DWS: The Federal Reserve did not explicitly commit to an imminent rate cut, but a first rate cut in September is still feasible
DWS US economists stated that the Federal Reserve has not explicitly committed to an imminent rate cut, but a rate cut in September is still possible. Given the current strong economic activity and gradual cooling of the labor market, this meeting does not need to issue clear forward guidance on the shift in interest rate policy to avoid triggering market reactions. The decision to cut rates in September will closely monitor the August Jackson Hole Global Central Bank Annual Meeting
According to the latest information from the Smart Finance app, DWS's American economist Christian Scherrmann stated that as expected, Federal Reserve officials acknowledged "further" progress in achieving the inflation target at the July interest rate meeting. However, contrary to market expectations, the officials did not explicitly commit to an imminent rate cut, indicating that more data is needed to confirm a sustained decline in inflation.
Chairman Powell signaled a dovish stance at the post-meeting press conference, suggesting that if economic data continues to improve, the Fed could cut rates as early as September, with the possibility of multiple rate cuts in the long run. He also revealed that rate cuts were actually discussed at this meeting, but were opposed by the vast majority of officials. Despite increased concerns among Fed officials about the labor market, the mainstream view still believes that an economic soft landing is possible.
Overall, this interest rate meeting once again focused on economic data, but it is clear that the stance of the Federal Open Market Committee is changing. In the past three months, inflation has continued to cool down, offsetting the rebound in the first quarter of this year, and the unemployment rate has also shown changes in recent months. Given the current strong economic activity and gradual cooling of the labor market, this meeting did not need to issue clear forward guidance on interest rate policy shift, as the Fed still hopes to avoid triggering significant market reactions similar to those in the fourth quarter of last year, which would be counterproductive. This may explain why Powell sought a balanced approach in his wording, even when making dovish statements. Looking ahead, a rate cut in September is still feasible, and close attention will be paid to whether the Jackson Hole Global Central Bank Annual Meeting in August can provide more clear signals