Fri, Aug 23, 2024 page12

• US Fed likely to lower rates in September

  INFLATION: Futures traders are now wholly convinced of a rate cut next month and waiting with anticipation for remarks on Friday from Fed Chairman Jerome Powell

  • AFP, WASHINGTON
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  Most members of the US Federal Reserve’s rate-setting committee said it would likely be “appropriate” to cut interest rates next month when they met last month, the US central bank said on Wednesday.

  “The vast majority observed that, if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting,” the US central bank announced in the minutes of its rate decision last month.

  The minutes published on Wednesday would likely fuel expectations that the Fed would implement its first interest cut this cycle when policymakers meet next month, starting its long path to easing monetary policy.

  

  US Federal Reserve Chairman Jerome Powell is pictured during a news conference following a Federal Open Market Committee meeting in Washington on July 31.

  Photo: Bloomberg

  Futures traders are now wholly convinced of a rate cut next month and waiting with anticipation for remarks on Friday from Fed Chairman Jerome Powell, hoping for clues about the future path — and scope — of rate cuts.

  Although last month’s decision to keep rates on pause was unanimous, the Fed on Wednesday said that “several” committee members had observed that recent inflation progress and rising unemployment, “provided a plausible case for reducing the target range 25 basis points at this meeting or that they could have supported such a decision.”

  The Fed has held its key lending rate at a 23-year high of between 5.25 and 5.50 percent for more than a year now, as it battles to return inflation to its long-term target of two percent.

  In recent months, the Fed’s favored measure of headline inflation has slowed to an annual rate of 2.5 percent, while the unemployment rate has jumped to 4.3 percent — up sharply from recent prints, but still low by historical standards.

  Separately, Bank of Japan (BOJ) Governor Kazuo Ueda would face intense market scrutiny today after the central bank’s rate hike and his clear hawkish signals contributed to a meltdown in global financial markets earlier this month.

  Ueda is scheduled to respond to questions from lawmakers in the lower house of parliament from 9:30am, followed by another session in the upper house starting at 1pm. Each session is set to last two-and-a-half hours.

  The unusual hearing, taking place when the broader parliament is not in session, was called by lawmakers insisting on an explanation from the BOJ.

  Hawkish signals from the central bank contributed to a market rout that wiped out as much as US$6.4 trillion from global stock markets this month, including the biggest plunge on record for the Nikkei 225 index. Markets later pared losses, with the S&P 500 back within sight of its record high last month and the Nikkei up about 20 percent from its low earlier this month.

  Speaking hours before a speech by Powell at Jackson Hole, Ueda’s likely aim is to generate as little news and volatility as possible. He would likely make no policy commitment, while giving assurances that there would not be a rate hike when financial markets are unstable, BOJ watchers said.

  “Ueda’s ultimate goal is to create no shock,” NLI Research Institute senior economist Tsuyoshi Ueno said. “The very reason this hearing is happening is because of the global market turmoil that followed the BOJ’s hawkish turn. If Ueda creates further chaos, that would be a nightmare for the central bank.”

  Additional reporting by Bloomberg
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