by Chris Becker
And there we have it. The United States Federal Reserve is transmitting loud and clear that it intends to cut rates to support the US and therefore global economy. In his testimony to the US Congress overnight, the Fed Chief Jerome Powell reiterated the central banks concern with the global economy, particularly because of Trump’s inane trade war with the US major partners:
Disagreement over interest rate policy could ease, however, as Mr Powell signalled that a cut could come soon in remarks that sent the S&P 500 surging past 3,000 points for the first time and prompting a fall in the dollar.
He told the committee that “uncertainties about the outlook have increased in recent months”. Although he expected continued US growth, he warned of economic weakness in other major economies, and a downturn in business investment driven by trade war worries.
“Concerns about the strength of the global economy continue to weigh on the US outlook,” Mr Powell said.
“Apparent progress on trade turned to greater uncertainty, and our contacts in business and agriculture reported heightened concerns over trade developments.”
This means a July rate cut is almost certain, by at least 25 basis points, maybe even more, but even James Bullard, the noted dove and St. Louis Federal Reserve President in a speech at the same time as Powell’s stated that 50 basis points would be “overdone” and that a 2nd cut later in the year should be enough.
The FOMC minutes were published at the same time and most of the members thought that rising risks from global concern and flagging business confidence supported a rate cut, but that such a cut would “risk financial imbalances”.
No duh. Like a stock market hell bent on blowing another bubble.
At least Powell has a spine, effectively telling Trump where to stick it if he threatens his position. From CNN:
California Democratic Rep. Maxine Waters pressed Powell at a House Financial Services Committee hearing about whether he would comply if he were to get a phone call from Trump asking him to pack up his stuff and go.“Of course, I would not do that,” replied Powell, who was appointed by Trump.“I can’t hear you,” said Waters in response to which the hearing room erupted in laughter.“The answer would be, ‘No,'” Powell said.