Tomorrow, Wednesday, July 31, we are waiting for the decision of the US Federal Reserve on monetary policy, which is widely expected to keep interest rates steady as it continues a delicate process of balancing the control of inflation and economic activity.
Fed Chairman Jerome Powell described the timing of the interest rate cut as his biggest short-term concern, and also predicted that inflation would not fall to the 2% target before the end of 2025, but also noted that the Fed should not wait for inflation to fall to 2% to lower interest rates so as not to be late in the easing process as they were initially delayed at the beginning of tightening and raising interest rates.
On the other hand, the Personal Consumption Expenditures index, the Fed's preferred inflation measure, rose by 2.5% in June year-on-year, compared to 2.6% in May, as policymakers noted a slowdown in the labor market and consumer spending, which together constitutes a convincing argument for easing, but some central bankers expressed caution, preferring to see more data indicating a sustained decline in inflation.
As important as this week's interest rate decision is, the wording of the Fed's message will be equally or more important, because it will provide valuable information on future moves, as all eyes turn to the upcoming September meeting.
A rate cut has already been hinted at in September, although it is not certain, and markets will be closely watching Powell's press conference to confirm the long-awaited easing of policy, or will Jerome Powell have another opinion and surprise the markets.
