Powell signals that rate cut could be coming soon
WASHINGTON (AP) — Chairman Jerome Powell signaled today the Federal Reserve is likely to cut interest rates late this month for the first time in a decade in light of a weakening global economy and rising trade tensions.
Delivering the central bank's semiannual report to Congress, Powell said that since Fed officials met last month, "uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook." In addition, annual inflation has dipped further below the Fed's annual target level.
Powell's remarks triggered a stock market rally, with the Dow Jones industrial average up nearly 100 points in late-morning trading.
Economists suggested that Powell's message made a quarter-point rate cut a virtual certainty at the Fed's meeting this month, with many forecasting further rate cuts to come.
Paul Ashworth, chief U.S. economist at Capital Economics, said he thinks economic growth will slow below a 1 percent annual rate in the second half of this year, which he thinks will lead to additional quarter-point cuts in December and then March.
Ashworth said a July rate cut would be "insurance against the downside risk that Fed officials believe have mounted in recent months."
Many investors have put the odds of a rate cut this month at 100 percent. The Fed's benchmark rate stands in a range of 2.25 percent to 2.5 percent after the central bank raised rates four times last year – action that incited public attacks on the Powell Fed from President Donald Trump.
Trump, who is counting on a strong economy for his re-election campaign, has called the Fed his biggest threat. He contends the central bank made a huge mistake by tightening credit last year and should be cutting rates now. Trump has argued last year's rate hikes have held back economic growth and the stock market.