Jerome Powell: I won't leave if Trump asks me to quit

Jeannie Matthews
July 11, 2019

Stock indexes jumped by more than half a percentage point in the opening minutes of trading on the prospects that the Fed will cut rates for the first time since the Great Recession.

U.S. Federal Reserve Chairman Jerome Powell said on Wednesday that Facebook's (FB.O) plan to build a digital currency called Libra "cannot go forward" until serious concerns were addressed, piling further pressure on the controversial project.

Powell additionally observed that "economic momentum appears to have slowed in some major foreign economies, and that weakness could affect the US economy" and that "a number of government policy issues have yet to be resolved, including trade developments, the federal debt ceiling and Brexit", The Wall Street Journal reports. Last year, Fed officials raised rates four times, in part to stave off the risk of high inflation and in part to try to ensure that they would have room to cut rates if the economy stumbled. "To me, it all depends on where you look in the economy".

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U.S. stock index futures gained, turning positive for the day after Powell's remarks were released, while the United States dollar fell against a basket of other currencies.

Powell presented his remarks and then took questions from members of the US House of Representatives Committee on Financial Services.

Powell will return to Congress on Thursday to testify before the Senate Banking Committee.

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"Looking at the Treasury market before and after the release of Chair Powell's prepared Testimony, markets appear to have been expecting him to offer a bit of resistance to the idea that a rate cut at the end of this month is a done deal", said Ian Shepherdson, the chief economist at Pantheon Macroeconomics.

Futures markets are betting that the Fed at its 31 July meeting will cut interest rates by 25 basis points although some have seen the possibility of a larger cut. As the economy recovered the central bank began slowly raising rates.

"Uncertainties about the outlook have increased in recent months", he wrote. Rates remained close to zero for years.

Powell said the Fed has established a working group to follow the project and is coordinating with other central banks across the globe.

But the ongoing trade wars and signs of trouble in markets outside the USA appear to have convinced more Fed members that there is now a case for cutting rates.

In the Fed's monetary policy report issued last week ahead of Powell's testimony, the trade war received its own analysis, a sign of the attention it is getting within the central bank.

Fed staff concluded the rise in world tariffs had a likely "material" impact on the slowdown in global trade past year, and that "uncertainty surrounding trade policy could be leading firms to delay investment decisions and reduce capital expenditures".

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