Nervous Jerome Powell opens door to interest-rate cut in US in July

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The US Fed chair has made it clear uncertainty, primarily about Donald Trump's trade battles, is a major factor behind the Fed's shift, along with weaker-than-wanted inflation

Federal Reserve chair Jerome Powell at a news conference after a federal open market committee meeting on June 19 2019, in Washington, US. Picture: CHINA NEWS SERVICE/VCG VIA GETTY IMAGES/SHA HANTING

“While the baseline outlook remains favourable, the question is whether these uncertainties will continue to weigh on the outlook and thus call for additional monetary policy accommodation,’’ he told reporters after the Fed left rates unchanged. The president asked White House lawyers earlier in 2019 to explore options for removing Powell as Fed chair, and Trump told confidants as recently as Wednesday that he believes he has the authority to replace him, Bloomberg reported this week.

Goldman Sachs now expects the Fed to cut by 25 basis points in both July and September and is not ruling out the possibility of a bigger move of 50 basis points “if the news flow disappoints”. The need to get ahead of the bond market could be another reason to push Fed officials towards a bigger reduction, economists including Jan Hatzius wrote in a note.

 

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