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.

Is the Fed Looking Forward to Lower Rates or in the Rear View Mirror Again?

Federal Reserve Chairman Jerome Powell told reporters the Fed was “closely monitoring” the effects of trade tariff talk and developments and would “act as appropriate,” holding out that the Fed is calculating the possibilities of a future interest rate cut.

St. Louis Fed President James Bullard claimed the global economic outlook has “darkened” with a hint that many interpreted as an indication he thinks the U.S. economy “is expected to grow more slowly going forward, with some risk that the slowdown could be sharper than expected due to ongoing global trade regime uncertainty.” Bullard also pointed out that a “downward policy rate adjustment may be warranted soon.” This pushed the 10-year bond yields to multi-year lows.

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