Federal Reserve officials have stated that although the economy is showing signs of slowing down, they are not yet ready to cut interest rates. The Federal Open Market Committee has left the interest rate unchanged at around 5.5% and indicated that they will not change it until inflation moves sustainably toward 2%. While the U.S. economy seems stable, there are signs of slowing, with the unemployment rate at 4.1% and job gains moderating. Inflation hit 2.5% in June, below the Fed’s target of 2%. Wall Street traders predict a September rate cut, but former Fed officials are calling for earlier action.
Fed Chair Jerome Powell has warned that delaying rate cuts could weaken economic activity. The Fed has been keeping interest rates elevated to fight inflation, but now they are signaling that keeping rates high could harm the economy. The Fed is under pressure to cut rates to prevent a recession, with sectors like housing and automotive markets showing weakness. Some companies expect sales to increase once interest rates start falling. There is speculation that interest rate relief may begin in September, which could have a positive impact on the economy in the future. The Fed will announce the results of the Open Market Committee meeting on Wednesday.
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