Wednesday, Fed Chairman Powell signaled that the Fed is likely to cut interest rates late this month for the 1st time in a decade in light of a weakening global economy and rising trade tensions.
Delivering the central bank’s semiannual report to Congress, Chairman Powell said that since Fed officials met last month, “uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the US economic outlook.” In addition, annual inflation has dipped further below the Fed’s annual target level.
His remarks triggered a stock market rally, with the DJIA up nearly 100 points in late-morning trading.
Economists suggested that Mr. Powell’s message made a quarter-point rate cut a certainty at the Fed’s meeting this month, with many further rate cuts to come.
Many investors have put the odds of a rate cut this month at 100%. The Fed’s benchmark rate stands in a range of 2.25% to 2.5% after the central bank raised rates 4X last year.
President Trump, who is counting on a strong economy for his re-election campaign, has called the Fed America’s biggest threat. He contends that the central bank made a huge mistake by tightening credit last year and should be cutting rates now. He argued that last year’s rate hikes have held back economic growth and the stock market.
Mr. Powell made no mention of the President’s criticism. He did thank Congress for the “independence” it has given the Fed to operate free of political intrusion.