The head of the U.S. central bank has signalled that a cut interest rates is coming after he warned of growing risks to the global economy.
Though the case for lowering borrowing costs isn't fully decided, reducing rates at this point would be similar to the Fed's efforts in the mid-1990s to nurse along a lengthy recovery rather than respond to a looming downturn.
"The statement also offered some positives and sounded more balanced than market moves initially suggested".
At their June policy meeting, Fed officials had signaled those concerns might warrant lower rates, and "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 said.
This was despite last week's strong United States jobs figures and an easing of trade tensions with China.
The Fed lifted USA borrowing costs four times in 2018, leaving the Fed Funds rate range at its current 2.25%-to-2.5%, boosting the appeal of US assets in the process and helping to lift the Dollar by 4% against rivals that year.
Since the conception, and the subsequent popularity of virtual assets, central banks and cryptocurrencies have had a long history of trying to diminish each other's importance in the financial market.
The comments sparked much-needed relief on trading floors around the world, having suffered steep losses at the start of the week in reaction to a blockbuster U.S. jobs report that dented hopes for a steep Fed cut at its next policy meeting. Talks have since restarted, but more than $350 billion worth of tariffs remain in place with no timeline on progress.
Minutes from the Federal Open Market Committees June meeting - released Wednesday afternoon - likewise showed Fed participants acknowledged "uncertainties and downside risks surrounding the economic outlook had increased significantly over recent weeks". On average, the economy has added 172,000 nonfarm payrolls per month between January and June.
During Powell's testimony before the Senate Banking Committee on Facebook's planned Libracryptocurrency, he said: "The size of Facebook's network means it could be, essentially, immediately systemically important".
Government bond yields dipped, with two-year US Treasuries falling below 1.87 percent, from around 1.93 percent.
- Dollars supported by inflation surprise but data won't prevent Fed cuts. The next policy announcement is set for July 31.
Core inflation, which is seen as a truer measure of domestically generated price pressures because it ignores volatile commodity items like energy and food, rose 0.3% last month when markets were looking for just a 0.2% gain.
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