Federal Reserve Chairman Jerome Powell, in a Wednesday testimony on Capitol Hill, stressed two points: The U.S. central bank, despite outward pressure from President Trump, remains independent, and an interest rate cut remains on the table in July.
"Based on incoming data and other developments, it appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook. Inflation pressures remain muted," he said in prepared remarks for the House Financial Services Committee.
Stocks curbed losses on Powell's dovish pivot. Wall Street continues to price in a 100 percent chance of a reduction in the benchmark federal funds rate at the Fed's upcoming July 31st meeting.
As expected, Powell largely remained in line with the Fed's message from its June meeting: The economy is softening, the U.S.-China trade war is concerning and the case for a rate cut is growing.
Minutes from the June 18-19 Federal Open Markets Committee meeting, which will be released at 2 p.m. on Wednesday, will shed further light on policymakers' thinking -- although Powell seemingly suggested in his testimony that some members favored cutting rates.
"Many FOMC participants saw that the case for a somewhat more accommodative monetary policy had strengthened," he said.
He noted that while the economy has performed "reasonably well" during the first half of 2019, inflation remains well below the Fed's 2 percent target. The interbank lending rate is currently between 2.25 percent and 2.50 percent -- the highest in decades, but low by historical standards. Most economists anticipate the Fed will lower by 25 basis points, to a range between 2 percent and 2.25 percent, at the end of the month.
But Powell stressed the Fed will "act as appropriate" to sustain the 11-year economic expansion and maintain its independence, despite frequent calls by Trump for the central bank to lower rates. Last week, the president derided the Fed as the “most difficult problem” facing in the U.S.
"Congress has given us an important degree of independence so that we can effectively pursue our statutory goals based on objective analysis and data," he said. "We appreciate that our independence brings with it an obligation for transparency."