Federal Reserve Holds Interest Rates, Signals Possible Cut in September

The Federal Reserve held its benchmark interest rate steady at 4.75-5.00% on Wednesday, as policymakers said they need more evidence that inflation is durably returning to the 2% target. Fed Chair Jerome Powell said a rate cut could come as early as September if incoming data continues to cooperate.

Markets interpreted the statement as mildly hawkish, with the S&P 500 falling 0.4%. The personal consumption expenditures price index rose 2.6% annually through June, still above target but down sharply from the 9% peak reached in 2022.

Powell warned that the ongoing US-Iran conflict and new tariffs on Canadian goods introduce fresh uncertainty into the inflation outlook. The probability of a September cut was priced at 72% by markets following the statement.