The Federal Reserve continues to keep interest rates unchanged, in line with market expectations.

The resolution statement now describes inflation as "somewhat" elevated, acknowledges "some" further progress in reducing inflation, notes that job growth has "somewhat" slowed down, and observes that the unemployment rate remains low but has "somewhat" increased.

The resolution statement no longer mentions being "highly attentive to inflation risks," instead focusing on the risks to its dual mandate of employment and inflation.

The resolution statement continues to reiterate that it is not appropriate to cut interest rates until there is more confidence in reducing inflation, and that the risks to employment and inflation remain more balanced.

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The "new Fed whisperer" suggests that the Federal Reserve has paved the way for a rate cut in September, treating employment and inflation goals more equally for the first time in two years. This significant shift implies that inflation may no longer be a barrier to rate cuts.

Some analyses indicate that the dovishness of the resolution is slightly less than expected, and it does not express greater confidence in reducing inflation.

As anticipated by the market, the Federal Reserve continues to maintain high interest rates, but at the same time, it has signaled the possibility of a rate cut in September: the Fed further confirms progress in reducing inflation, and in addition to inflation, the Fed begins to emphasize the importance of avoiding risks in the employment sector.

On Wednesday, July 31st, Eastern Time, the Federal Reserve announced after the FOMC meeting that the target range for the federal funds rate remains at 5.25% to 5.50%. The Fed's FOMC voting members have unanimously supported the interest rate decision for the 17th consecutive meeting.

So far, in this tightening cycle that began in March 2022, the Federal Reserve has not raised interest rates for eight consecutive meetings. Since the rate hike in July last year, the Fed has kept the policy rate at a high level not seen in over two decades.The Federal Reserve's decision to keep rates unchanged this time is in line with market expectations. As of Tuesday's close, tools from the Chicago Mercantile Exchange (CME) showed that the futures market estimated the probability of the Fed maintaining interest rates this week to be about 97%. Nick Timiraos, a journalist known as the "new Fedwire," wrote over the weekend that he expected the Fed's meeting this week to prepare for a rate cut in September, with the statement implying a higher likelihood of a rate cut than no cut.

After the decision was announced on Wednesday, Timiraos wrote in an article titled "The Fed Clears the Way for a September Rate Cut," emphasizing that although the Fed still kept interest rates unchanged, the officials made a significant shift this time, emphasizing a more equal focus on the dual mandates of employment and inflation, and they hinted that they are getting closer to a rate cut.

George Goncalves, Head of U.S. Macro Strategy at Mitsubishi UFJ Financial Group, commented that the Fed's decision statement showed that the Fed had modified enough elements, and they carefully considered how to express the beginning of a shift towards easing.

Win Thin, Global Head of Market Strategy at BBH, pointed out that many people had hoped for some degree of easing in the Fed's decision, similar to saying "we have greater confidence" in reducing inflation, but this time the Fed did not hint at a rate cut in September. The Fed will cut rates, but they are keeping their cards close to their chest, and this degree of dovishness is slightly lower than expected.

The statement changed to say that inflation has risen and some further progress has been made, while the unemployment rate remains low but has increased.

Compared to the previous Federal Reserve monetary policy decision statement in June this year, this statement made two major changes. The first is the comment on inflation.

The last statement said that in recent months, moderate further progress has been made in achieving the Fed's 2% inflation target. This statement says that some further progress has been made in achieving the inflation target. The last statement said, "Inflation has slowed down in the past year, but it is still high." This time, the first half of the sentence was reiterated, and the second half was changed to "but it is somewhat high."

At the same time, in the first paragraph of the statement evaluating the economic situation, the Fed also modified its description of employment. The last statement said that employment growth remains strong and the unemployment rate remains low. This time, it said that employment growth has slowed down, and the unemployment rate has increased, but it remains low.

The second major change in this statement is reflected in the second paragraph discussing the Fed's two major missions - full employment and reducing inflation. First, the Fed continues to reiterate that the FOMC committee seeks to achieve maximum employment and a 2% inflation rate over the longer term, and the committee judges that the risks to achieving the dual goals of employment and inflation continue to tend towards a better balance. Then, the Fed modified its wording.The previous resolution statement continued to reaffirm: "The economic outlook remains uncertain, and the (FOMC) committee remains highly attentive to inflation risks." This time it was changed to: "The economic outlook remains uncertain, and the committee is attentive to the risks facing its dual mandate on both fronts."

Timiraos commented that since the rapid interest rate hikes began two years ago to combat high inflation, this is the first time the Federal Reserve has treated the goals of employment and inflation more equally. The significance of this shift is that it suggests inflation may no longer be a barrier to rate cuts, especially if the labor market continues to cool.

Continue to reaffirm that it is not appropriate to cut rates before having more confidence in reducing inflation.

In terms of interest rate forward guidance, the statement maintains the guidance from January of this year, continuing to reaffirm that the FOMC expects it would not be appropriate to cut rates before having more confidence in the sustained progress of inflation moving toward 2%.

Regarding the reduction of the quantitative tightening (QT) plan, the statement uses the same language as the previous statement, stating that the FOMC will continue to reduce its holdings of U.S. Treasury securities, agency debt, and agency mortgage-backed securities (MBS).

At the last Federal Reserve monetary policy meeting on April 30 to May 1, it was announced that starting from June, the monthly cap on the reduction of the U.S. Treasury securities in the balance sheet (balance sheet reduction) would be lowered by $3.5 billion to $2.5 billion, while the cap for MBS remains unchanged.