Fed Holds Rates, Hints at Possible September Cut

Federal Reserve Chair Jerome Powell has indicated that a rate cut could be on the table for the September meeting, reflecting growing confidence that inflation is coming under control. This follows the Fed's decision to maintain the federal funds rate at its current range of 5.25% to 5.5%, a 23-year high, to combat inflation. Powell emphasized that future rate decisions will depend on incoming economic data, particularly regarding inflation and the labor market. Economist Claudia Sahm has criticized Powell's stance, arguing that the Fed should act immediately to ease inflation, rather than waiting for recession indicators. Sahm believes that the Sahm Rule, which she developed, should prompt fiscal measures during a recession to prevent economic downturns. The Federal Reserve's cautious approach aims to balance reducing inflation with maintaining employment stability.