• The Federal Reserve is widely anticipated to keep interest rates unchanged.
• Fed Chairman Powell’s remarks could provide important clues about the policy-easing strategy for the rest of the year.
• Markets see a strong chance of the Fed lowering policy rate multiple times starting in September.

The US Federal Reserve (Fed) will announce monetary policy decisions following the July 30 - 31 policy meeting on Wednesday. Market participants widely anticipate that the US central bank will leave the policy rate unchanged at 5.25%-5.5% for the eighth consecutive meeting.

The CME FedWatch Tool shows that markets see little to no chance of a rate cut in July but suggests that a September rate reduction is fully priced in. Hence, investors will scrutinize the changes in the statement language and comments from Fed Chairman Jerome Powell to figure out the policy-easing strategy for the rest of the year. According to the FedWatch Tool, there is a nearly 70% probability that the US central bank will cut the policy rate by a total of 75 basis points in 2024.

Growing optimism about disinflation progress resuming in the second half of the year – following the soft inflation prints seen in the second quarter – became apparent in Fed policymakers’ comments before the blackout period.