Federal Reserve Chair Jerome Powell is testifying before Congressional lawmakers this week at an interesting time.
President Trump continues his months-long criticisms on Twitter of the Fed and market participants are all but demanding a rate cut at the central bank’s next policy meeting in late July.
Quill Intelligence CEO Danielle DiMartino Booth, who spent years as an adviser to former Dallas Fed President Richard Fisher, expects lawmakers to probe Powell on the rationale behind a possible near-term rate cut.
“I will be looking for lawmakers to grill Jerome Powell on the reasoning behind the insurance rate cut that he basically advertised as coming,” she said, referencing a comment Powell made at a June press conference, when he told reporters: “An ounce of prevention is worth a pound of cure.”
That remark was a signal that the central bank was open to cutting rates in the near-term to proactively prevent an economic slowdown instead of waiting for the next recession to occur and then cutting rates as a response.
“I think that lawmakers are going to want to know why in the greatest economy ever, we’re making this move which you normally make when you see a recession coming,” she said. “I think there will also be a lot of questions on the Hill about how he feels about being under the microscope - constantly being bullied by the President.”
Just days ago, on July 5, Trump sent out a series of tweets critical of the Fed:
....As well as we are doing from the day after the great Election, when the Market shot right up, it could have been even better - massive additional wealth would have been created, & used very well. Our most difficult problem is not our competitors, it is the Federal Reserve!— Donald J. Trump (@realDonaldTrump) July 6, 2019
The Federal Reserve raised interest rates four times in 2018, which spooked global stock markets in the fourth quarter of 2018. On December 24, 2018, the S&P 500 (^GSPC) fell 19.8% from its September 2018 peak.
Still, DiMartino Booth acknowledged that various economic data points have been weakening, even in last Friday’s June jobs report, which came in well ahead of expectations. She pointed to a rise in the number of workers taking on second and third jobs as a worrisome sign underscoring the rosy headline June jobs number of 224,000 non-farm payrolls.
Powell’s testimony takes place on Wednesday and Thursday morning.
Scott Gamm is a reporter at Yahoo Finance. Follow him on Twitter @ScottGamm.
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