Federal Reserve officials held off on cutting interest rates at their July meeting, but minutes from that gathering showed that they were clearly poised to lower them at their meeting in September, just weeks before the presidential election.
Days after the Fed’s July gathering, a disappointing employment report showed that employers hired more slowly than expected.
That leaves the Fed primed to cut rates at their next meeting on Sept. 17-18, though just how much they will lower borrowing costs is still an open question.
Investors think that a quarter-point reduction is most likely, but they see a half-point cut as a possibility.
While the Fed is independent of politics, that move is likely to draw attention to the central bank.
The Fed has held interest rates steady at 5.3 percent, the highest level in more than two decades, since July 2023.
At that level, interest rates are hefty enough to discourage many families and businesses from borrowing money, which weighs on demand and helps to cool the economy, making it harder for companies to lift prices.
If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.
When the Federal Reserve met in July, officials decided against lowering interest rates, but the minutes from that session made it evident that they were ready to do so when they met in September—just a few weeks before the presidential election.
According to meeting notes released on Wednesday, “the vast majority” of officials believed that “if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting.”.
Employers hired more slowly than anticipated, according to a depressing employment report released a few days after the Federal Reserve’s July meeting. Furthermore, new data in the following weeks has indicated that inflation is still declining.
The Fed is therefore poised to lower rates at their September meeting. 17–18, though it’s unclear exactly how much they will reduce borrowing costs. Although a half-point cut is conceivable, investors believe that a quarter-point reduction is more likely.
That action is likely to bring attention to the central bank, even though the Fed is politically neutral. A decrease would occur just a few weeks before the presidential election in November, and during a period when the Fed’s policies, particularly its attempts to combat inflation and how it affects the housing market by raising mortgage rates, are frequently discussed on the campaign trail.
Since July2023, the Fed has maintained interest rates at 5 points 3 percent, which is the highest level in more than 20 years. At that point, the interest rates are high enough to deter many individuals and companies from taking out loans, which affects demand and cools the economy, making it more difficult for businesses to increase prices.
We appreciate your patience as we check access.
Subscribers already? Please log in.
Subscribe to get all of The Times.
