Fri, Jul 12, 2019 - Page 10 News List

Door open to Fed rate cut, chair says

ECONOMIC OUTLOOK:Jerome Powell said the US’ employment situation could not be described as a ‘hot’ jobs market, as wage increases are barely covering inflation

AFP, WASHINGTON

US Federal Reserve Chairman Jerome Powell testifies during a House Financial Services Committee hearing on Capitol Hill in Washington on Wednesday.

Photo: EPA-EFE

US Federal Reserve Chairman Jerome Powell on Wednesday left the door open to an interest rate cut this month, pointing to uncertainty about trade frictions and global growth.

Powell said that the Fed pays no attention to commentary from US President Donald Trump and that he would not step down should Trump try to fire him.

Powell last month said that many central bankers believed the case for lower rates “had strengthened,” given the rising “crosscurrents” in the economy.

In testimony to the US Congress, he stressed the importance of keeping the US economy growing to ensure that its benefits reach Americans left at the margins and said that the Fed would deploy all its tools to support continued expansion.

Investors took this as a clear signal the Fed would cut its the benchmark lending rate at the next policy meeting on July 30 and 31.

Early in the trading session, the broad-based S&P 500 on Wednesday hit 3,000 for the first time before paring gains somewhat, while the NASDAQ, the home of major tech companies, finished at a record.

Trump has been putting pressure on the Fed to cut the benchmark interest rate and boost the economy, repeatedly criticizing Powell on Twitter and in public comments.

Having raised the key borrowing rate nine times since 2015 as the economy expanded, most recently in December last year, the Fed last month opened the door to a rate cut amid signs of slowing.

Powell repeated that sentiment in his prepared statement to the House Financial Services Committee, saying that the central bank “would act as appropriate to sustain the expansion.”

He said that in the weeks since the policy meeting last month, “it appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the US economic outlook.”

At the same time, price measures watched closely by the Fed continue to run well below its 2 percent target, while wage gains so far are barely enough to cover inflation, he said, rejecting the claim the US is experiencing a “hot” jobs market.

“To call something hot, you need to see some heat,” he said, adding that the economy can tolerate a lower jobless rate than the Fed previously thought.

Because of the shortage of workers, companies are bringing marginalized people back into the workforce, he said, which “just says how important it is for us to continue to sustain this expansion.”

“That’s why we’re so committed to using our tools to sustain the expansion,” he said in response to a question.

Under questioning from committee Chair Maxine Waters, Powell said he would rebuff any demand from Trump that he resign.

“Of course I would not do that,” Powell said. “The law clearly gives me a four-year term and I fully intend to serve it.”

Powell has brushed off Trump’s frequent attacks, saying that the Fed does not pay attention to politics.

While he steered clear of commenting on Trump’s aggressive trade policies, especially against China, Powell said in his prepared testimony that businesses and farmers now “report heightened concerns” about the US economy.

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