Fed Chairman Hints That Rate Cuts May Be Needed Due to Trade Disputes

June 4, 2019 by Dan McCue
Federal Reserve Chairman Jerome Powell testifies on monetary policy, before the House Financial Services Committee on Capitol Hill in Washington, D.C., U.S., Feb. 27, 2018. (Olivier Douliery/Abaca Press/TNS)

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

Health

Voting

Federal Reserve

Federal Reserve Bank President Links Wage Inequity to Lack of Educational Investment
Education
Federal Reserve Bank President Links Wage Inequity to Lack of Educational Investment
February 3, 2021
by Victoria Turner

The high cost of higher education, lack of adequate college preparation for all and the “digital divide” between rural and urban populations are all areas in which greater investment is needed, according to the president of the Federal Reserve Bank of Cleveland. These “barriers” to entering... Read More

Federal Reserve Bank Presidents Call for 'Rethinking' of Job Flexibility
Future of Work
Federal Reserve Bank Presidents Call for 'Rethinking' of Job Flexibility
February 2, 2021
by Victoria Turner

The pandemic has exacerbated deep-rooted issues in the structure of jobs. The need to “rethink” the future-of-work to incorporate flexibility and employee needs came to the limelight during a fireside chat between the presidents of two Federal Reserve Banks on Monday. Issues of access to public... Read More

Janet Yellen Wins Senate Approval as Treasury Secretary
Dep. of Treasury
Janet Yellen Wins Senate Approval as Treasury Secretary

WASHINGTON (AP) — The Senate on Monday approved President Joe Biden’s nomination of Janet Yellen to be the nation’s 78th treasury secretary, making her the first woman to hold the job in the department's 232-year history. Yellen, a former chair of the Federal Reserve, was approved... Read More

Fed's Bostic Cautions That US Economic Recovery is Very Uneven
Economy
Fed's Bostic Cautions That US Economic Recovery is Very Uneven

Some parts of the U.S. economy are coming back strongly while others are still struggling because of the coronavirus pandemic, said Federal Reserve Bank of Atlanta President Raphael Bostic. "In some segments the economy is recovering and rebounding in a very robust way," Bostic said Sunday in an interview on CBS's "Face the... Read More

Mnuchin, Powell Say Congress Needs to Pass More COVID-19 Relief
Economy
Mnuchin, Powell Say Congress Needs to Pass More COVID-19 Relief

WASHINGTON — Treasury Secretary Steven Mnuchin, Federal Reserve Chairman Jerome Powell and representatives from both parties agreed on at least one point at a hearing Tuesday: The economy needs more relief from Congress to sustain the recovery from the coronavirus. Despite that broad consensus, Congress, paralyzed... Read More

Fed Signals Rates Will Stay Near Zero for at Least Three Years
Federal Reserve
Fed Signals Rates Will Stay Near Zero for at Least Three Years

The Federal Reserve left interest rates near zero and signaled it would hold them there through at least 2023 to help the U.S. economy recover from the coronavirus pandemic. The Federal Open Market Committee “expects to maintain an accommodative stance of monetary policy” until it achieves... Read More

News From The Well
scroll top