Two Fed regional chiefs say July rate cut may not be warranted

Two Fed regional chiefs say July rate cut may not be warranted

Federal Reserve Board Chairman Jerome Powell gave the markets what they wanted while also tossing some red meat the way of House Democrats.

Investors expect the Fed will cut its benchmark rate, now in a range between 2.25% and 2.5%, by a quarter percentage point at its 30-31 July meeting. He did not specify what had caused the shock.

Trump, also on Twitter, accused China Beijing of backsliding on a recent pledge to buy more United States farm exports. -China trade. In the latest evidence that the trade dispute was impacting growth, data showed that China's exports fell in June and imports shrank more than expected.

"The economy is in a very good place", Powell told the Senate committee.

But the United States can not rely on rare decade-long expansions to address the problem of inequality and opportunity.

Financial markets took Powell's two days of congressional testimony as a signal that when policymakers next gather in about three weeks, the Fed would cut rates for the first time since the financial crisis.

The markets have clearly priced in an outcome of a 25-basis points rate cut in July. This year it has fallen farther below that goal. It increased 1.6% year-on-year in June after rising 1.8% in May. As the economy recovered the central bank began slowly raising rates.

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That inquiry lasted seven months before President Donald Trump made a decision to move ahead with the first round of tariffs.

"Of course, I would not do that", Powell responded, before Waters asked him to repeat himself.

A relationship between the two existed "50 years ago" but that has gotten "weaker and weaker and weaker", Powell said. "Our most hard problem is not our competitors, it is the Federal Reserve!" "We salute you for that". "I think this would be on the merits".

The U.S. benchmark S&P 500 stock index notched a record closing high just shy of the 3,000 mark as financial shares were boosted by a jump in bond yields following soft demand in an auction of $16 billion in 30-year Treasuries. The FOMC is the Fed's policy-making body.

Lower interest rates decrease the opportunity cost of holding nonyielding bullion and weigh on the dollar, making gold cheaper for investors holding other currencies. It rose 2.1% from a year ago.

After the June FOMC meeting, the Fed predicted that the US real GDP will grow 2.1 percent in 2019, with the pace slowing down to 2 percent in 2020 and dropping further to a rate of 1.8 percent in 2021, according to the median projections of Fed Board members and Federal Reserve bank presidents. The Chair cited the monthly addition of 172,000 jobs in 2019, a lowering of the unemployment rate to 3.7 percent, and a GDP increase of 3.1 percent for the first quarter of 2019. "Obviously it is complicated by the fact that the president has called for rate cut but we still see indications that uncertainty is starting to be a drag on the economy", he said.

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