(WASHINGTON) — Google violated U.S. antitrust laws in maintaining a monopoly over the online search business, a federal judge ruled Monday, in a landmark ruling for the Justice Department in its efforts to rein in big tech giants.
D.C. District judge Amit Mehta declared Google violated Section 2 of the Sherman Act, finding the company illegally secured its dominance in the search market by paying billions of dollars to smartphone carriers like Apple to make Google the automatic search engine for their phones — effectively locking any rival businesses from being able to compete.
“Google is a monopolist, and it has acted as one to maintain its monopoly,” Mehta wrote in his ruling.
This is a developing story. Please check back for updates.
(NEW YORK) — A worldwide selloff jolted markets on Monday in the aftermath of a weaker-than-expected U.S. jobs report that elicited fear of an economic recession.
Japan’s main Nikkei 225 stock index dropped more than 12%, its worst day of trading since 1987. Each of the major U.S. stock indexes plummeted more than 2%.
Nvidia, a chipmaker that had helped catapult market gains so far this year, dropped as much as 14% before recovering some of those losses.
Renewed warnings of an imminent recession arrive after years of doomsday forecasts that stretch back to the staggering rise of inflation three years ago. So far, the U.S. has defied alarm and sustained solid growth, proving many analysts wrong.
Economists who spoke to ABC News disagreed about whether current economic conditions warrant serious concern about a possible recession or foretell resilience of the kind that has followed previous bouts of uncertainty.
Some analysts voiced optimism, pointing to continued economic growth and a tendency for markets to overreact in the face of negative news. Others cautioned of a monthslong labor market cooldown that indicates wider economic weakness and a potential downturn.
“You can see the probability of a recession moving slightly higher, but for me it’s nowhere near the level at which you jump out of the window because the house is burning,” Olu Sonola, the head of U.S. regional economics at Fitch Ratings, told ABC News. “You can still safely take the elevator or the stairs.”
The stock market downswing was set off by a disappointing jobs report on Friday. Employers hired 114,000 workers in July, falling well short of economist expectations of 185,000 jobs. The unemployment rate climbed to 4.3%, the highest level since October 2021.
The unemployment rate has soared this year from 3.7% to 4.3%. That trend has triggered a recession indicator known as the “Sahm Rule,” which says that a rise of 0.5 percentage points in the unemployment rate within a 12-month period typically precedes a recession.
Some economists have doubted whether the trend signals a recession in this case. That’s because the rising unemployment rate owes more to an increase in eligible workers that has expanded the labor pool rather than layoffs that have reduced the number of people with jobs.
The labor market is still growing and the unemployment rate remains at a historically low level.
“I still think we’re in the soft-landing stage,” Stephan Weiler, a professor of economics at Colorado State University and a former Fed research officer, told ABC News, predicting an outcome in which inflation returns to normal and the economy averts a recession.
“Some people expected this recession two years ago or more, and it still hasn’t come about,” Weiler added.
Some economists rebutted that rosy outlook, however. Nancy Lazar, chief global economist at investment firm Piper Sandler, said the uptick in the unemployment rate marks a key piece of evidence indicating a recession will take place before the end of the year.
“It wasn’t just a one-month number,” Lazar said, referring to the jobs report on Friday. “This has been a rising trend.”
The recent labor market cooldown took hold roughly two years after the Federal Reserve began raising interest rates in March 2022 as part of an effort to dial back inflation. On average, Lazar said, the economy dips into a recession two-and-a-half years after the Fed begins a series of rate hikes.
“We’ve been expecting a recession to unfold,” Lazar added, acknowledging that Piper Sandler had previously forecasted a recession as early as the end of 2023. The firm had erred in part because it underestimated the staying power of pandemic-era government stimulus, she said.
“We’re now at the highest risk of the economy moving into a recession,” she added.
On Sunday, Goldman Sachs economists raised the probability of a U.S. recession in the next year from 15% to 25%.
The market downturn has triggered calls for a large interest rate cut at the Fed’s next meeting in September. Some investors have voiced an even more urgent request for a rare emergency rate cut as soon as this week.
In theory, interest rate cuts would ease borrowing fees, unleash consumer demand and business investment and help the economy avert a downturn.
Economists, however, said an interest rate cut likely would not help the economy avoid an imminent recession, since rate changes typically affect the economy only after a period of several months.
Pointing to the market drop-off on Monday, economists said investors have a track record of overreacting to emerging trends in the economy. But, experts added, market swings can help bring about a recession anyway.
“Markets always tend to overreact to the upside and overreact to the downside,” said Sonola, adding that market sentiment may in turn weigh on business investment and economic activity. “It can be a self-reinforcing feedback loop.”
(NEW YORK) — Stocks plummeted on Monday as markets worldwide reckoned with a disappointing jobs report last week that fueled concern of a possible recession.
The major stock indexes in the U.S. fell more than 2% in early trading. The S&P 500 fell about 4%, while the tech-heavy Nasdaq dropped more than 6%. The Dow Jones Industrial Average fell roughly 1,000 points, or nearly 3%.
The market downturn triggered calls for a large interest rate cut at the Federal Reserve’s next meeting in September. Some investors voiced an even more urgent request for a rare emergency rate cut as soon as this week.
Japan’s main Nikkei 225 stock index dropped more than 12%, its worst day of trading since 1987.
In early U.S. trading, chipmaker Nvidia plunged more than 14%. Apple fell more than 8%.
“Investors are feeling massive pain globally,” Dan Ives, a managing director of equity research at investment firm Wedbush, said in a note to clients.
U.S. markets, he added, are “trading heavy in the red across the board.”
Employers hired 114,000 workers in July, falling well short of economist expectations of 185,000 jobs added, U.S. Bureau of Labor Statistics data on Friday showed. The unemployment rate climbed to 4.3%, the highest level since October 2021.
The unemployment rate has soared this year from 3.7% to 4.3%. That trend has triggered a recession indicator known as the “Sahm Rule,” which says that a rise of 0.5 percentage points in the unemployment rate within a 12-month period typically precedes a recession.
On Sunday, Goldman Sachs economists raised the probability of a U.S. recession in the next year from 15% to 25%.
(NEW YORK) — Stock futures plummeted on Monday as markets reckoned with a disappointing jobs report last week that fueled concern of a possible recession.
Each of the major stock indexes fell more than 2% in pre-market trading on Monday. The tech-heavy Nasdaq dropped nearly 6%.
The market downturn triggered calls for a large interest rate cut at the Federal Reserve’s next meeting in September. Some investors voiced an even more urgent request for a rare emergency rate cut as soon as this week.
(NEW YORK) — The major stock indexes dropped significantly on Friday after a weaker-than-expected jobs report stoked worries of a possible recession.
In early trading, the S&P 500 was on pace for its worst trading day in about two years. The Dow Jones Industrial Average had fallen nearly 800 points, or about 2%. The tech-heavy Nasdaq had fared even worse, dropping more than 2%.
The stock decline on Friday followed unsteady performance over roughly the past month. Until then, stocks had enjoyed strong gains this year.
From the outset of 2024 through Thursday, the S&P 500 had climbed more than 15%. The Dow Jones Industrial Average and the Nasdaq had also seen double-digit increases.
The selloff is concerning since it’s rooted in a labor market cooldown that may signal a wider economic downturn, investors told ABC News. However, the solid state of the economy may very well allow it to weather the difficulty and send stocks back toward gains.
“We don’t think it’s the start of a bear market,” Adam Turnquist, chief technical strategist at LPL Financial, told ABC News, ruling out the possibility of an outcome in which a stock index has dropped 20% below its most recent high.
“Today’s weaker economic data is certainly concerning,” Turnquist added. “We don’t think it’s pointing to an imminent recession, but it certainly changes the narrative.”
A weaker-than-expected jobs report is fueling concern about a potential recession and calls for an interest rate cut.
Employers hired 114,000 workers last month, falling well short of economist expectations of 185,000 jobs, U.S. Bureau of Labor Statistics data showed. The unemployment rate climbed to 4.3%, the highest level since October 2021.
Still, the unemployment rate remains at a relatively low level in historical terms. Gross domestic product data last week showed that the U.S. economy grew much faster than expected over three months ending in June, according to the Commerce Department.
“The stock market is churning as investors try to figure out if current valuations are justified given the softening economic data seen in recent months,” Clark Bellin, president and chief investment officer at Nebraska-based Bellwether Wealth, told ABC News in a statement.
“Stock market volatility is very normal, and we believe the economy is still on a sound footing,” Bellin added.
The fresh jobs data extends a monthslong stretch of economic performance marked by the key conditions for a rate cut: falling inflation and slowing job gains.
In recent months, Fed Chair Jerome Powell has shifted focus to the central bank’s responsibility for maintaining a robust job market, in addition to its goal of controlling inflation.
“For a long time, since inflation arrived, it’s been right to mainly focus on inflation. But now that inflation has come down and the labor market has indeed cooled off, we’re going to be looking at both mandates,” Powell said last month at a meeting of The Economic Club of Washington, D.C.
On Wednesday, Powell said the Fed may cut interest rates at its next meeting in September, though he said the central bank would like to see further evidence that inflation is heading downward.
An interest rate cut would ease borrowing costs for consumers and businesses alike, which may rekindle economic activity and boost hiring.
Chris Zaccarelli, chief investment officer at North Carolina-based Independent Advisor Alliance, said it’s too early to tell whether the underwhelming jobs report on Friday foretells sustained losses for the stock market.
“If it turns out that this is just some noise in the labor market data and that stabilizes — similar to how we had some noise in the inflation data earlier this year before that stabilized — then this will be looked back at as a temporary period of weakness in the economy and stock market,” Zaccarelli told ABC News.
“However, if this is a beginning of a turn in the economy for the worse, then all bets are off,” Zaccarelli added.
(WASHINGTON) — Former President Donald Trump this week voiced an alarming claim about the alleged threat that immigrants pose to Black workers.
“Coming from the border are millions and millions of people who happen to be taking Black jobs,” Trump said at a gathering of the National Association of Black Journalists in Chicago. “They’re taking the employment from Black people.”
Trump has delivered the same dire warning about an immigrant threat to Black employment on multiple occasions throughout the 2024 campaign, including at a debate with President Joe Biden in June.
Economists who spoke to ABC News dismissed the claim as false. In fact, they said, a tight job market in recent years delivered record-low Black unemployment and spurred rapid wage gains.
“The claim is absolutely not true,” Valerie Wilson, the director of a program on race, ethnicity and the economy at the left-leaning Economic Policy Institute Action, told ABC News.
In a statement to ABC News, the Trump campaign claimed that undocumented immigrants pose a threat to Black employment.
“Illegal immigration disproportionally affects Black workers, including other minority workers, and we need to do everything to protect them from their jobs from being taken away,” Trump campaign spokesperson Steven Cheung said.
Cheung noted that the the current Black unemployment rate of 6.3% is higher than its lowest level under Trump of 5.3%. Inflation-adjusted weekly earnings for Black workers currently stand lower than they did at their high point under Trump, Cheung added.
“That is why President Trump has promised the largest deportation operation in American history since President Dwight D. Eisenhower. Kamala Harris will give amnesty and citizenship to all 15 million illegal aliens and make permanent the assault on Black American jobs,” Cheung added.
The all-time lowest figure for Black unemployment recorded in a single month registered at 4.8% in April 2023 during Biden’s term. Last year, the average Black unemployment rate stood at 5.5%, setting a record for the lowest figure over a calendar year, U.S. Bureau of Labor Statistics data shows.
To be sure, the unemployment rate stood much higher than the 3.3% unemployment rate among white workers in 2023. Historically, the Black unemployment rate has clocked in roughly twice as high as that of white people, due in large part to continued racial discrimination among employers, economists previously told ABC News.
Another key metric has shown robust job gains among Black workers. Last year, the share of job holders between the ages of 25 to 54 — known as the “prime age” for workers — reached an all-time high of nearly 78% among Black people, the Economic Policy Institute found. That statistic helps correct for issues such as aging or higher education that can skew unemployment statistics.
“The bottom line is immigrants aren’t pushing out Black workers,” Christian Weller, a professor of public policy at the University of Massachusetts at Boston who studies racial disparities in employment, told ABC News.
“It isn’t particularly surprising,” Weller added. That’s because immigrants act not only as workers but also as consumers, helping fuel demand for goods and services, which in turn propels economic activity and drives up hiring, he said.
The economy has grown at a solid pace in recent years, defying fears among some observers of a potential slowdown. Gross domestic product expanded much faster than expected over three months ending in June, U.S. Commerce Department data last week showed.
In June, a budget outlook released by the nonpartisan Congressional Budget Office said immigration would account for a sizable share of U.S. economic growth over the coming decade. In all, the U.S. GDP will rise nearly $9 trillion higher than it would otherwise due to an anticipated influx of immigrants, the CBO found.
“At the heart of this question is not just that these are people who are filling jobs that need to be filled, but they are also paying taxes, raising their families, and spending in the neighborhoods and communist in which they live,” Michelle Holder, a labor economist at John Jay College of Criminal Justice, told ABC News.
When speaking about the issue this week, Trump falsely characterized immigrants as a threat to “Black jobs.” That phrase “Black jobs,” which Trump used previously, drew condemnation from some economists.
Holder, who is also Black, said the term invokes a period of U.S. history that predates anti-discrimination laws, when some job listings explicitly described jobs as available only to Black applicants.
“I get a visceral reaction because there was a time in this country when there was work considered only suitable for Black people,” Holder said.
When asked about the phrase on Wednesday at the gathering of the National Association of Black Journalists, Trump said: “A Black job is anybody that has a job. That’s what it is.”
Wilson, of Economic Policy Institute Action, also criticized the phrase, in part because it fails to acknowledge the issue of “occupational segregation,” in which employers tend to place Black workers in low-wage positions rather than high-wage ones. The U.S., she added, has made progress in addressing that trend in recent years, though it remains an impediment for wage gains among Black workers.
“It’s just a very poor choice of words in terms of trying to say anything about the labor market, and it’s a poor choice of words in particular because it’s offensive,” said Wilson, who is Black.
“It totally ignores the facts about the current economy and the improvement that we’ve seen over the last four years,” Wilson added.
(WASHINGTON) — A weaker-than-expected jobs report on Friday fueled concern about a potential economic recession and calls for an interest rate cut.
Employers hired 114,000 workers last month, falling well short of economist expectations of 185,000 jobs, U.S. Bureau of Labor Statistics data showed. The unemployment rate climbed to 4.3%, the highest level since October 2021.
The hiring in July marked a steep slowdown from the 206,000 jobs added over the previous month, and the new data came in well below the monthly average over the past year.
The cooldown of the job market foretells a possible economic downturn and bolsters the case for an interest rate cut at the Federal Reserve’s next meeting in September, analysts told ABC News. The central bank may have erred in holding interest rates steady at its meeting this week, some analysts added.
“The labor market is in a perilous spot,” Nick Bunker, economic research director for North America at Indeed Hiring Lab, told ABC News in a statement. “It’s not clear what changes and rescues it from its current trajectory.”
The report on Friday indicates that the job market is cooling faster than previously known, rekindling fears of a recession, some analysts said.
The unemployment rate has soared this year from 3.7% to 4.3%. That trend has triggered a recession indicator known as the “Sahm Rule,” which says that a rise of 0.5 percentage points in the unemployment rate within a 12-month period typically precedes a recession.
The major stock indexes fell in early trading on Friday in response to the jobs data.
“The July employment report landed with a loud thud,” Mark Hamrick, senior economic analyst at Bankrate, told ABC News.
In a post on X regarding the jobs data, prominent economist and New York Times opinion writer Paul Krugman described the economy as “pre-recessionary,” though he indicated that the economy will likely avert a downturn due to some technical reasons for the elevated unemployment rate.
Citing a need to rekindle job growth, however, Krugman called on the Fed to “cut, cut, cut.”
The fresh jobs data extends a monthslong stretch of economic performance marked by the key conditions for a rate cut: falling inflation and slowing job gains.
Price increases have slowed significantly from a peak of more than 9%, though inflation remains a percentage point higher than the Fed’s target rate of 2%. An outright drop in prices in June compared to the month prior marked a major sign of progress in slowing inflation.
In recent months, Fed Chair Jerome Powell has shifted focus to the central bank’s responsibility for maintaining a robust job market, in addition to its goal of controlling inflation.
“For a long time, since inflation arrived, it’s been right to mainly focus on inflation. But now that inflation has come down and the labor market has indeed cooled off, we’re going to be looking at both mandates,” Powell said last month at a meeting of The Economic Club of Washington, D.C.
On Wednesday, Powell said the Fed may cut interest rates at its next meeting in September, though he said the central bank would like to see further evidence that inflation is heading downward.
“We’ve made no decisions about future meetings and that includes the September meeting,” Powell said at a press conference in Washington D.C. “We’re getting closer to the point at which we’ll reduce our policy rate, but we’re not quite at that point yet.”
In recent months, observers voiced optimism about the possibility of a “soft landing,” in which inflation returns to normal levels while the economy averts a recession. However, the jobs report appeared to sour some of that enthusiasm.
“The soft landing in the U.S. labor market is in danger,” said Bunker.
(NEW YORK) — Less than a week after Elon Musk publicly endorsed the candidacy of former President Donald Trump, he shared an edited video of Vice President Kamala Harris that used artificial intelligence to mimic her voice.
Musk, the wealthiest person in the world, spread the video on his social media platform X, where he boasts 192 million followers. The post appeared to violate X policies that disallow sharing “synthetic, manipulated or out-of-context media.” Later, Musk defended the video as parody, which is permitted on the platform when adequately labeled.
A similar firestorm broke out this week after X suspended an account affiliated with a fundraising drive in support of Harris called “White Dudes for Kamala.”
A message from X indicated that the account had been suspended for “violating our rules against evading suspension,” according to a screenshot posted by an event organizer. X, which plays host to nearly 250 million users, later reinstated the account.
The incidents stoked concern among some experts about the potential for Musk to wield X as a means of influencing public conversation about an election in which he holds a clear preference.
“It’s an unsettling situation,” Paul Barrett, a professor at New York University Law School and deputy director of the NYU Stern Center for Business and Human Rights, told ABC News. “It illustrates the power that can reside in the hands of a single individual because of the almost bizarre way our current communications architecture is structured.”
Some experts disagreed, however, saying critics lack evidence of Musk’s undue intervention at X. They also downplayed the role X plays in the wider political conversation, noting that a focus on the platform risks overstating Musk’s influence.
“I actually don’t think his ownership of Twitter or activities on Twitter make the slightest bit of difference,” Siva Vaidyanathan, professor of media studies at the University of Virginia, told ABC News, referring to the platform by its former name.
X did not immediately respond to ABC News’ request for comment. The request also sought comment from Musk.
When Musk acquired Twitter in 2022, he vowed to relax content moderation and turn the platform into a “digital town square.” The company cut more than half of its staff, eased restrictions on some forms of speech and reinstated an account belonging to Trump, among other changes.
Meanwhile, Musk’s follower count soared. When he acquired Twitter, Musk had about 110 million followers. After adding more than 80 million followers, Musk has far surpassed the followings of top users like former President Barack Obama and pop star Justin Bieber.
In some cases, Musk has posted and amplified misinformation on X, including a post in January that falsely claimed a dependence on mail-in ballots would lead to a “rigged election.”
“As the owner of Twitter, he’s the person who’s supposed to police the content but he himself is engaging in the spread of fake information,” Hamed Qahri-Saremi, a professor of computer information systems at Colorado State University who studies social media, told ABC News.
After easing content moderation, the platform has come to rely on Community Notes, a system in which context is appended to false or misleading posts once it receives approval from a sufficient number of users. That system has proven inconsistent, however, allowing some false posts to spread widely without corrections, The New York Times reported last week.
Sam Woolley, a professor at the University of Texas School of Journalism who focuses on political communication and technology, said Musk’s commitment to free speech has fallen short in recent cases, for instance the temporary suspension of the account affiliated with “White Dudes for Harris.”
“Musk’s actions suggest serious contradictions with his stated free speech intentions on the platform,” Woolley told ABC News.
Some experts sharply disagreed with criticism of Musk regarding his oversight of X, saying he hasn’t interfered with the platform in a manner that suggests an intent to reward his political allies or punish his foes.
“Has Elon come out and specifically set a policy or rule for X that in turn would then say he’s abusing that power?” asked Jason Buckweitz, a professor of business at Columbia University who studies the digital economy. “I haven’t seen any evidence.”
“I don’t necessarily think it’s a concern unless there’s some level of negative influence,” Buckweitz added.
Plus, observers should not assume that Musk’s large follower count translates into immense impact, said Vaidyanathan, noting that some of the followers are likely bots and inactive users.
“The very exposure to or posting of something doesn’t mean that anybody saw it or believed it,” Vaidyanathan said. Many of the followers are likely supporters of Musk who would already back his preferred candidate anyway, he added.
For his part, Vaidyanathan said Musk still wields significant political influence as the owner of aerospace company Space X, which has current contracts with the U.S. government.
Joshua Tucker, director of the Center for Social Media and Politics at New York University, said Musk’s dual role as an owner and user of X raises a policy question surrounding the regulation of social media platforms.
Tucker, who declined to say whether X warrants government regulation, pointed to a law calling for the ban or sale of TikTok as an example of the federal government weighing in on social media. On Wednesday, the Senate passed bipartisan legislation that aims to protect children’s safety on social media, signaling further willingness to police the platforms.
“We continue to live in an era where we have to think very carefully as a country about what types of public policies to regulate the behavior of social media companies in terms of public health but also the information ecosystem,” Tucker said.
Speaking about Musk’s dual role on X, Tucker added: “If this is something the public finds objectionable, that’s ultimately a public policy question.”
A Spirit Airlines takes off from Oakland International Airport on May 06, 2024 in Oakland, California. (Justin Sullivan/Getty Images)
(NEW YORK) — Spirit Airlines is shifting gears from its famously no-frills service to offer new fare options that include premium seats, carry-on baggage, Wi-Fi and even snacks.
The ultra-low-cost Florida-based carrier announced “a significant transformation” to its pricing structure on Tuesday with new ticketing bundles and more perks for passengers.
“We’re unveiling a new era in Spirit’s history and taking low-fare travel to new heights with enhanced options that are unlike anything we’ve offered before,” Ted Christie, Spirit’s president and chief executive officer, said in a statement.
Christie said the changes were a result of customer feedback from guests who want “choices for an elevated experience that are affordable and provide unparalleled value.”
The changes come on the heels of a similar announcement from Southwest Airlines earlier this month. The Dallas-based budget carrier said it would add assigned seats and a premium cabin, promising full details to come in September at the company’s investor day.
What to know about new changes on Spirit Airlines
Starting mid-August, Spirit Airlines will offer four new flexible travel options for travelers to choose from that range from elevated to economical, all without change or cancel fees: Go Big, Go Comfy, Go Savvy and Go.
Go Big includes a Big Front Seat, which has extra legroom, a wider seat, additional cushioning and no middle seat; snacks and drinks, including alcoholic beverages; one carry-on bag and one checked bag; priority check-in and boarding; and streaming access with high-speed Wi-Fi.
Go Comfy offers increased comfort and space with a guaranteed blocked middle seat, one carry-on bag, one checked bag, priority boarding, a snack and a non-alcoholic beverage.
Go Savvy gives passengers the choice between one carry-on bag or one checked bag and standard seat selection during booking.
Go, the airline’s base-level fare, provides options to purchase trip extras after booking including checked bags, standard seat selection, Wi-Fi, and snacks and beverages.
Travelers will be able to book the new options online at checkout starting Aug. 16 with the new guest experience changes rolling out by Aug. 27, 2024.
Priority check-in
Starting Aug. 27, passengers who purchase the Go Big fare class — or are Free Spirit Gold members or Free Spirit World Elite Mastercard holders — will be able to use a dedicated priority check-in line to access the first available ticket counter agent. The new lines will roll out at more than 20 airports.
Enhanced boarding experience
Spirit’s redesigned boarding process will have five groups with priority boarding available to Go Big and Go Comfy fare-classes, Free Spirit Gold and Silver members, Free Spirit World Elite Mastercard holders and active-duty U.S. service members, plus spouses and children who are traveling with that service member.
Expanding guest benefits, flexibility
The airline now offers no change or cancellation fees for all guests, regardless of ticket type, a checked bag weight allowance up to 50 pounds, and extended future travel voucher expiration, now up to 12 months.
(WASHINGTON) — The Federal Reserve maintained its benchmark interest rate on Wednesday, keeping borrowing costs at their highest level in more than two decades despite a prolonged cooldown of inflation. An interest rate cut is widely expected in the coming months.
The Fed issued its latest interest rate decision after a months-long stretch of data has established the key conditions for a rate cut: falling inflation and slowing job gains.
Still, economists expected the Fed to leave interest rates unchanged on Wednesday. The move offered the central bank time to ensure current trends hold ahead of its next meeting in September.
“Inflation has eased over the past year but remains somewhat elevated,” the Federal Open Market Committee, the policymaking body at the Fed, said in a statement. “The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%.”
The chances of an interest rate cut in September stand at more than 85%, according to the CME FedWatch Tool, a measure of market sentiment. The same tool showed the odds of a rate cut on Wednesday at a meager 5%.
The economy appears to be hurtling toward interest rate cuts later this year. Such an outcome would deliver long-sought loan relief for households and businesses saddled with expensive debt.
Price increases have slowed significantly from a peak of more than 9%, though inflation remains a percentage point higher than the Fed’s target rate of 2%. An outright drop in prices in June compared to the month prior marked a major sign of progress in slowing inflation.
The labor market has continued to grow but its breakneck pace has cooled. The unemployment rate has ticked up this year from 3.7% to 4.1%.
The Fed is guided by a dual mandate to keep inflation under control and the labor market strong. The monthslong stretch of good news for inflation alongside bad news for unemployment has prompted the Fed to give additional consideration to its goal of keeping Americans on the job, Fed Chair Jerome Powell said last month.
“For a long time, since inflation arrived, it’s been right to mainly focus on inflation. But now that inflation has come down and the labor market has indeed cooled off, we’re going to be looking at both mandates. They’re in much better balance,” Powell said at a meeting of The Economic Club of Washington, D.C.
“That means that if we were to see an unexpected weakening in the labor market, then that might also be a reason for reaction by us,” Powell added.
However, robust economic data released last week may complicate the path toward a rate cut.
The U.S. economy grew much faster than expected over three months ending in June, accelerating from the previous quarter and defying concerns about a possible slowdown, according to data from the U.S. Bureau of Economic Analysis.
If the Fed cuts interest rates as the economy is heating up, the central bank risks rekindling rapid price increases.
After the economic data came out last Thursday, the odds of a September interest rate cut fell to about 80%. The dip in sentiment proved temporary, however. The odds have risen seven percentage points since then.
