This week’s Federal Reserve (Fed) meeting is not so much about the present as the future. If things play out as expected, monetary policymakers will again keep interest rates unchanged at their highest level in two decades.

However, with a string of good inflation data in recent months, US central bankers in the US are expected to set the stage for interest rate cuts to begin in September. How aggressive they will be in this policy shift is the main question markets will be looking for in the statements following the meeting.

Currently, markets are discounting that the Fed will approve the first rate cut in four years when it meets on September 17-18. The central bank has kept its benchmark rate in a 5.25-5.5% range for all of last year.

The news on inflation in the US has improved, though it’s not yet great – most measures show that the rate of price growth is still more than half a percentage point above the Fed’s target, but has fallen significantly since mid-2022. The Fed’s preferred measure, the personal consumption expenditures price index, showed 12-month inflation at a 2.5% rate in June; the consumer price index had it at 3% and showed a real decline of 0.1% from the previous month.

Markets are watching to see if there will be a line in the Fed’s statement that says it won’t cut rates until it “gains more confidence that inflation is moving steadily toward 2%.” That would amount to a “September appointment.”