Investing.com – The “vast majority” of Federal Reserve policymakers signaled that it may be appropriate to begin cutting rates next month should the recent progress on inflation continue. 

“The vast majority observed that, if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting.,” the of Fed’s July meeting showed. 

At the conclusion of its previous meeting on Jul. 31, the Federal Open Market Committee, or FOMC, kept its benchmark rate in a range of 5.25% to 5.5%.

The central bank’s monetary policy has been in data dependent mode since it delivered its tenth rate hike in May last year.

Recent economic data, however, including a string of more convincing inflation data that point to ongoing deflation has given members more confidence that inflation is on a path toward the 2% goal. 

The most recent core consumption personal expenditure, or CPE, the central bank’s preferred inflation gauge, came it at 2.6% in the 12 months through June, unchanged from the prior month, though well below the peak of 5.4% seen in February 2022. 

” Almost all participants remarked that while the incoming data regarding inflation were encouraging, additional information was needed to provide greater confidence that inflation was moving sustainably toward the Committee’s 2 percent objective before it would be appropriate to lower the target range for the federal funds rate,” the minutes showed.

The progress on inflation has shifted the Fed’s focus, however, to the labor market, where a mixed string of recent data have sparked investor jitters. 

The July nonfarm payrolls increased by only 114,000, missing economist expectations for 179,000, while the unemployment unexpectedly tick up to 4.3% from 4.1%. 

The uptick in unemployment rate sparked worries about the state of the U.S. economy, leading to a major selloff in risk assets and calls for aggressive Federal Reserve rate cuts at upcoming meetings. Since then, however, a string of data including weekly jobless claims have helped to calm investor worries, tempering bets on a jumbo-sized Fed cuts. 

On Wednesday, concerns about the labor market was back in focus somewhat after the Bureau of Labor Statistics revised down March 2024’s employment gains by 818,000 positions earlier in the session, as part of the agency’s annual benchmark review of payroll data.