With all the uncertainty in the news, Fed Chairman Jerome Powell put an end to any rumors today in his testimony to the House Financial Services Committee.
After his decision to hold rates at the Fed’s June meeting, Powell signaled that they were prepared to cut rates at their meeting later this month. Powell cited slow global growth and uncertainty with trade policies for his decision.
In expectation of rate cuts, major stock indexes saw record highs. While Powell isn’t calling for doomsday preparation, he does feel that a rate cut would be a safe measure were the economy to slow. He is not impressed by the stellar June jobs report and doesn’t see it as a long term improvement to the economy.
Chairman Powell has recently come under fire from President Trump. The President has publicly expressed disapproval of the Fred Chairman and his policy opinions.
By doing so, the President has broken the long-time tradition of a laissez-faire attitude of the Executive Branch towards the Fed. In theory, the Fed should not align itself with the ideals of either political party, explaining the previous refrain from presidential scrutiny.
I feel this puts Chairman Powell in a unique situation. Whichever direction he decides to move rates in the future, it may give the message that he is either succumbing to the pressure of the White House or that he is acting in defiance of the President.
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