Fed chair­man sig­nals rate cut seems likely

Fed chair points to trade ten­sions, global con­cerns

The Arizona Republic - - Front Page - Martin Crutsinger

Fed­eral Re­serve Chair­man Jerome Pow­ell sig­naled Wed­nes­day that the Fed is likely to cut in­ter­est rates late this month for the first time in a decade amid a weak­en­ing global econ­omy and ris­ing trade ten­sions. ❚ De­liv­er­ing the cen­tral bank’s semi­an­nual re­port to Congress, Pow­ell said that since Fed of­fi­cials met last month, “un­cer­tain­ties around trade ten­sions and con­cerns about the strength of the global econ­omy con­tinue to weigh on the U.S. eco­nomic out­look.” In ad­di­tion, an­nual in­fla­tion has dipped fur­ther be­low the Fed’s an­nual tar­get level. ❚ Econ­o­mists sug­gested that Pow­ell’s mes­sage made a quar­ter-point rate cut a vir­tual cer­tainty at the Fed’s meet­ing this month, with many fore­cast­ing fur­ther rate cuts to come.

– Chair­man Jerome Pow­ell sig­naled Wed­nes­day that the Fed­eral Re­serve is likely to cut in­ter­est rates late this month for the first time in a decade in light of a weak­en­ing global econ­omy and ris­ing trade ten­sions.

De­liv­er­ing the cen­tral bank’s semi­an­nual re­port to Congress, Pow­ell said that since Fed of­fi­cials met last month, “un­cer­tain­ties around trade ten­sions and con­cerns about the strength of the global econ­omy con­tinue to weigh on the U.S. eco­nomic out­look.” In ad­di­tion, an­nual in­fla­tion has dipped fur­ther be­low the Fed’s an­nual tar­get level.

Pow­ell’s re­marks trig­gered a stock mar­ket rally, with the Dow Jones in­dus­trial av­er­age up nearly 100 points in late-morn­ing trad­ing.

Econ­o­mists sug­gested that Pow­ell’s mes­sage made a quar­ter-point rate cut a vir­tual cer­tainty at the Fed’s meet­ing this month, with many fore­cast­ing fur­ther rate cuts to come.

Paul Ash­worth, chief U.S. econ­o­mist at Cap­i­tal Eco­nomics, said he thinks eco­nomic growth will slow be­low a 1% an­nual rate in the sec­ond half of this year, which he thinks will lead to ad­di­tional quar­ter-point cuts in De­cem­ber and then March.

Ash­worth said a July rate cut would be “in­sur­ance against the down­side risk that Fed of­fi­cials be­lieve have mounted in re­cent months.”

Many investors have put the odds of a rate cut this month at 100%. The Fed’s bench­mark rate stands in a range of 2.25% to 2.5% after the cen­tral bank raised rates four times last year – ac­tion that in­cited public at­tacks on the Pow­ell Fed from Pres­i­dent Don­ald Trump.

Trump, who is count­ing on a strong econ­omy for his re­elec­tion cam­paign, has called the Fed his big­gest threat. He con­tends that the cen­tral bank made a huge mis­take by tight­en­ing credit last year and should be cut­ting rates now. Trump has ar­gued that last year’s rate hikes have held back eco­nomic growth and the stock mar­ket.

In his pre­pared re­marks, Pow­ell made no men­tion of the pres­i­dent’s crit­i­cism. He did thank Congress for the “in­de­pen­dence” it has given the Fed to op­er­ate free of po­lit­i­cal in­tru­sion. But later, in the ques­tion-and-an­swer per­iWASHINGTO­N od, Demo­cratic mem­bers of the House Fi­nan­cial Ser­vices Com­mit­tee, made clear their dis­con­tent with Trump’s at­tacks.

Rep. Max­ine Wa­ters, who leads the com­mit­tee, de­clared that “this pres­i­dent has made it clear that he has no un­der­stand­ing or re­spect for the in­de­pen­dence of the Fed­eral Re­serve.” She also re­ferred to pub­lished re­ports that Trump had dis­cussed fir­ing Pow­ell.

Asked by Wa­ters what he would do if Trump said he wanted to fire him, Pow­ell replied, as he has in the past, that he in­tends to serve his full fouryear term.

In other re­marks, Pow­ell said that ris­ing fed­eral bud­get deficits will even­tu­ally push up U.S. in­ter­est rates, though it may not hap­pen un­til “way out in the fu­ture.”

GETTY IM­AGES

Speak­ing Wed­nes­day to the House Fi­nan­cial Ser­vices Com­mit­tee, Fed­eral Re­serve Chair­man Jerome Pow­ell said trade ten­sion is caus­ing some con­cern about the eco­nomic out­look glob­ally.

SU­SAN WALSH/AP

Fed­eral Re­serve Chair­man Jerome Pow­ell tes­ti­fies be­fore the House Fi­nan­cial Ser­vices Com­mit­tee on Wed­nes­day.

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