Fed Meeting Today: Is a Rate Cut Coming? Forecast

The Fed Meeting on July 31: What to Expect

The Federal Reserve’s meeting on July 31 is set to unveil the decision on interest rates: what to expect from the US central bank meeting, and especially from Powell’s words.

Investors are almost certain that in this late July meeting nothing will change, with rates remaining steady.
All attention will be focused on the president’s statements, in search of any element supporting expectations of an initial reduction in the cost of money in September.
The decision on the cost of money will be published at 8:00 PM Italian time, and Powell’s press conference will begin at 8:30 PM.

The last time the US bank changed rates was in July 2023, increasing them by 25 basis points to bring the federal funds rate between 5.25% and 5.5%, the highest in the last 23 years.
What to expect from the meeting that ends today after two days of discussions, and what indications on rate cuts and the US economy? The forecasts.

Fed Meeting on July 31: Rates Steady, Cut in September? Forecasts

The Federal Reserve will likely keep monetary policy unchanged, but is expected to offer the clearest signal so far that it is seriously considering an interest rate cut, most likely at the next September meeting: this is the forecast by ING strategists, shared by the majority of analysts.

“We expect the next FOMC meeting to lay the groundwork for a rate cut in September, while the Fed argues the need to shift policy from a restrictive territory to a more neutral stance,” said James Knightley.

Some market observers, from former New York Fed President William Dudley to Mohamed El-Erian, have even made the case for a more aggressive easing than currently anticipated.
In separate Bloomberg Opinion columns, Dudley has stated that the Fed should consider rate cuts this week and El-Erian has warned of a “policy error” if the central bank keeps rates too high for too long.

“If the Fed keeps rates unchanged on July 31 as expected, the September meeting could represent a turning point in the Fed’s battle against inflation.
It would be the first interest rate cut since the beginning of the pandemic in 2020.”

Signals for the Fed from the US Economy

The meeting today comes in an economic context with both bright and dark spots.

The Fed’s preferred inflation gauge, the Personal Consumption Expenditures Index, rose by 2.5% in the last year through June, according to the US Department of Commerce.
GDP growth increased by 2.8% in the second quarter, more than economists had predicted, supported by consumer spending.

Unemployment has risen from a low of 3.4% in April last year to 4.1% in June, above the 4% level predicted by the Fed for the end of the year in its latest forecast cycle.

High rates are not sparing the economy: when the Fed begins to change course, a deterioration in unemployment and consumption could jeopardize the US recovery.