By WSJ City
Federal Reserve Chairman Jerome Powell strongly signalled again Thursday that the central bank could cut interest rates later this month.
He and legislators in both parties also expressed broad concern about Facebook's plan to create a cryptocurrency-based payment network, underscoring the intense legislative and regulatory scrutiny the project could face.
---Facebook's coin, Libra, will be pegged to a basket of government-issued currencies.
--- Users could send it to each other and use it to make purchases on Facebook and across the internet.
--- The Fed has a group of staffers looking at Libra's implications.
--- Powell reiterated the Fed's intention to "act as appropriate to sustain the expansion."
--- Investors interpreted that line to mean the central bank is likely to lower its benchmark interest rate July 30-31.
--- The Fed's preferred price index rose 1.5% in May from a year earlier.
--- There are worries that if low inflation persists, consumers' and investors' expectations for inflation will decline.
--- This will cause inflation to stay low or even slow more.
"The size of Facebook's network means it could be, essentially, immediately systemically important. This should be subject to the highest level, the highest expectations in terms of privacy but also prudential regulation."
What Was Said
Economists say Libra has more potential to disrupt global finance than earlier cryptocurrencies, which failed to gain traction at the retail level and experienced huge swings in value, making them unattractive alternatives to government-issued money. Libra could be different, in part because Facebook's 1.56bn daily users gives it the potential for widespread adoption.
Powell said Thursday the economic outlook hadn't significantly improved since the Fed's June meeting.
A Facebook spokeswoman, in an emailed statement, pointed to Mr. Powell's remark Thursday that "everyone wants to start from the proposition that they want innovation to occur."
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