Fed Holds Interest Rates, Points to Slowing Economic Activity
The Fed left interest rates unchanged but downgraded their view of the US economy. The Fed voted 9-2 to hold the benchmark federal funds rate, with Governors Christopher Waller and Michelle Bowman voting against the decision in favor of a quarter-point cut. This was the first time since 1993 there were two dissents in a FOMC rate decision. The FOMC includes seven governors and five of the 12 regional reserve bank presidents.Officials said recent indicators suggest that growth of economic activity moderated in the first half of the year, and the labor market is "solid" and inflation "remains somewhat elevated".▪Money markets are estimating a 60% chance of Fed rate cut at the Sept Fed meeting, and 2 rate cuts by year-end.Commentary:“Although swings in net exports continue to affect the data, recent indicators suggest that growth of economic activity moderated in the first half of the year,” officials said in a post-meeting statement. The Fed had previously characterized growth as expanding “at a solid pace.”In their statement, central bank officials repeated the view that the labor market is “solid” and inflation “remains somewhat elevated.”The committee’s decision to hold steady once again defies the intense pressure from President Trump to cut rates. Earlier on Wednesday, in a social media post, Trump said the Fed “MUST NOW LOWER THE RATE.”Fed Chair Jerome Powell will hold a press conference at 2:30 ET p.m.Data released Wednesday showed gross domestic product increased an annualized 3% in the second quarter after shrinking at a 0.5% rate in the previous period. The swing was caused largely by the front-loading of imports in the first quarter to get ahead of tariffs. Consumer spending advanced at its slowest pace over consecutive quarters since the onset of the pandemic.Here is a side-by-side comparison of the current vs the June FOMC statement.The copyright of this article belongs to the original author/organization.
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