Jerome Powell, Chairman of the Federal Reserve has signaled an openness to rate cuts during the upcoming meeting of the Federal Open Market Committee (FOMC).
In his semi-annual testimony to the House Financial Services Committee on Wednesday, the Fed Chair said that though the economy remained strong, "crosscurrents, such as trade tensions and concerns about global growth, have been weighing on economic activity and the outlook."
Rate Cuts Coming Up?
He said that while jobs, wage growth, and consumer spending remained strong in the second quarter of 2019, growth in business investment "seems to have slowed notably, and overall growth in the second quarter appears to have moderated."
Another cause of concern for the economy was the slowdown in fixed investment that may reflect concerns about trade tensions and slower growth in the global economy. "In addition, housing investment and manufacturing output declined in the first quarter and appear to have decreased again in the second quarter," Powell said.
Some other economic issues that needed to be addressed, according to Powell, included stagnation of middle and lower incomes, low levels of upward mobility for low-income households, and the long-term effects of rising federal debt.
He also signaled that the Fed was relooking at their stance on monetary policy, indicating a rate cut in the cards during the upcoming FOMC meeting. "In our June meeting statement, we indicated that, in light of increased uncertainties about the economic outlook and muted inflation pressures, we would closely monitor the implications of incoming information for the economic outlook and would act as appropriate to sustain the expansion," he said. "Many FOMC participants saw that the case for a somewhat more accommodative monetary policy had strengthened."
Powell also addressed recent remarks by President Donald Trump on the Fed's monetary policy stance.
Bloomberg recently reported that the President had compared the Fed to “a stubborn child,” and said that if the Fed “knew what it was doing” it would cut rates. He had also announced his intentions to nominate two potentially dovish members to the Fed, either of whom "might be a Fed chair pick for Trump when Powell’s term ends in 2022, assuming the president wins reelection next year," according to the Bloomberg report.
Answering a question by Maxine Waters, Chairwoman of the House Financial Services Committee on what he would do if he "got a call from the President telling you that you are fired and to pack up and go," Powell said, "I wouldn’t do that."
He added, "The law clearly gives me a four-year term and I intend to fully serve the term."
He also addressed the Fed's stance on the ongoing trade tensions while answering a question by Rep. Carolyn Maloney saying that no one should interpret what he said about trade headwinds as in any way a criticism of trade policy.
"We do not play a role in assessing or criticizing the trade policy, it is not something assigned to us. We react in principle to anything that affects our ability to achieve the core mandate goals assigned to us by Congress, which could call for a policy response," he said.
Powell will give his semi-annual testimony before the Senate Banking Committee on Thursday at 10 a.m. EST.
Click here to read the Fed Chair's testimony.