Federal Reserve Chairman Jerome Powell offered little new insight into the U.S. central bank's plan for interest rates during the Jackson Hole Economic Symposium in Wyoming on Friday, promising to "act as appropriate" to sustain the record economic expansion.
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The economic outlook, Powell said, remains strong, despite uncertainties resulting from the U.S.-China trade war, slowing global growth and muted inflation. Powell alluded to the "eventful" weeks since the Fed's previous meeting and acknowledged there are growing signs of a global slowdown, especially in China and Germany.
However, Powell stopped short of saying whether the Fed will cut rates in September, instead pointing to the limitations of monetary policy.
"Because the most important effects of monetary policy are felt with uncertain lags of a year or more, the Committee must attempt to look through what may be passing developments and focus on things that seem likely to affect the outlook over time or that pose a material risk of doing so," Powell said in prepared remarks.
Experts, however, said they still expect policymakers to lower rates by a modest 25 basis points next month, given the deterioration of growth and continued muted inflation.
"The stage looks set for a September cut," said James McCann, senior global economist at Aberdeen Standard Investments. "The concern in markets will be that a slow and steady Fed might be falling behind the curve.”
Traders are pricing in a 100 percent chance of a rate cut during the Fed's Sept. 17-18 meeting, according to the CME's FedWatch tool.
The central banking conference comes in the wake of a flutter of worrisome economic activity worldwide, including the inversion of the spread between the yields of 2-year and 10-year Treasury bonds — an occurrence that’s preceded every recession for the past 50 years. While the curve has since steepened, President Trump has continued to pressure the U.S. central bank, and Powell, to make a deeper interest rate cut.
Yet experts caution while there’s no doubt global growth is sluggish — Germany’s economy is shrinking, and China’s industrial output recently fell to a 17-year low — economic data in the U.S. remain, for the most part, healthy. Although manufacturing activity is slowing, job growth is robust; unemployment is low, and consumer confidence is still pretty high.