Log in
Forgot password ?
Become a member for free
Sign up
Sign up
Dynamic quotes 

MarketScreener Homepage  >  News  >  Economy & Forex  >  All News

News : Economy & Forex
Latest NewsCompaniesMarketsEconomy & ForexCommoditiesInterest RatesBusiness LeadersFinance ProfessionalsCalendarSectors 
All NewsEconomyCurrencies / ForexCryptocurrenciesEconomic EventsPress releases

Fed pushes back on aggressive U.S. rate cut views

share with twitter share with LinkedIn share with facebook
share via e-mail
06/25/2019 | 05:40pm EDT
FILE PHOTO: Federal Reserve Chairman Jerome Powell holds a news conference following a two-day Federal Open Market Committee meeting in Washington

NEW YORK (Reuters) - Federal Reserve officials on Tuesday pushed back on market expectations and presidential pressure for the central bank to deliver a significant U.S. interest rate cut of half a percentage point as soon as its next meeting.

Chairman Jerome Powell defended the central bank's independence from President Donald Trump and financial markets, both of which seem to be pushing for aggressive rate cuts, in remarks at the Council on Foreign Relations in New York.

"The Fed is insulated from short-term political pressures," said Powell. Asked later about the possibility of disappointing markets by not delivering a cut, Powell added, "We're not in the business, really, of trying to work through short-term movements in financial conditions. We have to look through that."

But he said he and his colleagues are currently grappling with whether uncertainties around U.S. tariffs, Washington's conflict with trading partners and tame inflation require a rate cut.

St. Louis Federal Reserve Bank President James Bullard on Tuesday said he does not think the U.S. economic situation is dire enough to warrant cutting rates by a half-percentage point at its next meeting in July, even though he pushed to lower rates last week.

"Just sitting here today, I think 50 basis points would be overdone," Bullard said in an interview with Bloomberg Television. "I don't think the situation really calls for that, but I would be willing to go 25 (basis points)."

At a meeting last Wednesday, the central bank left interest rates on hold but signalled reductions beginning as early as July.

Bullard dissented, arguing that weak inflation and uncertainties about the outlook for economic growth warranted a rate cut.

"You had a one-two punch," with Powell warning against policy bending to short-term political pressures and Bullard saying half a percentage point would be too much, said Art Hogan, chief market strategist at National Securities in New York. "Everyone felt like the June meeting was so dovish that the July meeting is a lock and it's not."

Richmond Federal Reserve President Thomas Barkin said there was a risk of recession for the United States but when asked if a rate cut might be needed this year, he said: "I don't know."

Investors have long been anticipating rate cuts this year even as Fed policymakers had once suggested such a move would have been premature or even irresponsible in light of a strong labour market and lofty asset prices.

U.S. stock indexes dropped following Powell's remarks, while yields on U.S. Treasury bonds ticked higher. The dollar got a brief boost against a basket of other currencies.

Investors still appear to be predicting a cut next month but on Tuesday they scaled back more aggressive bets that the cut would be half a percentage point.

The Fed's rate-setting committee next gathers on July 30-31. In the meantime, policymakers will be closely watching data on U.S. economic growth and jobs as well as the G20 summit in Osaka, Japan, at the end of the week, where Trump is due to meet one-on-one with at least eight world leaders, including Chinese President Xi Jinping, for discussions on trade. The two leaders have been at odds on the terms of a trade deal that could resolve months of disagreements that have led to tit-for-tat tariffs.

Powell said that, while the tariffs themselves have not yet been catastrophic for the U.S. economy, whose growth prospects remains strong, trade tensions could hurt markets and confidence going forward. The central bank has also been worried that inflation currently shy of its 2%-a-year goal could become embedded in people's expectations. That could restrain spending and make it more likely rates will have to fall back to zero from their current 2.25-2.50% level.


Powell is facing increasing anger from Trump, who nominated him for the job in late 2017.

The U.S. president, who has said as recently as this weekend that he has the power to demote Powell, said on Twitter on Monday that the Fed "doesn't know what it is doing," adding that it "raised rates far too fast" and "blew it" given low inflation and slowing global growth.

Trump believes the U.S. dollar is too strong, and the euro too weak, and feels the situation could be eased if the Fed lowered rates, a senior administration official said on Tuesday.

The official also said the White House had no plans to demote Powell. Some legal experts say it would be hard or impossible for Trump to remove Powell.

The U.S. Congress chose to insulate the Fed from political pressure "because it had seen the damage that often arises when policy bends to short-term political interests," Powell said in his speech.

"We're human. We'll make mistakes. I hope not frequently, but we'll make mistakes. But we won't make mistakes of integrity or character."

(Reporting by Trevor Hunnicutt; additional reporting by Chuck Mikolajczak and Richard Leong in New York, Jeff Mason in Washington, David Ljungren in Ottawa and Jason Lange in Washington; Editing by Lisa Shumaker)

By Trevor Hunnicutt

share with twitter share with LinkedIn share with facebook
share via e-mail
Latest news "Economy & Forex"
12:40pCanadian Pacific beats on higher crude shipments, cost control
12:40pNATIONAL PORK PRODUCERS COUNCIL : U.S. Pork Industry Battling Challenges, NPPC President Tells Capitol Hill
12:38pLagarde resigns as IMF chief, cites more clarity on ECB post
12:38pBank of Canada to take over administration of reference rate for swaps
12:29pBig banks beat profit expectations but warning signs grow
12:28pSenators grill Facebook on its plans for Libra cryptocurrency
12:22pWTO opens way for Chinese sanctions against U.S. tariffs in Obama-era dispute
12:22pWall Street slips after mixed bank earnings, Trump comments
12:20pCapacity Announces Appointments of Josh Krueger as COO and Nick Curatallo as Head of Partnerships
12:15pNSF NATIONAL SCIENCE FOUNDATION : Is a milder mustard on the way?
Latest news "Economy & Forex"