Fed's Powell: Trade Uncertainty, Global Growth Worries Could Prompt Rate Cuts--Update
25 June 2019 - 6:36PM
Dow Jones News
By Nick Timiraos
Federal Reserve officials are debating whether uncertainty over
the Trump administration's trade policy will cause the economy to
slow and warrant rate cuts later this year, Fed Chairman Jerome
Powell said in remarks set for delivery Tuesday afternoon.
Many Fed officials "judge that the case for somewhat more
accommodative policy has strengthened," Mr. Powell said in opening
remarks before the Council on Foreign Relations in New York. "But
we are also mindful that monetary policy should not overreact to
any individual data point or short-term swing in sentiment. Doing
so would risk adding even more uncertainty to the outlook."
Fed officials agreed last week to hold their short-term
benchmark rate steady in a range between 2.25% and 2.5%, but more
officials projected a weaker economic outlook could warrant lower
rates this year. The Fed's next scheduled meeting is July
30-31.
Mr. Powell said the central bank had a relatively optimistic
outlook for the economy until early May. After that, trade
negotiations between Washington and Beijing faltered, leading
President Trump to increase tariffs on Chinese goods -- and data on
global growth turned weaker. Mr. Trump also threatened to impose
tariffs on Mexico but suspended them before they took effect.
"Limited available evidence we have suggests that investment by
businesses has slowed from the pace earlier in the year," Mr.
Powell said. The risks to what had been a favorable outlook earlier
this year have increased, he added.
"The question my colleagues and I are grappling with is whether
these uncertainties will continue to weigh on the outlook and thus
call for additional policy accommodation," said Mr. Powell.
Stock markets have rallied since the Fed signaled a stronger
bias toward cutting rates last week. Nevertheless, Mr. Trump
continued to lash out against the central bank, on Monday warning
that the economy may not be strong enough to warrant higher
borrowing costs.
"Think of what it could have been if the Fed had gotten it
right," Mr. Trump said in a statement on Twitter. "Now they stick,
like a stubborn child, when we need rate cuts.... Blew it!"
Mr. Powell has said consistently the central bank won't set
policy based on political demands because this has, in past
periods, led to harmful outcomes for the economy, such as runaway
inflation. While he has refrained from commenting on Mr. Trump's
specific critiques, Mr. Powell underscored on Tuesday that the Fed
wouldn't yield to such forces.
"The Fed is insulated from short-term political pressures --
what is often referred to as our 'independence,'" he said.
"Congress chose to insulate the Fed this way because it had seen
the damage that often arises when policy bends to short-term
political interests."
Write to Nick Timiraos at nick.timiraos@wsj.com
(END) Dow Jones Newswires
June 25, 2019 13:21 ET (17:21 GMT)
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