“There has been some progress toward the Committee’s 2% target,” the central bank’s Federal Open Market Committee said in a statement at the end of a two-day meeting, in which it kept its benchmark overnight interest rate on hold. range of 5.25%-5.50%but also paved the way for a cut at its meeting on September 17 and 18, just seven weeks before the November 5 US election.
While Fed officials are wary of any action that might undermine their “data, not politics” approach to setting borrowing costs, the steady decline in inflation in recent months has created a broad consensus that the battle against rising prices is coming to an end.
Inflation, the Fed said, was now only “somewhat elevated,” an adjustment from the “elevated” assessment it has used throughout much of its monetary tightening campaign.
In addition, the Fed removed the reference to being “closely alert to inflation risks,” replacing it with an acknowledgement that policymakers were now “mindful of risks to both parts of their dual mandate,” which includes Congress’s charge to maintain maximum employment consistent with stable prices.
U.S. central bankers have said it would be appropriate to cut borrowing costs before inflation actually returns to target, to take into account the time it takes for monetary policy to affect the economy.
So far, the economy “has continued to expand at a solid pace,” the Fed said in its latest statement, and while “job gains have moderated,” the unemployment rate “remains low.”
Fed Chairman Jerome Powell will hold a press conference at 18:30 GMT to provide more details on the meeting and the outlook for the economy and interest rates.
The new monetary policy statement was approved unanimously.
