Powell to Trump: Well, it's your turn
WASHINGTON (Reuters) – Tucked away in Fed leader Jerome Powell's news conference Wednesday was a not-so-subtle message for President Donald Trump: the economy is stalling because the US central bank has acted to support it through an unstable patch, and about it continues is now in the president's lap.
FILE PHOTO: US President Donald Trump looks on as Jerome Powell, his nominee to chair the US Federal Reserve, speaks at the White House in Washington, USA, November 2, 2017. REUTERS / Carlos Barria / File Photo [19659003] In a buck-stops-over-there-now performance, Powell indicated that the Fed's two interest rate cuts this year are likely to be sufficient insurance against the growing global risk stemming from Trump's whipsaw trade talks with China, and that the Fed sees little need in the future to move unless the risks are realized in the form of weaker US financial data.
"Trade developments have gone up and down, and I suppose, maybe backing up during this interview," Powell said in a reference to Trump's sometimes unpredictable trade war with China and, sometimes, other countries.
"I think our shift to a more accommodating stand during the year has been one of the reasons the outlook has remained favorable," Powell said, citing reasonably strong US data. Going forward "we're going to be very data dependent" when deciding on further speed moves.
The Fed cut its benchmark overnight lending rate by a quarter percentage point on Wednesday, the second such move this year, but new projections by politicians showed that no further cuts were expected in 2019.
The comments continue a subtle push back by Powell against a CEO who has used personal insults and a steady stream of Twitter invective to demand the Fed slump rates to recession and take other out-of-the-norm steps to boost the economy.
During a keynote address at a central bank conference in Jackson Hole, Wyoming, last month, Powell said the US central bank had no recent precedent for setting monetary policy when the rules of global trade had become so unpredictable and began to sap business confidence and depress global growth.
The United States, the world's largest importer, has been caught up in often contentious negotiations with its top trading partners since the Trump administration imposed tariffs on steel and aluminum imports in March 2018. The escalating US customs war with China has shut down Chinese imports of petroleum and many agricultural products, and uncertainty as to when the trade negotiations could be resolved, dampened investment.
The International Monetary Fund said in July that global trade slowed in the first quarter of 2019 to its lowest level since 2012. Customs rates used in the US-China trade war could shave off 0.5% of global economic growth in 2020, the IMF said .
Whether it begins to provide a still relatively optimistic view of the Fed will depend on whether Trump's trade talks with China end on a note restoring what the Fed said as "weakening" business investment, or leaving the world standing and guessing.
"It's an unusual situation," Powell said. The US economy itself is strong. … The difference here is that we have significant risks ”that elected representatives will have to manage.
Reporting by Howard Schneider; Additional reporting from Heather Timmons; Editing by Paul Simao
