The Latest: Analyst still sees likelihood of Fed rate cuts
WASHINGTON (AP) — The Latest on the gathering of central bankers in Jackson Hole, Wyoming (all times local):
In the wake of Federal Reserve Chairman Jerome Powell’s speech in Jackson Hole, Wyoming, some analysts still foresee the likelihood of further interest rate cuts.
“I still think the Fed will cut the interest rate in September as an insurance policy,” says Sung Won Sohn, business economist at Loyola Marymount University in Los Angeles. “The cost of an economic recession is very high and painful so the Fed wants to do something in advance” to prevent an economic downturn.
Sohn suggests that the Fed will feel the need to act because of rising threats from the trade war and the global slowdown and because it won’t want to wait for those threats to worsen.
Federal Reserve Chairman Jerome Powell says President Donald Trump’s trade wars have complicated the Fed’s ability to set interest rate policies but offers no clear signal about further interest rate cuts.
Speaking to a Fed policy conference in Jackson Hole, Wyoming, Powell points to increasing evidence of a global economic slowdown and suggests that uncertainty from Trump’s trade wars has contributed to it.
He says the outlook for the U.S. economy remains favorable but that it continues to face risks. Powell reiterates that the Fed “will act as appropriate to sustain the expansion.”
The Fed cut rates last month for the first time in a decade, and financial markets have baked in the likelihood of further rate cuts this year.
Global stock markets are up ahead of a closely watched speech by the U.S. Federal Reserve chairman.
Market benchmarks in London, Frankfurt, Shanghai and Tokyo are all higher on Friday. Futures for the Dow and the S&P 500 are up 0.2% and 0.3%, respectively.
Investors are looking to Jerome Powell’s speech Friday for signs of direction on interest rates after two regional Fed presidents said they see no need for a change.
Investors expect a cut in September, the Fed’s second in three months, to shore up U.S. economic growth amid a tariff war with Beijing and weakening global growth.
“Markets seem very clearly positioned for some very dovish guidance from Mr. Powell,” Jeffrey Halley of Oanda said in a report. “It is a dangerous assumption to make.”
Against the backdrop of a vulnerable economy, Federal Reserve Chairman Jerome Powell takes center stage Friday with the financial world seeking clarity on whether last month’s first Fed rate cut in a decade likely marked the start of a period of easier credit.
The confusion has only heightened in the days leading to the annual gathering of global central bankers in Jackson Hole, Wyoming, at which Powell will give the keynote address.
Investors are looking for a clearer signal from Powell that he and other members of the Fed’s interest rate committee support further rate cuts to counter a slowing global economy and calm turbulent markets.