Fed Chairman Hints That Rate Cuts May Be Needed Due to Trade Disputes
Federal Reserve Chairman Jerome Powell hinted on Tuesday that the central bank is prepared to cut interest rates later this year if it decides President Donald Trump’s many trade conflicts are harming the U.S. economy.
“We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion,” Powell said during a Fed conference in Chicago.
Although he did not give an explicit indication of what the Fed will do if Trump’s trade policies begin to significantly degrade the economy, interpretations of his remark caused the Dow Jones Industrial Average to surge in afternoon trading.
The current U.S. economic expansion is expected to become the longest uninterrupted growth period on record next month, surpassing the 10-year expansion of the 1990s.
Despite this, many economists and investors fear that the White House inspired trade wars and the retaliatory tariffs that come with them are dramatically increasing the risk of a recession coming sooner rather than later.
Appearing on CNBC shortly after Powell spoke, Fed Vice Chairman Richard Clarida declined to speculate on what the Fed might do in the face of a slowdown, saying only “We will put in policies that need to be in place.”
President Trump has imposed far-reaching tariffs on imports on China, which has retaliated with tariffs of its own on U.S. exports.
He has also threatened to impose an escalating series of tariffs against Mexico unless it stops migrants from Central America into the United States.
Clarida told CNBC that the U.S. economy is in a “good place,” at the moment, and that the trade dispute with China have had only a small impact so far.
The Fed conference in Chicago is focused on how the central bank can make its rate policy more effective at a time when inflation has remained chronically below the Fed’s target level. The Fed is also holding listening sessions around the country to gather public comments to inform future policy changes.
“With the economy growing, unemployment low and inflation low and stable, this is the right time to engage the public broadly on these topics,” Powell said.
In The News
WASHINGTON - Federal Reserve Chairman Jerome Powell told a House panel on Tuesday that while the U.S. economy continues to show steady growth, the broadening coronavirus outbreak “could lead to disruptions in China that spill over to the rest of the global economy.” Powell offered his... Read More
WASHINGTON - Paul Volcker, the Federal Reserve chairman who in the early 1980s pushed interest rates to historic highs to rein in runaway double-digit inflation and set the economy on a course to renewed growth, died on Monday. He was 92. Volcker, a New Jersey native,... Read More
WASHINGTON — China on Friday announced tariff hikes on $75 billion of U.S. products in retaliation for President Donald Trump's latest planned increase, deepening the trade conflict between the two nations at a time when the president insists "China wants to make a deal with us."... Read More
WASHINGTON - President Donald Trump said Tuesday that his administration is considering a temporary payroll tax cut as a way to bolster the U.S. economy though he continues to insist the nation is not inching toward a recession. "I’ve been thinking about payroll taxes for a... Read More
WASHINGTON — The Federal Reserve on Wednesday cut interest rates for the first time since the Great Recession in 2008, a risky move that clashes with its historical practice of taking such a step only when the economy is in real trouble. The small, quarter-point reduction... Read More
WASHINGTON — A week after President Donald Trump tweeted his intention to nominate Judy Shelton and Christopher Waller to the Federal Reserve Board, GOP senators are expressing cautious optimism about both picks, despite Shelton’s unorthodox views on monetary policy. They’re at least better than the president’s... Read More