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US Federal Reserve Holds Interest Rates Steady, Hints at Possible Cuts
The US Federal Reserve has made its decision on interest rates, keeping them unchanged at 5.25 to 5.50 percent for the eighth time in a row. This news came after a two-day meeting of the Federal Open Market Committee, indicating that the Fed is taking a cautious approach while monitoring the economy.
Fed Chair Jerome Powell briefly discussed the potential for rate cuts as soon as September, stating that there has been significant progress in reducing inflation. He noted that if inflation continues to decrease, a reduction in interest rates may be on the table during the next Fed meeting.
In the wake of Powell’s statements, stock markets reacted positively, with the S&P 500 experiencing its best day since February. Technology stocks led the charge, particularly Nvidia Corp, which saw a 13 percent surge in its shares thanks to optimistic analyst forecasts.
Powell emphasized that while inflation has eased, it is still somewhat elevated. He pointed out that the central bank has maintained high borrowing rates for an entire year to ensure inflation declines towards its two percent target.
Traders are now anticipating that the Fed might start cutting rates beginning in September, with many expecting a modest 25 basis-point cut. This sentiment has shifted positively in the markets, suggesting that investors are more confident in the Fed’s shift towards a looser monetary policy.
Meanwhile, gold prices surged as well, responding to Powell’s hints about potential cuts. Spot gold has risen over four percent in recent weeks amid these developments, while oil prices also saw a notable increase due to geopolitical tensions in the Middle East.
Outside of the US, the Bank of Japan made headlines by raising interest rates for the first time since 2008. This move surprised many but reflects a shift in monetary policy that could influence global markets.
Overall, as the economy shows signs of stabilizing, all eyes are on upcoming reports that could guide the Fed’s next steps, particularly the jobs report due soon.
