WASHINGTON, July 29 Reuters The Federal Reserve is expected to hold interest rates steady at a twoday policy meeting this week but open the door to interest rate cuts as soon as September by acknowledging inflation has edged nearer to the U.S. central bank39;s 2 target.

Policymakers in advance of the July 3031 meeting were reluctant to commit to the timing of a first rate cut, but audibly cheered recent data showing price pressures were easing broadly, with headline inflation moving closer to the Fed39;s target and evidence from job, housing and other markets suggesting that trend would continue.

Data on Friday showed the Fed39;s preferred personal consumption expenditures price index, which was accelerating by as much as 7.1 on a yearoveryear basis in 2022, rose by 2.5 in June after a 2.6 gain in May. Since March, in fact, the annualized monthtomonth changes in the PCE price index show it rising at just 1.5 half a percentage point below the Fed39;s target. A companion measure stripping out volatile food and energy prices is trending at 2.3 over that same window within sight of the 2 goal.

Combined with a broader sense that price pressures are easing, that data may be enough for Fed officials to change their description of inflation as elevated in next week39;s policy statement, and note rising confidence that the pace of price increases will return to 2. Policymakers have said they should start cutting interest rates before inflation fully returns to their target,…