Washington, Jul 10 (EFE).-The chairman of the Federal Reserve warned here Wednesday of a worsening outlook for the United States’ economy due to persistent trade tensions and global weakness, clearly signaling that an interest rate cut is possible at this month’s central bank policy meeting.
“Crosscurrents, such as trade tensions and concerns about global growth, have been weighing on economic activity and the outlook” for the country, Jerome Powell said in remarks to the US House of Representatives’ Committee on Financial Services.
He noted that growth in business investment seems to have “slowed notably,” while “economic momentum appears to have slowed in some major foreign economies, and that weakness could affect the US economy.”
The Fed chairman recalled that the US central bank’s policy-making body, the Federal Open Market Committee (FOMC), said in a statement after its June meeting that it would act as appropriate to sustain economic expansion “in light of increased uncertainties about the economic outlook and muted inflation pressures.”
He also noted that many FOMC participants saw then that “the case for a more accommodative monetary policy had strengthened.”
In his remarks on Wednesday, Powell indicated that the Fed has not changed its stance in the ensuing weeks and that data and other developments show that “uncertainties around trade tensions and concerns about the strength of the global economy” remain persistent and “continue to weigh on the US economic outlook.”
Despite those concerns, however, Powell said job openings remain plentiful amid a strong US labor market in which the unemployment rate has fallen to just 3.7 percent, close to its lowest level in 50 years.
Market analysts interpreted Powell’s remarks as a clear sign that the Federal Reserve may cut its benchmark federal-funds rate – now at a target range of 2.25-2.5 percent – at the next FOMC meeting scheduled for July 30-31.
A reduction in the federal-funds rate would be the Fed’s first in more than a decade.
“A rate cut in July is now all but certain. The strength of last week’s jobs number did lead some to think that the Fed may pause for thought. It’s clear from (Powell’s testimony) that they won’t,” James McCann, senior global economist at Aberdeen Standard Investments, said in a note to clients on Wednesday.
US stocks rose to record highs following Powell’s remarks, with the S&P 500 briefly moving above 3,000 points for the first time ever before falling below that threshold at Wednesday’s close.
The Dow Jones Industrial Average also hit an intraday high, while the tech-heavy Nasdaq Composite index closed at a record of 8,202.53.
US President Donald Trump has criticized the Fed for raising interest rates four times in 2018, while the central bank said it was returning its target federal-funds rate to a historically normal level after it had been held at near zero following the 2008-2009 global recession.
Trump has promised steady annual economic growth of 3 percent or more and knows that achieving – or coming close to achieving – that goal could provide a big boost to his re-election bid next year.
The Fed released its latest economic projections in June, forecasting that the US economy will grow 2.1 percent this year and 2 percent in 2020.
Rumors have swirled that Trump has been exploring ways to remove Powell as Fed chairman, a move that would be unprecedented.
But on Wednesday Powell stressed that he would not leave his post if Trump tried to force him out.
“Of course, I would not do that. The answer would be, ‘No,’ … the law gives me a four-year term and I fully intend to serve it,” Powell, whose tenure concludes in February 2022, said.
On Tuesday, the White House’s economic adviser, Larry Kudlow, said Powell’s job is safe “at the present time.”