Wed Sep 11 09:43:34 UTC 2024: ## Fed Poised for Interest Rate Cut as Inflation Cools

**WASHINGTON** – The Federal Reserve is widely expected to cut interest rates next week, fueled by a significant slowdown in inflation. Consumer prices rose 2.5% in August compared to a year ago, marking a deceleration from the 2.9% recorded in July. This welcome news comes just days before the Fed’s anticipated rate adjustment.

While inflation has eased from its 2022 peak, it remains above the Federal Reserve’s target rate of 2%. The CME FedWatch Tool, a measure of market sentiment, indicates near certainty of a rate cut at the upcoming Fed meeting. Market observers are divided on the magnitude of the cut, with some predicting a typical quarter of a percentage point reduction and others suggesting a more substantial half-point cut.

The job market, like inflation, has shown signs of cooling in recent months. Last week’s jobs report, though showing a solid increase of 142,000 jobs, fell short of expectations. The unemployment rate has also edged upwards from 3.7% to 4.2% this year.

The Federal Reserve operates under a dual mandate of controlling inflation and maximizing employment. Low interest rates, in theory, stimulate economic activity and boost employment, while high rates slow economic performance and curb inflation. Recent trends have shifted the Fed’s focus towards safeguarding a healthy job market.

At last month’s annual gathering in Jackson Hole, Wyoming, Fed Chair Jerome Powell expressed his confidence in a sustainable path towards the 2% inflation target, signaling a readiness for an interest rate adjustment. The Fed has kept rates at their highest level in over two decades since last year, impacting borrowing costs for mortgages, credit cards, and other financial instruments. This policy has helped curb inflation but also carries the risk of pushing the U.S. into a recession.

Goldman Sachs economists have revised their prediction of a U.S. recession in the next year from 15% to 25%. However, opinions remain divided among economists on whether current economic conditions necessitate heightened concern.

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