Fed hints at rate cut in September as inflation nears 2%

Mumbai: The US Federal Reserve's Federal Open Market Committee (FOMC) kept interest rates unchanged at the end of its two-day meeting, but also hinted at a cut in September. Meanwhile, the Bank of England has announced a cut in interest rates.

The committee said in its statement that inflation in the US is falling towards the Federal Reserve's target of two percent. Keeping this statement in mind, a reduction in interest rates has been indicated in the next meeting.

The interest rate in the US is currently between 5.25 and 5.50 percent, but a reduction in it is planned in the meeting to be held in September. There is a possibility of seeing a reduction in interest rates before the elections to be held in November in the US.

With inflation having been declining steadily for some time now, there was a consensus in the Committee that the fight against inflation was nearing its end.

The Federal Reserve uses the personal consumption expenditure (PCE) price index for its annual target of two percent inflation. The PCE price index, which rises to seven percent in 2022, was at 2.50 percent in June of the current year. The US economy is growing at a strong pace. The statement issued by the Fed said that employment growth has slowed down, but the unemployment rate remains low.

Meanwhile, the Bank of England has cut interest rates from five percent to five percent for the first time in more than four years. Interest rates have been reduced for the first time since March 2020. Interest rates in England were at a 16-year high of 5.25 percent.