After friendly inflation readings throughout the second quarter, more Fed members are signaling they are "getting closer" to cutting interest rates.
On July 17, Fed Governor and voting member, Christopher Waller, said, “Current data are consistent with achieving a soft landing, and I will be looking for data over the next couple months to buttress this view. While I don’t believe we have reached our final destination, I do believe we are getting closer to the time when a cut in the policy rate is warranted.”
![](https://cdn.prod.website-files.com/64555ce9fe44f34940b2c512/6699725d9eb95ce5daa997f1_WallerQuoteJuly.png)
Wallers’ comments follow similar statements by Fed Chair Jerome Powell and New York Fed President John Williams (who are also always voting members at Fed meetings). Both noted that they’ve been encouraged by more recent inflation reports, especially after readings in the first quarter were higher than anticipated:
• “I feel like the past three months - and I would include in June, based on what we've seen - seems to be getting us closer to a disinflationary trend that we’re looking for. I would like to see more data to gain further confidence inflation is moving sustainably towards our 2% goal. We've got a few good months now.” – John Williams, July 17, 2024
• “We didn’t gain any additional confidence in the first quarter but the three readings in the second quarter, including the one from last week, do add somewhat to confidence.” – Jerome Powell, July 15, 2024
![](https://cdn.prod.website-files.com/64555ce9fe44f34940b2c512/669972978ae3bd007b755c44_YoYInflationProgress%20(1).png)
The Fed’s focus in recent years has been taming out-of-control inflation, even though they have a dual mandate of price stability and maximum employment. However, Powell acknowledged in his Semiannual Monetary Policy Report to Congress on July 9 that “elevated inflation is not the only risk we face,” as the job market has “cooled considerably.”
Of note in particular, the latest Jobs Report from the Bureau of Labor Statistics showed that the unemployment rate rose to 4.1% in June and is now at the highest level since 2021. The 4.1% reading is especially significant given the latest Summary of Economic Projections that were released after the Fed’s June meeting. Sixteen of nineteen Fed members said they would be surprised by a 4.2% unemployment rate, and we’re just shy of this level now.
The bottom line is that recent inflation and labor sector data have led to growing odds (over 90% as of this writing) that the Fed will cut rates at their meeting on September 18. Additional reports released between now and then will play a pivotal role in this decision, especially those listed here.
![](https://cdn.prod.website-files.com/64555ce9fe44f34940b2c512/669972b4c7e48724389bbafa_KeyDates.png)
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