- Federal Reserve Chairman Jay Powell signaled in a highly anticipated speech Friday that the central bank was open to further interest rate cuts.
- But policymakers likely won’t lower as much as the White House has demanded.
- While he said the economy remained in a "favorable place," geopolitical factors including an escalating trade dispute between the US and China have created a "complex, turbulent picture."
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Federal Reserve Chairman Jay Powell signaled in a highly-anticipated speech Friday the central bank wasn’t prepared to cut interest rates as much as the White House has demanded, drawing ire from President Donald Trump.
At the annual economic policy symposium in Jackson Hole, Wyoming, Powell said the economy was in a "favorable place" with strong job creation and consumers spending. He added that policymakers would act to sustain those conditions in the face of "significant" risks.
Powell said that geopolitical factors including tariff escalations between the largest economies have created a "complex, turbulent picture" and that there were no recent precedents to guide a policy response to the trade situation.
"We can, however, try to look through what may be passing events, focus on how trade developments are affecting the outlook, and adjust policy to promote our objectives," Powell said. "Trade policy uncertainty seems to be playing a role in the global slowdown and in weak manufacturing and capital spending in the United States."
In recent weeks, President Donald Trump has increasingly pressured independent central bank to cut rates by as much as a full percentage point even as it downplayed recession risks.
"As usual, the Fed did NOTHING! It is incredible that they can ‘speak’ without knowing or asking what I am doing, which will be announced shortly," Trump wrote on Twitter following Powell’s speech. "We have a very strong dollar and a very weak Fed. I will work ‘brilliantly’ with both, and the U.S. will do great…….My only question is, who is our bigger enemy, Jay Powel or Chairman Xi?"
With Fed officials divided over whether to further lower interest rates in September, investors were expected to hang onto every word Powell said Friday. The policy-setting Federal Open Market Committee cut by a quarter percentage point to a target range of between 2% and 2.25% in late July.
The yield curve inverted last week for the first time since before the global financial crisis, setting off concerns that a potential recession was ahead. The closely-watched development, where long-term rates fall below their short-term counterparts, has historically predicted downturns in the US.
Financial markets opened lower Friday after China announced plans to retaliate against the Trump administration with new tariffs September 1 and December 15. President Donald Trump said this month would extend duties to virtually all Chinese products on those same dates.
Fed officials have expressed an increasing degree of concern over tariffs. The next tranche of import taxes on China was scheduled to hit far more consumer products, putting the brightest spot in the US economy at risk.
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