Fed leaves interest rate unchanged ... for now

WASHINGTON — The US Federal Reserve left its key lending rate unchanged again on Wednesday, but signaled that it could make its first cut as soon as September.

After two days of deliberations, policymakers voted unanimously to maintain the US central bank's benchmark interest rate between 5.25 percent and 5.50 percent, the Fed said in a statement, keeping rates at a 23-year high.

The statement softened the description of inflation and said the risks to employment were now on a par with those of rising prices — neutral language that opens the door for rates to fall after more than two years of tightening credit.

Fed Chair Jerome Powell pushed the message even further in his post-meeting news conference in Washington, saying price pressures were now easing broadly in the economy — what he called "quality "disinflation — and that if coming data evolve as anticipated, support for cutting rates will grow.

"If we were to see inflation moving down ... more or less in line with expectations, growth remains reasonably strong, and the labor market remains consistent with current conditions, then I think a rate cut could be on the table at the September meeting," he said. "The broad sense of the committee is that the economy is moving closer to the point at which it will be appropriate to reduce our policy rate."

Earlier on Wednesday, a key gauge of wages grew more slowly in the second quarter, compared with the first three months of this year, though the increase was still faster than inflation.

Yet with the unemployment rate ticking higher for three months in a row, some economists have raised concerns that the Fed should cut rates more quickly later this year.

"The finish line is in sight and it would be tragic for the Fed to stumble and fall, with one-tenth of a mile left in the marathon, which is what I think they would be doing if they don't start cutting," Bharat Ramamurti, an adviser at the American Economic Liberties Project and former economist in the White House, said on a call on Monday with reporters.

Election battle

If the Fed does move in September, its decision would thrust the independent central bank into the middle of the 2024 presidential election battle between former president Donald Trump and Vice-President Kamala Harris.

Republican lawmakers warned in a hearing with Powell last month that the September rate cut could be seen as a politicized move, highlighting progress on inflation and offering the mood-lifting promise of cheaper credit and home mortgages in the near future.

Trump has previously accused Powell — who he nominated — of displaying political favoritism toward the Democratic Party and suggested that he would not reappoint the central banker as Fed chair if he wins in November.

Agencies Via Xinhua