Why is the Fed likely to keep interest rates unchanged?

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The Fed is likely to keep interest rates unchanged due to moderating inflation and slowing economic growth.

Recent economic data from the United States indicates a slowdown in both inflation and gross domestic product (GDP) expansion, which supports the Federal Reserve's current monetary policy stance. This environment suggests that maintaining benchmark interest rates at their current level is appropriate for the near term.
Moderating Inflationary Pressures

The US Federal Reserve's preferred inflation gauge, the Personal Consumption Expenditures (PCE) Price Index, showed a notable decrease, falling to 3.7 per cent in June from 4.1 per cent in May. This easing trend in inflation, coupled with a decline in average petrol prices to US$4.39 per gallon in July from US$4.54 in June, suggests that inflationary pressures are diminishing.
Slower Economic Growth Observed

The US economy experienced a deceleration in its growth rate during the second quarter. Gross domestic product (GDP) expanded by 1.5 per cent, falling short of the consensus forecast of 2.1 per cent. This slower pace of economic expansion, alongside moderating inflation, provides a rationale for the Federal Reserve to hold its benchmark interest rate steady.
Implications for Future Rate Hikes

The combination of cooling inflation and reduced economic growth diminishes the immediate need for further interest rate hikes. This scenario could lead to the US dollar losing momentum, particularly as the prospect of a rate hike at the September meeting becomes less probable. Consequently, the US dollar index (DXY) has fallen below the 100-point mark.

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Why is the Fed likely to keep interest rates unchanged?

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