Wednesday, October 16, 2019
 
Columnist
Martin Hennecke

Powell moves closer to a rate cut
 
11/07/2019
 
<p>Federal Reserve Chairman Jerome Powell pushed the central bank closer to cutting interest rates this month by saying the economy continues to face downside risks including the US-China trade war and sluggish inflation.</p><p>Since Fed officials met in June, &quot;it appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the US economic outlook,&quot; Powell said in prepared remarks to US lawmakers yesterday. &quot;Inflation pressures remain muted.&quot;</p><p>Stocks jumped in response to his remarks. All three major indexes, which had been lower in premarket trading, rose upon the release of Powell&#39;s statement. The Dow Jones Industrial Average rose 124 points to 26,907, the S&amp;P 500 was up 0.53 percent, while the Nasdaq inched up 0.73 percent.</p><p>The Fed chief&#39;s semi-annual testimony supports views that the central bank is preparing to cut at its July 30-31 meeting, despite a strong June jobs report.</p><p>Traders cemented bets that a quarter-point rate cut is coming this month, and moved to price in closer to three quarter-point reductions by the end of 2019.</p><p>Treasuries rallied and the dollar weakened.</p><p>Under mounting pressure from President Donald Trump to cut rates, Powell opened his testimony by embracing the central bank&#39;s mandates for maximum employment and stable prices as well as its &quot;independence,&quot; noting that it comes with a need for transparency and accountability.</p><p>Powell carefully explained the reasons why the policy committee has shifted its views this year, and noted that &quot;crosscurrents have reemerged, creating greater uncertainty.&quot; Despite a current trade war truce with China, Powell continued to stress downside risks to the outlook.</p><p>&quot;Uncertainties about the outlook have increased in recent months,&quot; Powell said in the text of his remarks. &quot;Economic momentum appears to have slowed in some major foreign economies, and that weakness could affect the US economy. Moreover, a number of government policy issues have yet to be resolved, including trade developments, the federal debt ceiling, and Brexit.&quot;</p>

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