WASHINGTON – The Federal Reserve on Friday reiterated its commitment to “do the right thing” to support the current economic expansion, now the longest in U.S. history, while noting that most Fed officials have lowered their expectations of future interest rate developments.
The Fed’s statement on interest rates features in its biannual monetary policy report, which indicates that since May “the tenor of incoming information on economic activity, on the whole, has become a bit darker and more gloomy. uncertainties about the economic outlook have increased “.
Federal Reserve Chairman Jerome Powell will testify before Congress on the monetary report Wednesday and Thursday of next week. He will likely face questions as to whether Friday’s strong jobs report, showing 224,000 jobs created in June, lessens the chances of a rate cut in June.
The Fed at its last meeting in June signaled that it was ready to start lowering interest rates if necessary to protect the U.S. economy, a change from the commitment it had made since January of remain “patient” before changing the rates.
The Fed raised its key rate four times in 2018, angering President Donald Trump, who blamed the rate hikes for slowing economic growth and stock market depression. The Fed’s benchmark rate is currently in the 2.25% to 2.5% range.
WATCH: Fed leaves key rate unchanged but hints at future cuts
Financial markets were expecting a rate cut, with the Fed’s CME group tracker putting the odds of at least one rate cut at the July meeting at 100%.
However, this expectation reflected the views of investors before the government signaled the massive gain of 224,000 jobs in June, which is a rebound from the gain of 72,000 jobs in May.
In the monetary report, the Fed noted that the views of Fed officials on the economic outlook changed from May as global growth slowed and US businesses and farmers began to express “heightened concerns. On rising trade tensions.
In early May, Trump increased tariff penalties on $ 250 billion worth of Chinese goods and threatened to expand tariffs to $ 300 billion on other Chinese imports after trade talks between the two largest broke down. world economies.
The Fed said that in its updated economic forecast released in June, about half of Fed officials expected they would have to cut interest rates this year. The other half thought the benchmark rate could stay where it is now.
Trump declared a ceasefire in his trade war with China last week after meeting with Chinese President Xi Jinping at the Group of 20 summit in Japan. The two countries have agreed to resume negotiations to reach an agreement to meet US demands for better protection of US technology.
Trump has launched a number of attacks on Powell and the Fed. Earlier this week, he announced his intention to fill the two remaining positions on the Fed’s seven-member board, along with economists Judy Shelton, who had served as Trump’s economic adviser, and Christopher Waller, currently director. research at the Fed’s regional bank in St. Louis. .
If confirmed by the Senate, the two officials should back Trump’s call for the Fed to cut interest rates.