US Fed minutes show many saw a stronger rate-cut case

Ann Santiago
July 11, 2019

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.

The Fed's benchmark rate now stands in a range of 2.25% to 2.5% after the central bank boosted rates four times past year. "There is a risk that weak inflation will be even more persistent than we now anticipate", he said, hinting at the possibility of a rate cut.

Though US economic growth remains largely on track, and the jobs report for June showed continued strong hiring, the events of May changed US trade policy from something of a sideshow in the Fed's view to a central concern.

Earlier rounds of USA tariffs on trading partners including China had been dismissed as of little macroeconomic importance, with the Fed in early May still anticipating its policy rate would remain unchanged in a range of 2.25% to 2.50% for the rest of the year.

Mr Powell, in written testimony ahead of his appearance at the House of Representatives Financial Services Committee, said he expected continued United States growth.

Not all Fed officials were on board with a near-term rate cut.

Mornings with Maria panel weighs in on the June jobs report and its impact on Federal Reserve policy.

Fed Chair Gears Up for Two-Day Clash With TrumpJerome Powell and Donald Trump have a rocky relationship.

A lot depends on what Powell says today.

Many investors have put the odds of a rate cut this month at 100 per cent.

Powell said any regulatory review of the recently announced project should be "patient and careful", while acknowledging digital currencies do not neatly fit within existing rules.

Powell additionally observed that "economic momentum appears to have slowed in some major foreign economies, and that weakness could affect the US economy" and that "a number of government policy issues have yet to be resolved, including trade developments, the federal debt ceiling and Brexit", The Wall Street Journal reports. Trump and Chinese President Xi Jinping declared a truce last month in what had threatened to become an escalating U.S.

But Trump's statements spooked financial markets so decisively, and the threats to the global economy became so palpable, that a rate cut now appears nearly certain.

Minutes from the Federal Open Market Committee's June meeting were also released Wednesday and revealed officials perceived economic risk as having "increased significantly" - strengthening the case for a rate cut, according to the Street.

Powell has brushed off Trump's attacks, but in his testimony he noted that Congress has granted the central bank "an important degree of independence" to conduct policy "based on objective analysis and data".

During Wednesday's hearing, Powell reiterated his previous assertion that the Fed will "act as appropriate" to sustain the current economic expansion. Both are regarded as highly likely to support Trump's drive to lower rates.

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