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Does the Fed Chairman's testimony to the Congress signal a rate cut in July?

Grace A


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In his testimony to the House Committee on Financial Services and the Senate Banking Committee, Fed chairman Jerome Powell said that the US economy is facing adverse business sentiment due to a severe “confidence shock.” While the confidence was somewhat restored after the Fed stepped in and assured markets that it would ease interest rates as early as this month, trade uncertainties and the global growth outlook would continue to weigh on the US economy going forward.

The Fed chairman said that while he was concerned about the slowdown in global growth and the outlook for manufacturing activity, the Fed will go all out to maintain the current state of expansion, which is in a record eleventh year.

In his answer to a question on why he intends to cut interest rates in spite of the economy expanding amid a robust labour market, Powell said that the US economy is in “a very good place” and the goal of the central bank’s monetary policy is to sustain the current expansion in growth for as long as possible. He also said that with inflation on the decline, most of his colleagues at the rate-setting committee were suggesting a more accommodative monetary policy, a clear signal that the central bank would extend a rate cut at its monetary policy meeting on 31st July.

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