nobel laureate in economics Paul Krugman stated, &#34;The Fed should cut rates now.&#34; He cited a specific indicator from the New York Fed designed to measure the &#34;persistence&#34; of inflation.
Powell himself insists that his focus is on the Fed's dual mandate of lowering inflation while maintaining maximum employment. He has been largely successful in this regard, as inflation has undoubtedly declined while the job market remains historically strong.
However, progressives point out that the sharp slowdown in the job market may be an early sign of a recession. According to ADP data, private sector employment growth was below expectations on Wednesday, adding only 122,000 jobs in July, while the unemployment rate rose from 4% in May to 4.1% in June.
Powell described this situation as stability in the labor market. He said, &#34;The labor market conditions have returned to the pre-pandemic situation: strong, but not overheated.&#34;
But he made it clear that he does not want to see the situation deteriorate further. He stated, &#34;I do not want to see substantial further cooling in the labor market.&#34;

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