Federal Rate Cut is Coming; Powell is Showing His Hand; Maybe Keeping His Job

Fed chief Jerome Powell has given further fodder to those expecting Fed rate cuts this year in testimony before Congress. The market believes Powell will lower rates as early as the next Fed meeting and Powell’s testimony reassured them about the Fed’s dovish shift in June.

Powell said that the lower U.S. business investment and slower growth among American manufacturers as worrisome signs. He said U.S. gross domestic product is likely to moderate in the second quarter from the 3.1% annual pace of growth in the first three months of the year.

His comments for “somewhat more accommodating monetary policy.”

Jerome Powell – Chairman – The Federal Reserve System (also known as the Federal Reserve or simply the Fed) is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a series of financial panics (particularly the panic of 1907) led to the desire for central control of the monetary system in order to alleviate financial crises. Over the years, events such as the Great Depression in the 1930s and the Great Recession during the 2000s have led to the expansion of the roles and responsibilities of the Federal Reserve System

The inflation front that has been very present in the current economy also appears be very tame. As Powell said:

“We see the risk of a prolonged shortfall” of the inflation target of the Fed’s 2%…we should be looking at something that produces more symmetric outcomes.”

Remember in June he claimed “It appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook.” This has given the market a firmer belief that at least one “insurance” rate cut is on the horizon.

“When asked what the Fed is looking at in determining whether to ease, the first thing he cited was weaker data in overseas economies,” said Stephen Stanley.  One should note that the European Central Bank will have a new leader soon Christine Lagarde that has to deal with record negative interest rates and the German bank issues.

Powell said that the lower U.S. business investment and slower growth among American manufacturers as worrisome signs. He said U.S. gross domestic product is likely to moderate in the second quarter from the 3.1% annual pace of growth in the first three months of the year.

Lawrence Alan Kudlow (born August 20, 1947) is an American financial analyst and former television host serving as Director of the National Economic Council under President Donald Trump since 2018

Of course President Donald Trump has also been pushing/tweeting and now has Larry Kudlow (Director of the National Economic Council under Trump) is arguing that Powell should cut interest rates. Their argument is that Fed hikes last year stalled and stopped the economy from experiencing much stronger growth from the Trump tax cuts.

Trump has even insisted he has the authority to fire Powell, though many legal analysts disagree. But Kudlow has calmed the waters saying “Fed Chair Powell’s job is safe at the present time” and “I will say that unequivocally, at the present time, yes, he is safe.”

Powell responded by saying “I think the law is clear that I have a four-year term, and I fully intend to serve it,” he said.

So it looks again like rates are coming down and possibly soon.

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Jay Black

I try to write fact based articles that most people won't. Lets improve this world including both Corporate and Government malfeasance. If you have a lead about a ethical failure please comment on my article or in many of my comments.

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