On July 31, the Federal Reserve released a statement from the Federal Open Market Committee (FOMC), deciding to leave the federal funds rate unchanged between 5.25% and 5.50%.

In the statement, the Fed noted that inflation has made some progress toward its 2% target. At the same time, the Fed said that it would not be appropriate to lower the target range until there is greater confidence that inflation continues to move toward the target level.

At the press conference, when asked if the market expects the Fed to cut rates in September, Powell said a rate cut could be discussed at the next meeting if the data meets expectations.

To meet the Fed's expectations, inflation should fall, economic growth should remain relatively strong, and the labor market should remain at roughly the same level. Powell emphasized the gradual normalization of labor market conditions and noted that the Fed plans to maintain a balance between inflation and economic growth.

Powell made several references at the press conference to the Fed's dual mission of maintaining price stability and maximizing employment. He said that the labor market is not currently a source of inflation and that he does not expect to see labor market conditions deteriorate.

Overall, Powell's comments were dovish. Unsurprisingly, the U.S. Dollar Index retreated after traders reacted to his comments, while the S&P 500 tested its intraday high. For now, the market is almost certain that the Fed will begin its rate-cutting cycle in September.