Powell to testify on trade’s effect on economy, interest rates
Federal Reserve Chairman Jerome Powell has downplayed the effect of U.S. trade skirmishes on the economy, and Fed policymakers have forecast a total of four interest rate hikes this year. But that was before President Donald Trump threatened another $200 billion in tariffs against China last week, raising the prospect of a global trade war.
Powell’s testimony before Congress this week could reveal whether the Fed may slow the pace of rate increases amid the growing risks. Also this week: reports on retail sales, housing starts and industrial production.
Economists estimate the Commerce Department will report Monday that retail sales overall grew a robust 0.6 percent last month. And Nomura economist Lewis Alexander figures a core measure – that excludes volatile items such as autos and gasoline – increased a healthy 0.4 percent.
Although Powell generally has shrugged off U.S. trade fights with China and other countries, he acknowledged in a radio interview that they could weaken the economy if Trump’s import tariffs lead to a sustained rise in consumer prices. Powell could provide a more detailed appraisal in testimony on the economy and interest rates before the Senate Banking Committee
Tuesday and the House Financial Services Committee Wednesday.
The trade standoffs have dinged business confidence, but industrial production has been bolstered by solid demand from American consumers and companies. Auto production also likely rebounded strongly last month after a fire at a parts supply factory disrupted output in May, Alexander says. After industrial production dipped 0.1 percent in May, economists expect the Fed on Tuesday to announce a 0.6 percent increase in June.
On Wednesday, the Commerce Department releases the latest figures on housing starts. Groundbreaking for new homes has been volatile because shortages of workers and available lots have partly offset strong demand. After starts jumped 5 percent in May, economists estimate they fell 1.7 percent in June to a seasonally adjusted annual rate of 1.3 million.