Published: Wed, July 10, 2019
Markets | By Otis Pena

Federal Reserve chairman signals cut in USA interest rates

Federal Reserve chairman signals cut in USA interest rates

Asian shares turned mixed on Wednesday while rising Treasury yields lifted the dollar as markets wondered if the world's most powerful central banker would confirm or confound expectations for United States policy easing this month.

Wednesday's testimony comes as Powell and the Fed face harsh criticism from President Donald Trump, who last weekend called the agency "our most hard problem" and said its inaction has stifled the US economy. Policymakers have dimmed their outlook for the economy since last increasing interest rates in December, citing cooler global growth, below-target inflation levels and ongoing trade tensions.

"Nothing will distract us from complete focus on our job".

Some Fed watchers have suggested that cutting rates now would serve as an insurance policy of sorts by the central bank against a potential economic downturn. Trump wrote on Twitter earlier this month, the latest in a series of unprecedented attacks on the independence of the Fed by a sitting president.

Investors, as tracked by the CME Group, have assigned a 100 per cent likelihood to a rate cut when the Fed meets in three weeks. -China trade war hurting corporate profits.

That change reflects two developments.

However, as Powell noted, "crosscurrents" concerning trade policies and global growth have reared their head. Mr. Trump and Chinese President Xi Jinping declared a truce last month in what had threatened to become an escalating U.S.

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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.

"Apparent progress on trade turned to greater uncertainty, and our contacts in business and agriculture reported heightened concerns over trade developments".

"The Q&A portion of today's testimony will likely be Mr. Powell's moment to talk down the prospect of a 50 basis points rate cut at the July meeting", O'Hare said.

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The California Democrat started and ended her time with comments on President Trump, calling him "reckless" in her opening and deploring the Federal Reserve to resist his administration's "high-pressure tactics".

Powell chose not to reshape market expectations, which were leaning heavily toward a July cut of 25 bps, further illustrating that the Fed is not willing to fight market sentiment following the clumsy execution of its final rate hike in the fourth quarter of past year.

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