As prices soared in the wake of the coronavirus pandemic, the Fed responded by raising interest rates to their highest level in 20 years to soothe the U.S. economy and return inflation to its long-term target of 2%.
Inflation has eased significantly since peaking in 2022, but progress stalled in the first quarter of this year, effectively bringing the Fed’s battle to a halt.
More encouraging second-quarter data has prompted cautious optimism from some policymakers in recent weeks.
Federal Reserve Chairman Jerome Powell told lawmakers on the Senate Banking Committee in Washington on Tuesday that the latest data “shows some further progress” since the first quarter of the year. “As we get better data, our confidence will increase that inflation is sustainably trending toward 2 percent,” he added, according to prepared remarks. The Fed is widely expected to keep rates on hold again at its rate-setting meeting later this month, but it could start cutting rates in September. Futures traders are estimating a more than 75% chance that the Fed will make its first rate cut by September.
