Fed Minutes Show a Cut ‘Likely’ to Come in September

Federal Reserve officials held off on cutting interest rates at their July meeting, but minutes from that gathering showed that they were clearly poised to lower them at their meeting in September, just weeks before the presidential election.

“The vast majority” of officials thought that “if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting,” according to notes from the meeting released on Wednesday.

Days after the Fed’s July gathering, a disappointing employment report showed that employers hired more slowly than expected. And in the weeks since, fresh data have showed that inflation continues to cool.

That leaves the Fed primed to cut rates at their next meeting on Sept. 17-18, though just how much they will lower borrowing costs is still an open question. Investors think that a quarter-point reduction is most likely, but they see a half-point cut as a possibility.

While the Fed is independent of politics, that move is likely to draw attention to the central bank. A reduction would come just weeks before November’s presidential election, and at a time when the Fed’s policies — especially its effort to fight inflation and its effect on the housing market through mortgage costs — have become a common topic of conversation on the campaign trail.

The Fed has held interest rates steady at 5.3 percent, the highest level in more than two decades, since July 2023. At that level, interest rates are hefty enough to discourage many families and businesses from borrowing money, which weighs on demand and helps to cool the economy, making it harder for companies to lift prices.