Powell says second-quarter inflation data ‘strengthens our confidence’
Federal Reserve Chairman Jerome Powell said that inflation and labor data continue to balance, 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
Powell says Fed ‘pays attention’ to both sides of dual mandate
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, the risks to achieving our employment and inflation goals continue to become more balanced. In fact, we are focusing on the risks to both sides of our dual mandate,” Powell said.
— Jesse Pond
See what’s changed in the new Fed statement
The Fed’s July statement brought the latest comments on the labor market and inflation. click here See a comparison of the June and July releases.
— Alex Harling
Wells Fargo Investment Institute says the market is too optimistic about the number of interest rate cuts in 2025
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
The Fed kept interest rates steady in July, noting “further progress” on inflation.
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
Market stance ahead of Fed decision
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
Ten-year Treasury yields fall ahead of Fed rate decision
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%. Although it fell only three basis points on the day, it was a far cry from the benchmark yield in October last year. Touch 5% —For the first time since 2007.
The 2-year Treasury yield also hovered around 4.36%, little changed on the day. Come back in AprilHowever, due to concerns about labor costs, the interest rate on this note exceeded 5%.
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
What investors can expect from the Fed’s decision
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 trades indicate a 100% chance that policymakers will ease rates at this meeting.
— Dara Mercado
