Published: Thu, July 11, 2019
Markets | By Erika Turner

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

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

As news of Powell's testimony broke, the Dow Jones Industrial Average jumped 195 points, CNBC reports. The market rallied through much of June after the Fed first signalled that it might cut rates if necessary to shield the USA economy. Reducing rates at this point would be similar to the Fed's efforts in the mid-1990s to nurse along a lengthy recovery rather than respond to a looming downturn, and "there's no immediate need to move", Philadelphia Fed President Patrick Harker said on Tuesday. The Fed's benchmark rate stands in a range of 2.25% to 2.5% after the central bank raised rates four times past year - action that incited public attacks on the Powell Fed from President Donald Trump. But while unemployment remains at near-record lows, job growth has slowed since past year. He did thank Congress for the "independence" it has given the Fed to operate free of political intrusion. But over the last decade, the Federal Reserve has been banging the inflation beehive with a baseball bat and the bees haven't come out. She also referred to published reports that Trump had discussed firing Powell.

Maxine Waters pressed Powell whether he would comply if he were to get a phone call from Trump alerting him he should pack up his stuff and go.

Fed Chair Gears Up for Two-Day Clash With TrumpJerome Powell and Donald Trump have a rocky relationship. On Thursday, he will address the Senate Banking Committee.

Powell said the digital currency project, announced by the social media giant in June, raised "serious concerns" for regulators. Many forecasters predict that growth has slowed to an annual rate of around 2% in the just completed April-June quarter.

A lot depends on what Powell says today.

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In the wake of Trump's aggressive trade policies, especially with China, Powell said businesses and farmers "report heightened concerns" about the USA economy.

At the same time, in the view of Fed officials, Trump's policies - including higher tariffs and an unpredictable governing style - have increased economic risks and led them to consider the same rate reductions Trump has demanded. But notably, he added that "many" Fed official saw that the case for a looser monetary policy "had strengthened".

After pricing in multiple rate cuts for 2019, Wall Street suffered a chilly weekend following the release of better-than-expected jobs data. The monthly jobs report out last week showed that United States hiring rebounded last month.

In June, the USA 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. In January, as the global economy slowed, officials said they would be "patient" with future adjustments, signaling they had put rates on hold. Both are regarded as highly likely to support Trump's drive to lower rates.

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