Fed Trims Interest Rates But Signaled A Potential Pause Ahead

Recently, the Fed (Federal Reserve) sanctioned an anticipated quarter-point interest rate curb but stated that the measures to alleviate policy can be nearing a pause. In a vote closely expected by financial markets, the central bank’s FOMC (Federal Open Market Committee) reduced its standard funds rate by almost 25 basis points in a range of 1.5–1.75%. The rate indicates what lenders charge jointly for overnight lending but is also connected to most kinds of revolving customer debt. It was the third curb in this year as a part of what Jerome Powell—Fed’s Chairman—has illustrated as a “mid-cycle change” in a growing financial expansion.

With this cut, there came hints directing to a higher bar for potential easing. The FOMC removed an important clause that had emerged in post-meeting declarations from June stating it was determined to “act relevant to uphold the expansion.” In June, Powell used the phase to place the July rate curb, and it has been integrated into the formal language since. The statement reported, “The Committee would persist to monitor the insinuations of incoming data for the economic viewpoint as it reviews the suitable course of the target range for the national funds rate.”

On a related note, Powell stated that the Fed must see a “major” rise in the inflation rate prior to increasing rates. Fed Chairman said that the central bank will need to see a maintained and noteworthy uptick in price pressures ahead of considering prospective rate hikes. Powell said from Washington, “Lately, we just attained 2% core inflation to choose one measure. Just reached it for a few months and then we have reversed. So I feel we will need to see a truly considerable move up in inflation that is relentless before we will consider surging rates to tackle inflation concerns.”