Fed Leaves Interest Rates Alone, But Powell Says a Cut Is 'On the Table' for September

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The Federal Reserve once again held interest rates steady at its July meeting, but Fed Chair Jerome Powell said a “rate cut could be on the table at the September meeting” if the data continues to show inflation and employment coming into balance.

Powell spoke following the Federal Open Market Committee meeting, where the Fed voted to leave the federal funds rate at a target range of 5.25% to 5.50%. Powell sounded much more positive than he did earlier this year when inflation appeared to be stalling. Overall, Powell said the economy “is so much better than where we were a year ago.”

This story is a part of Fed Watch, CNET’s coverage of the Federal Reserve’s Open Committee meetings and what’s next for interest rates.

His comments support most experts’ predictions that an interest rate cut is on the way in September, with some optimists betting on two cuts before the end of the year. Those cuts could finally spell some relief for Americans who’ve been waiting for rates to drop before taking out a new loan or mortgage, as well as those paying off high-interest credit card debt. 

The Fed began raising interest rates two years ago in an effort to bring down inflation, which is currently at 3% year over year but peaked at 9.1% in June 2022, according to Consumer Price Index data. The Fed has held interest rates at its two-decade high since last summer in an effort to bring inflation down toward its target of 2%.

And while rising inflation has been the primary focus these past few years, Powell said the committee has seen enough progress there to turn its attention toward ensuring employment remains strong. The US unemployment rate rose to 4.3%, the Bureau of Labor Statistics reported on Friday. Rising unemployment could potentially prompt the Fed to lower the federal funds rates, which could make borrowing less expensive for businesses and encourage them to increase hiring.

Tiffany Wendeln Connors is a senior editor for CNET Money with a focus on credit cards. Previously, she covered personal finance topics as a writer and editor at The Penny Hoarder. She is passionate about helping people make the best money decisions for themselves and their families. She graduated from Bowling Green State University with a bachelor's degree in journalism and has been a writer and editor for publications including the New York Post, Women's Running magazine and Soap Opera Digest. When she isn't working, you can find her enjoying life in St. Petersburg, Florida, with her husband, daughter and a very needy dog.