If inflation data remains cool, Powell considers a September rate cut.

If economic data remains on its present course, the Federal Reserve may reduce interest rates during its September meeting, as stated by Federal Reserve Chair Jerome Powell on Wednesday.

A reduction in our policy rate could be considered at the next September meeting if the test is passed, according to Powell.

Economic indicators suggest that inflation may decrease towards the central bank's target of 2%, while the unemployment rate has increased above 4%. The Fed's policy statement on Wednesday emphasized its awareness of risks associated with both maximum employment and stable prices.

Central bankers will base their rate-cutting decisions on data, but not solely on individual data points, according to Powell's statement on Wednesday.

Powell stated that the consistency of the totality of data, the evolving outlook, and the balance of risks with rising confidence on inflation and maintaining a solid labor market will be the question.

The Fed's preferred inflation gauge, the personal consumption expenditures price index, increased by 2.5% year over year in June. Economists anticipate a slowdown in hiring with the next non-farm payrolls report due out on Friday.

Powell stated that he does not believe the current state of the labor market is a significant source of inflationary pressures. Therefore, he does not want to see any further cooling in the labor market.

The Fed maintained its benchmark rate on Wednesday within the range of 5.25% to 5.50%. It is predicted that when the Fed decides to lower rates, it will be by 25 basis points or 0.25 percentage points.

Powell stated on Wednesday that a potential 50-basis point rate cut is not something the team is currently considering, and any future cuts would depend on the economic data.