US Fed Maintains Interest Rates, Signals Possible September Cut

The US Federal Reserve has maintained interest rates at a 22-year peak of 5.25 to 5.5 percent as inflation shows signs of cooling, suggesting a potential rate cut as early as September.

"Inflation has eased over the past year but remains somewhat elevated. In recent months, there has been some further progress toward the Committee's 2 per cent inflation objective," stated the Federal Open Market Committee (FOMC), the Fed's policy-setting body, on Wednesday after a two-day policy meeting.

Compared to the June meeting, the Fed's statement indicated improvement. Previously, it had only mentioned "modest further progress" in curbing price pressures, according to Xinhua news agency.

The committee emphasized that it would not consider reducing the target range until there is greater confidence that inflation is steadily moving toward the 2 percent goal.

Additionally, the committee will persist in reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as noted in the statement.

When questioned about the likelihood of a September rate cut, US Federal Reserve Chair Jerome Powell remarked at a Wednesday afternoon press conference, "we have made no decisions about future meetings. That includes the September meeting."

Powell, however, acknowledged that "the broad sense of the committee is that the economy is moving closer to the point at which it will be appropriate to reduce our policy rate."

Highlighting the recent positive inflation readings, Powell said, "we've seen progress across all three categories of core PCE inflation: goods, non-housing services, and housing services."

In the second quarter, the personal consumption expenditures (PCE) price index rose 2.6 percent, down from a 3.4 percent increase in the first quarter, according to the Commerce Department's Bureau of Economic Analysis. Excluding food and energy prices, the PCE price index climbed 2.9 percent in the second quarter, compared to a 3.7 percent rise in the previous quarter.

"We think the time (for a rate cut) is approaching. If we get the data that we hope we get, a reduction in our policy rate could be on the table at the September meeting," the Fed chief stated.