Published: Fri, July 12, 2019
Markets | By Otis Pena

Fed's Barkin Sees Risks to U.S. Economy

Fed's Barkin Sees Risks to U.S. Economy

For now, the economy is still going strong.

"Apparent progress on trade turned to greater uncertainty, and our contacts in business and agriculture reported heightened concerns over trade developments", Powell said, noting that business investment, an important component of economic growth, "seems to have slowed notably" in recent months. "To me, it all depends on where you look in the economy". The U.S. dollar .DXY fell against a basket of other currencies. Meanwhile, U.S. interest rate futures appeared to price in greater odds of a 50-basis-point rate cut this month. Bostic is not a voting member of the Fed's interest-rate committee but will be in 2021.

But the US central bank is now laying the groundwork for its first policy shift triggered by tweets, as Fed officials grapple with how the ground shifted on May 30 when US President Donald Trump threatened on Twitter to impose new import tariffs on Mexico if it did not agree to curb the flow of migrants across the US-Mexico border.

"Nearly all participants had revised down their assessment of the appropriate path for the federal funds rate over the projection period", said the minutes of the Fed's June 18-19 policy meeting released on Wednesday, adding "many participants indicated that the case for somewhat more accommodative policy had strengthened".

The minutes showed widespread concern that the economy is losing steam.

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Some Fed officials, however, said that while they expected fewer rate hikes than they had in the past, "there was not yet a strong case for a rate cut from current levels".

His about-face coincides with heightened trade tensions between the USA and China, and what can only be described as social media bullying by Mr Trump, pushing the central bank to cut rates.

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.

Powell will return to Congress tomorrow to testify before the Senate Banking Committee. But Powell hinted that the Fed might need to decrease borrowing costs through rate cuts in order to sustain the expansion.

Minutes of the Fed's last policy-setting meeting, in June, showed policymakers discussed a range of possible reasons to cut rates, including as insurance against worse-than-expected growth and to boost inflation expectations. -China trade war and other issues that he suggested could point to a need for stimulus.

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