Powell to go against a interest rate cut

Federal Reserve  Chairman Jerome Powell pushed the central bank to cut interest rates by the end of this month, according to Bloomberg

While stressing that the economy still faces the risk of collapse due to the Sino-US trade war and slow inflation.

Jerome Powell said in remarks prepared for US lawmakers on Wednesday:

Federal Reserve - Jerome Powell-central bank-interest rate

“Since the meeting of Federal Reserve officials in June,” doubts about trade tensions and concerns about the strength of the global economy continue to affect the US economic outlook. “” Inflation pressures are still low. “

A few days after a strong job report was released.

suggestions were made that Federal Reserve  officials may not cut interest rates when they meet from July 30 to 31.

How was the reaction to such a proposal?

  • Traders reacted to Powell’s testimony by reinforcing the stakes that a quarter-point cut would come.  
  • As they moved to price in nearly three quarter-point cuts by the end of 2019.  
  • US stock index futures reversed lower.
  • Treasuries rose and the dollar weakened.

But under growing pressure from President Donald Trump to ease monetary policy.

Powell has adopted central bank mandates to get maximum employment and stable prices as well as his independence.

Pointing out that it comes with the need for transparency and accountability.

Powell carefully explained the reasons why the policy committee changed its views this year.

“The emergence of cross-currents, which increased uncertainty,” he said.

Despite the current trade truce with China, he continued to stress the negative risks that threaten expectations.

Doubts over expectations have increased in recent months. “

  1. “The economic momentum seems to have slowed down in some major foreign economies, and this weakness can affect the US economy.
  2. Moreover, a number of government policy issues, including commercial developments, maximum federal debt, and Brixett have not yet been resolved. “

This was an opportunity to reverse those expectations if he wanted to, after that he did the exact opposite.

On what the bank based on these expectations:

  • He noted that the FOMC had committed itself to careful monitoring of data
  • “Act as appropriate to maintain expansion.
  • Based on the data.

In conclusion,”It seems that doubts about trade tensions and concerns about the strength of the global economy still affect the economic outlook of the United States.”

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Marowa Al Tujjar
Marowa Al Tujjar
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