Some see Powell speech as setting stage for another rate cut

WASHINGTON — Some economists saw Federal Reserve Chairman Jerome Powell’s speech Friday in Jackson Hole as setting the stage for further interest rate cuts this year. A quarter-point rate cut reduction in September is considered all but certain. Some think the Fed will cut rates again in December.

Paul Ashworth, chief U.S. economist at Capital Economics notes that Powell “warned that the downside risks have intensified in the three weeks since the July (Fed) meeting.”

Brian Bethune, economics lecturer at Tufts University, says, “We are looking for at least one rate cut in September, and the possibility of an additional rate cut in the fall is greater than 50%.”

Trump continues attack

Reacting to Powell’s speech, President Donald Trump, who has relentlessly attacked Powell and the Fed for its rate policies, kept up his verbal assaults on Twitter:

Our Country has lost, stupidly, Trillions of Dollars with China over many years. They have stolen our Intellectual Property at a rate of Hundreds of Billions of Dollars a year, & they want to continue. I won’t let that happen! We don’t need China and, frankly, would be far....

— Donald J. Trump (@realDonaldTrump) August 23, 2019

“As usual, the Fed did NOTHING!” Trump tweeted. “It is incredible that they can ‘speak’ without knowing or asking what I am doing, which will be announced shortly. We have a very strong dollar and a very weak Fed. I will work “brilliantly” with both, and the U.S. will do great.”

Trump adds:

“My only question is, who is our bigger enemy, Jay Powel (sic) or Chairman Xi?”

On a day of fast-moving events in the financial world, Powell’s speech followed China’s announcement earlier Friday that it will impose new tariffs on $75 billion of U.S. products in retaliation for Trump’s latest planned tariff increases. China will also raise import taxes on U.S.-made autos and auto parts. Beijing’s actions deepened a trade conflict that threatens to tip a weakening global economy into recession.

Attacking China

China’s move also ignited a separate attack by Trump on Twitter against Beijing:

“Our Country has lost, stupidly, Trillions of Dollars with China over many years. They have stolen our Intellectual Property at a rate of Hundreds of Billions of Dollars a year, & they want to continue. I won’t let that happen!”

In his speech in Jackson Hole, Powell said Trump’s trade wars have complicated the Fed’s ability to set interest rates and have contributed to a global economic slowdown.

Seeking clarity

Powell’s speech came against the backdrop of a vulnerable economy, with the financial world seeking clarity on whether last month’s rate decision likely marked the start of a period of easier credit.

The confusion only heightened in the days leading to the Jackson Hole conference, at which Powell gave the keynote address. Minutes of the Fed’s July meeting released Wednesday showed that although officials voted 8-2 to cut their benchmark rate by a quarter-point, there was a wider divergence of opinion on the committee than the two dissenting votes against the rate cut had indicated.

The minutes showed that two Fed officials favored a more aggressive half-point rate cut, while some others adopted the polar opposite view: They felt the Fed shouldn’t cut rates at all.