Federal Reserve President Jerome Powell said the central bank "would act as appropriate to sustain the expansion."
Federal Reserve Chairman (Fed) Jerome Powell warned on Wednesday of the worsening economic outlook in the United States due to "trade tensions" and "global weakness", in a clear signal of the possibility of a cut in interest rates at the end of the month.
"According to the latest data and other events, it seems that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the outlook," Powell said in his semiannual appearance before Congress.
The markets interpreted its intervention as a clear indication that the Fed could carry out a possible reduction in interest rates, currently between 2.25 and 2.5%, at its next meeting on July 30 and 31. This would be the first drop in the price of money in the United States in more than a decade.
"A cut in July is almost a certainty. The strength of employment generation data last week led some to think that the Fed could stop to think. But it is clear from Powell's testimony that they will not," he said. James McCann, economist at the Aberdeen Standard investment fund, in a note to clients.
Powell's intervention comes at the same time that US President Donald Trump has reiterated his criticism and raised pressure on the central bank by insisting that he should reduce the price of money to support economic activity in the United States.
In fact, it has been rumored that Trump has come to raise the possibility of the dismissal of Powell, something unprecedented in the history of the Fed. "Of course I would not. My answer would be no (...). he clearly gives a four-year term, "Powell said to the direct questions of Democratic Congresswoman Maxine Waters, who asked him if he would agree to resign from the Fed front in case Trump ordered it.
Trump has urged the central bank to reduce interest rates to fuel economic activity, unusual statements in Washington, as the Executive has traditionally respected the independence of the agency responsible for directing the country's monetary policy. Interestingly, Powell was appointed by Trump himself in early 2018, and his term ends in February 2022.
This Tuesday, the White House economic advisor, Larry Kudlow, stressed that "no effort" is being made to remove the Fed chief and said "unequivocally, that at the present time, (Powell) is safe" .
Now that the position of both show signs of convergence does not seem the appropriate time to fan the tensions.
Posted in Portfolio, available here
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