Fed warns more rate cuts not ‘preset’ despite recession fear
THE US Federal Reserve’s policymakers warned investors against expecting more interest rate cuts in coming months, insisting it is not on a “preset course” despite rising recession fears.
The minutes from the central bank’s July meeting revealed that most Fed policymakers saw the first cut to rates in a decade as a “mid-cycle adjustment” rather than a new wave of stimulus.
Last month’s meeting spurred hopes of more rate cuts but the Fed panel largely viewed the stimulus as insurance against slowing global growth and simmering trade tensions, it revealed. A “couple” of rate-setters favoured a deeper cut to boost inflation.
The Fed’s policy “would be guided by incoming information” and wanted to avoid “any appearance of following a preset course”, the minutes said.
However, the central bank’s meeting was held before the recent escalation in the Us-china trade war and the outlook for the world economy has darkened since. Markets will now look to a key speech from Jerome Powell, the Fed’s chairman, tomorrow to see if he will signal more aggressive stimulus.
Donald Trump yesterday continued to ramp up the pressure to cut rates, telling the central bank to “wake up”. The US president has played down mounting recession worries but admitted he is mulling fresh tax cuts as trade tensions weigh on global growth.
The cost of the trade war for American families could surge to $1,000 a year after the next round of US tariffs, JP Morgan has calculated.
US shoppers will face a jump in costs from a 10pc tariff hitting another $300bn of Chinese goods, lifting the impact of Mr Trump’s trade war on households from $600 to just under $1,000 (£825).
The cost of the next tranche of tariffs would significantly impact “the wallet of the US consumer” in the run-up to next year’s US election, warned JP Morgan analyst Dubravko Lakos-bujas.
The Wall Street bank said the trade war could wipe out the majority of the boost that households had enjoyed from Mr Trump’s huge tax cuts.
The Trump’s administration’s spending spree will push the US budget deficit above the $1 trillion mark in 2020, two years sooner than expected, new estimates from the Congressional Budget Office revealed yesterday.