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Powell's Comments Contributing To The Market's Rally

Jayson Derrick

U.S. stocks bounced back Tuesday in part due to Federal Reserve Chairman Jerome Powell's comments the central bank will "act as appropriate" amid a trade war showing minimal signs of resolving anytime soon.

What Happened

Powell said during a speech in Chicago he isn't sure "how or when" current trade issues will be resolved, CNBC reported. The central bank continues to closely monitor any developments and how it may impact the U.S. economic outlook.

Powell said any future activity will be consistent with an objective of sustaining current economic expansion and maintain a strong labor market with inflation near the 2 percent objective.

Why It's Important

Powell's speech was also consistent with the Fed's prior commentary its policies remain data dependent, according to CNBC. The market anticipates the Federal Open Market Committee will cut the benchmark rate twice before the end of 2019 due to current conditions.

Powell's speech also included a longer-term outlook for the central bank on how it can navigate a future crisis. The current low rate environment implies minimal room before the nominal benchmark rate can't be lowered any more.

"In short, the proximity of interest rates to the ELB has become the preeminent monetary policy challenge of our time, tainting all manner of issues with ELB risk and imbuing many old challenges with greater significance," Powell said.

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