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Powell heads to Congress amid pressure to cut rates

Credit: Reuters Studio
Published on July 9, 2019 - Duration: 02:00s

Powell heads to Congress amid pressure to cut rates

As Federal Reserve Chairman Jerome Powell heads to his twice-yearly congressional update he's facing stiff pressure by the White House and financial markets to cut rates, even though the economy has recently showed signs of not being soft as earlier feared.

Conway G.

Gittens reports.

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Powell heads to Congress amid pressure to cut rates

When Federal Reserve Chairman Jerome Powell walks in to testify before Congress this week, he'll do so with a heavy weight on his shoulders... His very job may be on the line.

Reuters Fed watcher Trevor Hunnicutt.

SOUNDBITE (ENGLISH): REUTERS FEDERAL RESERVE CORRESPONDENT TREVOR HUNNICUTT, SAYING: "Chairman Powell really has a tough job right now.

He is under political pressure.

He's under pressure from the president to cut interest rates and introduce new stimulus policies for the economy." Financial markets are also pressuring Powell to cut the Fed's key lending rate when policymakers meet at the end of the month.

But a recent rebound in hiring suggests the economy may not be as weak as feared and may not need the Fed to do anything.

SOUNDBITE (ENGLISH): REUTERS FEDERAL RESERVE CORRESPONDENT TREVOR HUNNICUTT, SAYING: "The labor market really doesn't seem to be weak in a way that would justify a rate cut.

In fact, Feds past would say -'you know what, if we cut rates now we could actually cause markets to go haywire, there could be too much stimulus in the economy, inflation could kick off.'

So, this is a really unusual time right now." At Powell's press conference following the June meeting he seemed to indicate he was open to cutting rates if there were continued signs of weakness caused by the U.S.-China trade war.

But if that has changed, Powell needs to say so and he could use his congressional testimony to do that.

SOUNDBITE (ENGLISH): REUTERS FEDERAL RESERVE CORRESPONDENT TREVOR HUNNICUTT, SAYING: "If Powell wants to set up a cut in time for the July meeting, he's got to do so pretty soon.

He's got to engage because markets think that that's what's going to happen and that's going to be a cut.

If he wants to do something else, he gotta kind of tell markets pretty soon that that's the case or else there could be a really bad reaction if the Fed doesn't cut rates." Financial markets are predicting with 100 percent certainty a rate cut at the July 30-31st meeting.... So markets will be hanging on his every word during his congressional testimony to hear if a rate cut is indeed coming in July, later in the year, or at all.

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