The Federal Reserve is considering implementing an interest rate cut at its next policy meeting in September as the U.S. job market appears to be stabilizing. With the Fed set to debate its interest policy on Wednesday, the central bank appears to be set to keep rates constant at what is a more than two-decade high. This would mean that these interest rates have remained at this peak for a full year.
Recent data has instilled confidence in Fed Chair Jerome Powell that the US economic trajectory is a positive one, particularly as inflation seems to be cooling to the Fed’s 2% target. Still, in order to introduce rate cuts, the Fed will look for two objectives to be met, namely stable prices and maximum employment.
In order to provide the Fed with confidence on the employment front, next Friday’s monthly jobs report will need to come in strong. Nonfarm payrolls are expected to come in at 178,000, while the unemployment rate is forecasted to remain steady at 4.1%. Should such figures indeed be realized, this would provide the good workforce health that the Fed is looking for in order to consider introducing an interest rate cut over the near term.