Fed holds interest rates at July 31 meeting

By Alvin Wu
Business
Fed holds interest rates at July 31 meeting

Fed Chair Jerome Powell answers reporters' questions at the Federal Open Market Committee press conference on July 31, 2024. FEDERAL RESERVE/Handout

Aug. 8 (ZFJ) — The Federal Reserve maintained the target federal funds rate at 5.25-5.50% at the Federal Open Market Committee (FOMC)’s July 31 meeting.

This rate was set on July 26, 2023, and has been held steady since then. The Fed has been aggressively increasing the interest rate since raising it from 0.00-0.25% to 0.25-0.50% in March 2022 in order to fight stubborn inflation.

“The labor market has come into better balance and the unemployment rate remains low,” said Fed Chair Jerome Powell in his opening remarks at a press conference. “Inflation has eased substantially from a peak of 7% to 2.5%.”

The Fed has a dual mandate to maximize employment and maintain price stability. It has long sought to lower inflation to 2%.

Powell reported that “economic activity has continued to expand at a solid pace,” saying that GDP growth “moderated” from 3.1% last year to 2.1% in the first half of this year.

The Fed also reported that the second quarter saw an average of 177 thousand payroll job gains per month—”a solid pace but below that seen in the first quarter.”

The unemployment rate increased but still remains low at 4.1%.

“Overall, a broad set of indicators suggests that conditions in the labor market have returned to about where they stood on the eve of the pandemic: strong but not overheated,” said Powell.

Powell expressed that the second quarter’s inflation readings bolstered the FOMC’s confidence in the timing of a rate cut but that “more good data would further strengthen that confidence.”

“We had a quarter of poor inflation data at the beginning of the year, then we saw some more good inflation data, we had seven months at the end of last year,” Powell said in response to a Reuters reporter’s questions. “We just want to see more and gain confidence, and as I said, we did gain confidence and more good data would cause us to gain more confidence.”

Responding to a Fox Business reporter’s questions, Powell commented on the FOMC meeting discussions, saying, “The decision was unanimous, all 19 participants supported it, but there was a real discussion back and forth of what the case would be for moving at this meeting.”

Many investors are worried that the Fed has pressed the brakes on the economy for too long. The decrease in job gains, for example, and other key metrics that turned out weaker than expected have investors concerned that the U.S. economy may enter a recession. Large layoffs have persisted in the headlines.

On Monday, Aug. 5, Japanese and American stock indexes suffered massive drops in a panic over recession worries. They’ve since mostly recovered.

The next FOMC meeting is from Sept. 17-18.

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