ANZ has cautioned that while the Federal Reserve is expected to maintain current interest rates at its upcoming July meeting, the subsequent meeting in September will be critical. According to ANZ’s recent US Pulse note, factors such as increasing dissent within the Federal Open Market Committee (FOMC), easing inflation figures, and emerging global trade tensions are setting the scene for a potentially significant decision in September.
ANZ suggests there is a compelling argument for a rate cut in September, contingent on further progress regarding inflation. The bank’s note highlights remarks from governors Michelle Bowman and Chris Waller, indicating their openness to reducing rates later this year if the current inflation trends continue. Any division in the policy vote could introduce market volatility, with traders closely monitoring the FOMC statement for unanimity.
Chair Jerome Powell’s upcoming press conference will be closely scrutinised for hints that the Fed is growing more concerned about moderating labour market momentum and persistent services inflation. ANZ also points out challenges arising from global trade policy, including a new US-Japan-EU tariff framework and a possible extension of the China tariff pause, which could skew inflation results later in the year.
ANZ anticipates that market pricing of a rate cut will remain heavily reliant on upcoming data releases, specifically core PCE inflation and non-farm payrolls, before the September meeting. Investors should view the expected July hold as a prelude to the more crucial September decision, particularly if Powell signals that a rate cut is a possibility. ANZ is one of Australia’s big four banks, providing a range of banking and financial products and services. It operates in Australia, New Zealand, and the Asia Pacific region.
