Fed Chair Powell signals USA interest rate hike

25 basis point cut priced in. Will he go further

25 basis point cut priced in. Will he go further

Richmond Federal Reserve President Thomas Barkin on Thursday delivered a strong dose of skepticism over cutting US interest rates, saying a small rate cut is unlikely to budge business pricing decisions and a large one risks unleashing unwanted inflation.

Some businesses, particularly in manufacturing, have pulled back on spending and hiring because of greater uncertainty about US trade disputes, Fed officials said, according to minutes of the June 18-19 meeting released Wednesday. But resolving issues around the unevenness and distribution of that growth may be beyond monetary policy.

"I am not seeing the storm clouds actually generate a storm yet", said Bostic, who described himself as skeptical of the need to cut interest rates right now. Visit MarketWatch.com for more information on this news.

Powell will return to Congress tomorrow to testify before the Senate Banking Committee.

"If anything, relative to earlier in the year, the conditions, the arguments, for adding policy accommodation have strengthened over time", Williams told reporters on the sidelines of an event at the University at Albany - State University of NY.

Brainard, in a separate appearance in Scranton, Pennsylvania, piled on. "Of course, my judgment about the actual path of policy will continue to be influenced by the evolution of the data and the risks".

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Eight of 17 Fed officials expected the central bank to lower rates by the end of the year, while another eight saw no change and one projected a rate increase, according to updated quarterly forecasts of the federal funds rate released last month. Economists expect the reduction will likely be a quarter-point.

"Powell is setting it up, certainly for a July rate cut", said Jack Ablin, chief investment officer at Cresset Capital Management in Chicago. Fed Chairman Jerome Powell in congressional testimony this week seemed to set the stage for just such a move, highlighting persistent uncertainty in part due to the U.S. Almost all officials cut their forecasts for the short-term rate that the Fed controls, compared to the previous meeting, the minutes said. Both men say a rate cut is needed to boost inflation expectations.

Many Fed officials said that "the economy appeared to have lost some momentum", the minutes said, as business confidence, business spending, and manufacturing activity all weakened.

Atlanta Fed President Raphael Bostic said Thursday that he was not concerned about the failure of the central bank to achieve its 2% annual inflation target.

With the Fed's current preferred measure of inflation running at 1.6%, below the 2% target, some policymakers argue the central bank needs to do more or risk losing public trust that it takes the target seriously. Bostic said he is going to go into the July Federal Open Market Committee meeting with an open mind.

But he added that his analysis of inflation expectations, based on surveys of professional forecasters and business executives, left him unconvinced that expectations are slipping.

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