Uncertainty regarding trade policy as well as a weak global economy “continue to weigh on the U.S. economic outlook," says Federal Reserve’s Chairman Jerome Powell, Reuters reports.
As such, Powell said the Fed will “act as appropriate” in order to maintain the economic growth.
Powell discussed the current situation in his prepared remarks to a congressional committee. He mentioned a number of risks that are negatively impacting the economy. These include persistent weak inflation and diminished growth in other economies. He also sees slowing business investments as another component, stemming from the uncertainties regarding the Trump administration’s trade war with China.
At their June policy meeting, Fed officials discussed the possibility of introducing lower rates. Powell believes that “since then, based on incoming data and other developments, it appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. outlook.”
Powell added, “Apparent progress on trade turned to greater uncertainty, and our contacts in business and agriculture reported heightened concerns over trade developments,” Powell said, noting that business investment, an important component of economic growth, “seems to have slowed notably” in recent months.
Since December, the Fed’s benchmark overnight interest rate has been consistently between 2.25% and 2.50%. Due to Trump’s policies and unpredictable actions, the Fed is considering its reduction, which the president has called for.