Powell said the central bank was watching “carefully” for a sharper slowdown in the labor market
The central bank is keeping a close eye on the labor market and remains alert for signs of a potential slowdown, Fed Chairman Jerome Powell said.
“We are very careful about this,” he said during a press conference Wednesday. “We know the role, which …. I would call it a statistic that has happened throughout history.”
At this point, low unemployment and low layoff rates suggest a “normalizing labor market,” the Fed chairman said.
— Samantha Subin
The economy looks ‘very different’ than a year ago, Powell said
The US economy now looks very different from last year, Fed Chairman Powell said.
The central bank raised interest rates at its July meeting in 2023. They noted that unemployment has risen higher, while the inflation path has fallen significantly.
“It’s a very different economy,” he said a year earlier.
Powell described the current economy as “historically unusual” and “a welcome outcome for the people we serve.”
“What we’re thinking all the time is: How are we going to continue this?” said.
– Alex Harring
Stocks rose as the Fed’s Powell said a rate cut could be a possibility in September
Fed Chairman Powell gave traders a warning they’ve been waiting for – a rate cut could be on the table in September, depending on economic data.
Investors cheered the findings, sending stocks to new highs for the day. The Dow Jones Industrial Average added more than 450 points, or 1.12%, while the S&P 500 jumped 2.12%. The Nasdaq Composite advanced 3.11% higher.
— Darla Mercado
The Fed will evaluate inflation and employment more closely, Powell said
The Fed may consider prices and the labor market more equal because inflation has cooled, Chairman Powell said.
“While we are away from the inflation mandate, we need to focus on it,” Powell said. “Now, we’re back to a closer focus.”
On the labor front, he said that indicators show the labor market has gradually normalized from an “overheated” situation.
– Alex Harring
A Fed rate cut could be on the table as early as September if the inflation test is met, Powell said
The Federal Reserve left rates unchanged on Wednesday, but Fed Chairman Powell indicated at a press conference that a September rate cut may be on the table.
“The broad committee’s sense is that the economy is approaching a point where it is appropriate to reduce the policy rate,” he said.
“The question will be whether the total data, the emerging outlook and the balance of risks are consistent with rising confidence in inflation and maintaining a solid labor market,” Powell said. “If the test is met, a policy rate reduction could be on the table as soon as the next meeting in September.”
– Lisa Kailai Han
Second-quarter inflation data has ‘increased our confidence,’ Powell said
Inflation and employment data continue to move toward a more favorable balance, but the central bank will not cut rates until it has greater confidence that inflation continues “steadily” toward its 2% target, Fed Chairman Powell said.
“The second quarter inflation reading has boosted our confidence and better data will add to that confidence,” he said.
– Michelle Fox
Fed ‘cautious’ for both sides of dual mandate, Powell says
Fed Chairman Powell said that members of the Federal Reserve are paying attention to rising unemployment and potential weakness in the labor market.
“As the labor market has cooled and inflation has declined, the risks to achieving the employment and inflation goals continue to move toward a better balance. Indeed, we consider the risks to both sides of our dual mandate,” Powell said.
– Jesse too
See what changed in the new Fed statement
The July statement from the Federal Reserve brought updated language on the labor market and inflation. Click here to see a comparison of the June and July releases.
– Alex Harring
Markets are very sanguine about the number of rate cuts in 2025, Wells Fargo Investment Institute said
Traders would do well to keep their hopes up when it comes to Federal Reserve rate cuts in 2025, notes Scott Wren, senior global market strategist at Wells Fargo Investment Institute.
“The interest rate market has had a habit of being overly optimistic when it comes to rate cuts over the past two years,” he wrote in an investor note on Wednesday. “We suspect the current market is too optimistic.”
Wren’s team sees two rate cuts this year and just one in 2025, suggesting consumer inflation remains too high compared to the Fed’s 2% target.
“Our current projection calls for a rate cut next year because rental apartment inflation is usually late to pick up late next year,” he said. “We expect the Consumer Price Index (CPI) to return 3% in 2025.”
— Darla Mercado
The Federal Reserve kept rates unchanged in July, indicating ‘some further progress’ in inflation
Central bank policymakers kept interest rates in the target range of 5.25% to 5.5%, where they have been for the past year.
The Federal Reserve has indicated that inflation is approaching its target, but has given no clear indication that a rate cut is imminent.
“In recent months, there has been some further progress towards the 2 percent inflation Committee,” policymakers said in a postmeeting statement.
Read more from CNBC’s Jeff Cox on the July Federal Reserve meeting here.
— Darla Mercado
Where the market stands before the Fed’s decision
All three major averages were higher after 1:50 pm ET.
The S&P 500 advanced 1.57%, while the Nasdaq Composite gained 2.36%. The Dow Jones Industrial Average rose 279 points, or 0.69%.
— Darla Mercado
10-year Treasury yields fell ahead of the Fed’s rate decision
Bond yields have fallen sharply, even as the Federal Reserve has stood its ground on interest rates.
Ahead of the Federal Reserve’s July rate decision, the yield on the 10-year Treasury note fell to around 4.11%, the lowest level since March 12 when it was 4.081%. Although it was only a drop of three basis points today, it is a far cry from last October when the benchmark yield touched 5% – the first time since 2007.
The 2-year Treasury yield was also around 4.36%, unchanged on the day. Back in April, however, rates on this note topped 5%, spurred by concerns about labor costs.
Investors who have held these risk-free bonds have enjoyed attractive income since the Federal Reserve kept rates high. Bond yields and prices have an inverse relationship. However, when bond yields fall, investors can expect to see price appreciation from that corner of their portfolio.
— Darla Mercado, Gina Francolla
What investors can expect going into the decision of the Fed
Investors are looking ahead to the Federal Reserve’s policy decision for July, rather than improving views on the central bank’s prospects for rate cuts.
The Fed is expected to keep the interest rate steady at the conclusion of the meeting on Wednesday, keeping the benchmark rate in the range of 5.25% to 5.5%, which has been in place for the past year.
Traders will turn to the central bank’s postmeeting statement and listen closely to Fed Chairman Jerome Powell’s press conference for details on whether rate cuts could begin in September. Indeed, food fund futures trading shows a 100% chance that policymakers will cut rates at the meeting.
Read more from CNBC’s Jeff Cox on what investors should be looking for at the end of Wednesday’s meeting.
— Darla Mercado
