Will Fed cut interest rates in September? Here's what we know

The Federal Reserve just cut interest rates for the first time since 2008 — now, investors want to know whether policymakers at the U.S. central bank will continue to ease monetary policy during their upcoming September, or if this was a one-and-done maneuver.

Although Fed Chairman Jerome Powell ruled out the possibility of multiple rate cuts, he suggested policymakers could lower the benchmark federal funds rate again this year (those more-dovish comments help stocks recoup earlier losses).

“It’s not the beginning of a long series of rate cuts,” he told reporters on Wednesday. “I didn’t say it was just one, or anything like that.”

He stressed that “real economic weakness” would need to precede deeper cuts, but U.S. economic data has remained relatively strong. In the spring, the U.S. economy cooled slightly from the previous quarter, but still expanded at an annual rate of 2.1 percent, beating Wall Street’s expectations. The U.S. continues to steadily add jobs, and unemployment is still well-below 4 percent.

Whether or not the U.S. central bank cuts rates, however, depends on developments regarding lingering uncertainties, including the U.S.-China trade war, softening global growth and muted inflation -- which has remained persistently below the Fed’s 2 percent target goal.

“We’re seeing that it’s appropriate to adjust policy to a somewhat more accommodative stance over time, and that’s how we’re looking at it,” Powell said.


Language in the Federal Open Market Committee’s policy statement certainly left the door open for a second rate cut. In approving the 25 basis point reduction, policymakers cited "the implications of global developments in the economic outlook as well as muted inflation pressures” and said they will continue to “act as appropriate” to maintain the economic expansion.

Currently, traders are not pricing in any chance of a rate cut in September; about 54 percent think the Fed will keep rates steady, while 45 percent are forecasting a 25 basis point rate hike.