Economy

Fed chairman hints at first interest rate cut in over a decade

Fed chairman hints at first interest rate cut in over a decade”

The Wall Street Journal reported that "the S&P 500 and the Nasdaq Composite touched all-time highs, with the S&P briefly eclipsing the 3000 level for the first time" in intraday trading before subsiding ahead of the close.

The Dow exploded higher after Jerome Powell hinted at an impending interest rate cut.

President Trump has lambasted Powell - whom he appointed as Fed chair in late 2017 - for rate hikes, arguing that they've slowed economic and stock market gains.

"The Fed's consideration of rate cuts is not only about growth but also about inflation, which remains well below target, and inflation expectations, which were breaking to the downside before the Fed signaled the likelihood of cuts".

In June, the US economy created 224,000 jobs, surging past analyst expectations of 160,000, raising questions about how - or if - the report would affect the central bank's monetary policy. That's to say that markets feel that if Fed rate cuts are coming, they're going to come quickly over the next several months, a direct response to the growing threat of the US-China trade war.

At the June meeting, policy makers submitted new rate projections showing eight of 17 officials expected at least one cut in 2019.

Many investors have put the odds of a rate cut this month at 100 per cent. He did thank Congress for the "independence" it has given the Fed to operate free of political intrusion.

'Of course I would not do that, ' Powell responded when queried by Maxine Waters, the Democratic congresswoman from California.

Powell noted that he supports financial innovation as long as appropriate risks are identified, but he said the massive platform enjoyed by Facebook immediately sets Libra apart from other digital currency projects. "For central banks like the Federal Reserve or European Central Bank, there is too much global reliance on the stability of asset prices in order to dramatically surprise market participants".

It was unclear exactly how the Fed could slow the project if it wanted, given the murky regulatory treatment of digital currencies, but Powell's perspective looms large. He will testify again on Thursday before the US Senate Banking Committee.

The question is whether the Fed will still see a good argument for cutting interest rates after the strong U.S. June jobs data.

"I have kind of said what I meant to say on the subject and what I said is the law clearly gives me a four-year term and I fully into to serve it", Powell said.

In his bi-annual Congress testimony, Mr Powell said second-quarter growth "appears to have moderated", warning that business investment growth had "slowed notably" amid tariff tensions.

The Fed chairman told the House committee that he thinks average worker pay isn't rising fast enough to accelerate low inflation, even with the unemployment rate near a five-decade low.

The Fed's skittish outlook for the economy - which meanwhile downplayed the risks of inflation despite a strong job market - sent stocks roaring as it strengthened the central bank's case to take action to prolong an 11-year expansion. -China trade war and agreed to resume talks toward a deal that would meet the administration's demands to better protect US technology.



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