Powell Says Economy Is Normalizing & September Rate Cut Is On The Table

The Federal Open Market Committee (FOMC) left the federal funds rate (FFR) unchanged between 5.25%-5.50% at today's meeting, as expected. Fed Chair Jerome Powell did signal that a 25bps rate cut is highly likely at the September meeting now that the labor market is "normalizing" and inflation is cooling.

The 2-year and 10-year US Treasury yields slid by about 6 basis points during Powell's press conference today, with the 10-year ending the day around a 4-month low (chart). The bond market was also comforted by the Treasury Department's quarterly refunding announcement; the fiscal agent said it wouldn't be increasing the size of bond auctions for the foreseeable future. Tax revenues from the growing economy continue to boost the government's coffers.