The US Federal Open Market Committee (FOMC) held the Federal Funds Rate steady in the 5.25-5.50% target range at the July 2024 meeting. Federal Reserve Chair Jerome Powell signalled a possible rate cut in the September meeting.

The US economic activity has recently shown signs of losing momentum. In June, analysts marginally revised the 2024 real GDP growth forecast downward to 2.3% from 2.4% earlier. Additionally, the U.S. economic surprise index has turned negative as economic data have come in below market expectations.

The FOMC statement highlighted further progress toward the 2% inflation objective in recent months. It noted that inflation has eased over the past year but remains somewhat elevated.

Recent inflation figures have mostly been lower than or in line with market expectations. US CPI inflation fell to 3% YoY in June 2024, down from 3.3% YoY in May and below market expectations of 3.1% YoY. The Fed’s preferred measure, core PCE, printed at 2.6% YoY in June, unchanged from May.

Labour market conditions are gradually easing, as evidenced by moderate job gains and a decline in job openings. The unemployment rate has also ticked up, and wage growth has slowed.

The FOMC judged that ‘the risks to achieving its employment and inflation goals continue to move into better balance,’ and the Committee is ‘attentive to the risks to both sides of its dual mandate.’

In the post-policy press conference, Powell indicated a possible rate cut in September if economic conditions align with expectations. Markets now expect three rate cuts in 2024.

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