Chairman Powell signals September rate cut traders hope for | Wilnesh News

Federal Reserve Chairman Powell said the interest rate cut at the September meeting has nothing to do with the upcoming presidential election.

He said the central bank would be “absolutely” apolitical if it lowered borrowing costs at the meeting. But the Fed chairman also warned against assuming a rate cut will happen.

“We never use our tools to support or oppose a political party, politician or any political outcome,” Powell said.

He also said the central bank’s economic forecasts did not take into account who wins the presidency.

“We would never try to make a policy decision based on the outcome of an election that hasn’t happened yet,” Powell said. That would be “a line we will never cross.”

Powell noted that November will mark his fourth term as Fed chair. He also emphasized that the central bank is a non-political institution.

— Alex Harling

Federal Reserve Chairman Jerome Powell appeared to rule out the possibility of the central bank cutting interest rates by 50 basis points.

“I don’t want to be specific about what we’re going to do, but it’s not something we’re considering right now,” he said.

—Samantha Subin

Federal Reserve Chairman Jerome Powell said the Fed is paying close attention to the labor market and remains alert for signs of a sharp decline.

“We are watching this very carefully,” he said at a news conference on Wednesday. “We realized this role and I would call it a statistical event that has happened historically.”

The Fed chairman pointed out that the current low unemployment rate and low layoff levels indicate that “the labor market is normalizing.”

—Samantha Subin

Federal Reserve Chairman Jerome Powell said the U.S. economy looks very different today than it did a year ago.

The central bank will raise interest rates at its July 2023 meeting.

“It’s a completely different economy,” he said a year ago.

Powell described the current economy as “historically unusual” and a “welcome outcome for the people we serve.”

“What we’ve been thinking about is: How do we continue?” he said.

— Alex Harling

Federal Reserve Chairman Jerome Powell gave traders the signal they’ve been waiting for – a possible interest rate cut in September based on economic data.

Investors cheered the discovery, sending stocks to the day’s highs. The Dow Jones Industrial Average rose more than 450 points, or 1.12%, while the S&P 500 gained 2.12%. The Nasdaq rose as much as 3%.

— Dara Mercado

Chairman Powell said that as inflation cools, the Fed will be able to measure prices and the labor market more equally.

“We have to focus on that when we’re nowhere near our inflation target,” Powell said. “Now our focus is back to something closer to equilibrium.”

On the employment front, he said indicators show that the job market has gradually normalized from an “overheated” condition.

— Alex Harling

The Federal Reserve kept interest rates unchanged on Wednesday, but Chairman Powell said at a press conference that it may consider cutting interest rates in September.

“The committee’s broad view is that the economy is approaching a level where lower policy rates would be appropriate,” he said.

“The question is whether the headline data, the evolving outlook and the balance of risks are consistent with rising inflation confidence and a robust labor market,” Powell said. “If that criteria are met, a cut in our policy rate could come as early as September.” will be discussed at the next meeting.”

—Lisa Kelley Han

Federal Reserve Chairman Jerome Powell said that inflation and labor data continue to be balanced, but that the central bank will not cut interest rates unless it is more confident that inflation is “sustainably” moving toward its 2% target.

“The second-quarter inflation data has enhanced our confidence, and more good data will further enhance our confidence,” he said.

— Michelle Fox

Federal Reserve Chairman Jerome Powell said that Fed members are closely monitoring the recent rise in unemployment and potential weakness in the labor market.

“As the labor market cools and inflation declines, risks to achieving our employment and inflation goals continue to move toward a better balance. In fact, we are concerned about the risks to both sides of our dual mandate,” Powell said.

— Jesse Pond

The Fed’s July statement brought the latest comments on the labor market and inflation. Click here to see a comparison of the June and July releases.

— Alex Harling

Scott Wren, senior global market strategist at Wells Fargo Investment Institute, said traders would be wise to keep their expectations in check when it comes to a rate cut by the Federal Reserve in 2025.

“Over the past two years, interest rate markets have had a habit of being overly optimistic when it comes to rate cuts,” he wrote in an investor note on Wednesday. “We suspect the market is now too optimistic.”

Wren’s team expects two rate cuts this year and just one in 2025, noting that consumer inflation remains too high compared with the Fed’s 2% target.

“Our forecasts currently call for one rate cut next year, as rental apartment inflation typically rebounds with a delay towards the end of next year,” he said. “We expect consumer price index (CPI) to rise 3% in 2025.”

— Dara Mercado

Central bank policymakers have kept interest rates at the target range of 5.25% to 5.5% over the past year.

The Federal Reserve said inflation is approaching its target but gave no clear sign of an imminent rate cut.

“In recent months, the Committee has made some further progress towards achieving its 2% inflation objective,” policymakers said in a statement after the meeting.

Click here to read more from CNBC’s Jeff Cox on the Fed’s July meeting.

— Darla Mercado

All three major moving averages were higher just after 1:50 pm ET.

The S&P 500 rose 1.57% and the Nasdaq rose 2.36%. The Dow Jones Industrial Average rose 279 points, or 0.69%.

— Dara Mercado

While the Fed has kept interest rates steady, bond yields have fallen sharply.

Ahead of the Fed’s July rate decision, the 10-year Treasury yield fell to about 4.11%, its lowest level since March 12, when it was 4.081%. While it was down just three basis points on the day, it was a far cry from last October when benchmark yields hit 5% for the first time since 2007.

The 2-year Treasury yield also hovered around 4.36%, little changed on the day. However, back in April, the note’s interest rate topped 5% amid concerns about labor costs.

Investors who have been holding onto these risk-free bonds have been earning attractive income since the Fed kept interest rates high. Bond yields have an inverse relationship with prices. However, as bond yields fall, investors can expect prices in this corner of their portfolio to appreciate.

— Darla Mercado, Gina Francola

Investors are no longer paying attention to the Fed’s policy decision in July, but are focusing on the prospect of the Fed cutting interest rates.

The Fed is widely expected to keep interest rates steady at the end of Wednesday’s meeting, keeping the benchmark rate within the range of 5.25% to 5.5% over the past year.

Traders will turn to the Fed’s post-meeting statement and closely monitor Chairman Jerome Powell’s press conference for details on whether rate cuts could begin in September. In fact, federal funds futures trading suggests there is a 100% chance that policymakers will ease rates at this meeting.

Read more from CNBC’s Jeff Cox to find out what investors should be watching as Wednesday’s session concludes.

— Dara Mercado