Economy

Senior Fed officials weigh in on potential rate cut

Senior Fed officials weigh in on potential rate cut”

Trump has criticized the central bank for keeping credit too costly and for failing to lower interest rates last week.

Some of those policy makers did in fact advocate for a rate cut at last week's meeting, including St. Louis Fed chief James Bullard and the Minneapolis Fed's Neel Kashkari. The Dow Jones Industrial Average rose 13 points, or less than 0.1%, to 26,740, while the S&P 500 was down less than a point at 2,944.

USA stock futures slightly changed as investors eyes on Fed official's comments.

"Just sitting here today, I think 50 basis points would be overdone", Bullard said in an interview with Bloomberg Television.

Bullard dissented, arguing that weak inflation and uncertainties about the outlook for economic growth warranted a rate cut.

Trump on Monday tweeted that the Fed "blew it" by not cuttings rates at its meeting last week. At that session the Fed kept its policy rate unchanged in a range of 2.25% to 2.5% but dropped a previous pledge to be "patient" in changing rates in coming months. I hope not frequently, but we'll make mistakes.

Powell said that the Fed's independence from direct political control had served the country well and when central banks do not have that protection "you see bad things happening".

All three major USA stock indexes ended the session in the red after Powell said the Fed was grappling with whether trade uncertainties and other issues warrant rate cuts. But with uncertainty over on-again, off-again trade talks between China and the United States, the world's two largest economies, and the threat of tariffs on almost all remaining Chinese goods, the Fed is now beginning to signal a more a nimble approach.

He pointed in particular to the near-collapse of US-China trade talks last month.

Tyson Foods Inc and Pilgrims Pride Corp dipped 1.1% and 1.3%, respectively, after the U.S. Department of Justice opened a criminal probe over possible poultry price fixing.

The Fed, which paused its rate-hike campaign this year and suggested last week that it could cut borrowing costs as early as next month amid concerns about US trade disputes and other economic risks, is facing increasing anger from Trump. In the meantime, policymakers will be closely watching data on US economic growth and jobs as well as the G20 summit in Osaka, Japan, at the end of the week, where Trump is due to meet one-on-one with at least eight world leaders, including Chinese President Xi Jinping, for discussions on trade.

In addition to rising trade tensions, Powell said since May incoming data has raised new concerns about the strength of the global economy, noting tentative signs that investment by USA businesses has slowed from earlier this year.

Many Fed officials believe the case for easier monetary policy has strengthened, but "we are also mindful that monetary policy should not overreact to any individual data point or short-term swing in sentiment", he said.

But risks to that outlook have grown, he added, as recent progress on resolving trade disputes had deteriorated, producing greater uncertainty.



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