The Federal Reserve hinted that it could deliver an interest rate cut as early as September, as Chair Jay Powell said recent data gave officials more confidence that inflation is receding. At the conclusion of its monetary policy meeting on Wednesday, the Fed left its benchmark rate unchanged but noted that officials are "attentive to the risks to both sides of its dual mandate"—a shift from previous statements that emphasized inflation risks over a potential downslide in the jobs market. Powell told reporters during a news conference that weaker inflation in the second quarter and an "ongoing, gradual normalization" in labor market conditions have brought economic risks into better balance.

It was a busy week for central banks globally. The Bank of England cut rates for the first time since 2020 on Thursday. The Bank of Japan, facing a different macro environment, raised rates amid pressure on the yen and a resurgence in both growth and inflation after a decades-long period of stagnation for the nation's economy. As it ponders a rate cut, the Fed will be looking closely at fresh data ahead of its September meeting, starting with the July jobs report on Friday. Economists believe that hiring cooled with 185,000 jobs added, compared with 206,000 in June. Payroll processor ADP's monthly survey found that private-sector jobs growth slowed to 122,000 in July, the lowest level since January and down from 150,000 a month earlier. In a new video, PGIM Fixed Income Chief US Economist Tom Porcelli shares key takeaways from the Fed meeting, including Powell's heightened emphasis on labor over inflation.