Federal Reserve kicks off highly anticipated meeting with interest rate cuts on the docket
EY-Parthenon chief economist Gregory Daco outlines why the Fed will gradually cut interest rates and not get too aggressive on «Making Money.»
The Federal Reserve on Tuesday begins a highly anticipated two-day meeting where policymakers are expected to cut interest rates for the first time in four years as stubborn inflation shows signs of continuing to ease.
The Fed's policymaking arm, the Federal Open Market Committee (FOMC), kicks off its meeting on Tuesday and will announce its decision regarding interest rates on Wednesday, when Fed Chair Jerome Powell will also shed light on the central bank's thinking at a press conference.
After its last policy meeting in July, the Fed kept its benchmark federal funds rate steady at a 23-year-high range of 5.25% to 5.5% but opened the door to interest rate cuts if inflation continued to ease. Inflation data showed that price growth slowed to 2.9% year over year in July and last week's release of August data reflected a continuation of that trend, with headline inflation at 2.5% from a year ago.
Powell has signaled that the Fed doesn't need to wait for inflation to reach the central bank's target rate of 2%, given the progress in slowing inflation, which peaked at 9.1% in June 2022. Markets expect the Fed to kick off a series of interest rate cuts this week that will continue in the months ahead, though there is debate over the size of the initial rate cut.
INFLATION RISES 2.5% IN AUGUST, LESS THAN EXPECTED
Federal Reserve Chair Jerome Powell signaled last month that the «time has come» for interest rate cuts. (Al Drago/Bloomberg via Getty Images)
A LSEG poll of economists projects the Fed will cut interest rates by 25 basis points this week, lowering the benchmark rate to a
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