Fed chief says no recession expected

Investors predict cut in interest rates

Federal Reserve Chairman Jerome Powell said the most likely outlook for the U.S. and world economy is continued moderate growth. His comments cemented expectations for another quarter-percentagepoint cut in interest rates later this month.

“Our main expectation is not at all that there will be a recession,” either in the U.S. or the global economy, Powell said Friday in Zurich during a questionand-answer session in which he was joined by Swiss National Bank President Thomas Jordan.

The Fed chief noted that the central bank is monitoring “significant risks,” including global trade tensions, that could threaten this scenario. “We’re going to continue to watch all of these factors, and all the geopolitical things that are happening,” he said. “We’re going to continue to act as appropriate to sustain this expansion.”

Powell’s remarks reinforced investors’ expectations for a quarter percentage-point cut when U.S. central bankers gather in Washington Sept. 17-18. They were also the last public words on policy from the Fed until the gathering: A pre-meeting quiet period, during which officials do not make public remarks related to monetary policy, starts today.

Powell could have signaled he was open to a half-point rate cut, which some policymakers have sought — and which President Donald Trump has loudly been calling for on Twitter. But he did not.

“The U.S. economy has continued to perform well,” he said. “The most likely outlook for our economy remains a favorable one, with moderate growth, a strong labor market, and inflation moving back up close to our 2% goal.”

U.S. stocks extended gains and Treasuries were mixed after Powell spoke. The dollar fell.

Rate-cut expectations were also reinforced earlier Friday when the U.S. Labor Department reported employers added 130,000 new jobs in August, undershooting economists’ estimates.

For months, Powell and his Fed colleagues have warned that trade tensions and slower global growth represent mounting risks to the U.S. economy. To guard against those risks and to boost below-target inflation, the Fed cut rates by a quarter point in July in what Powell called a “mid-cycle adjustment” and “not the beginning of a long series of rate cuts.”

In recent weeks, however, manufacturing data has suggested that ongoing trade disputes are causing not only uncertainty, but real damage to the U.S. economy.

Powell was also asked about

a Bloomberg Opinion column published last week by former New York Fed chief Bill Dudley, which suggested that the Fed reject interest-rate cuts that would shield the economy from Trump’s trade policies and help Trump’s prospects for reelection in 2020.

“We serve all Americans regardless of their political party,” Powell said. “The idea that we would deviate from that is just simply wrong.”

The Fed aims for low and stable inflation and maximum employment — jobs Powell said it was narrowly focused on. But it has been harder to judge how to achieve those goals in 2019. Recently, the policy-setting Federal Open Market Committee has been divided over whether rates need to be lowered.

Key officials, including John Williams, the president of the Federal Reserve Bank of New York, have been noncommittal about whether and when they want to adjust borrowing costs next, but have also done little to walk back market expectations for additional moves. The regional presidents Esther George and Eric Rosengren have recently indicated that they were not yet convinced a cut is needed.