Federal Reserve Chairman Powell laid the groundwork for this month's interest rate cut Wednesday, while records from the latest Fed meeting showed growing concern among policy makers that the US-China trade war, while not yet directly curbing economic growth, is indirectly leading to companies'reluctance to buy equipment, raise wages for employees and raise prices.
Taken together, these factors are likely to depress economic growth and inflation, thus ending economic expansion. The Federal Reserve is getting closer to cutting interest rates in case something happens.
Powell used his testimony in Congress to confirm that the U.S. economy was still threatened by disappointing factory activity, weak inflation and a growing trade war.
According to the minutes of the Federal Reserve's interest rate meeting, these are the uncertainties that prompted "many" policymakers to believe that a rate cut is necessary "in the short term". Shortly after Powell's testimony to the House Financial Services Committee ended a few hours later, the Federal Reserve released the minutes.
"Since then, uncertainties surrounding trade tensions and concerns about global economic conditions seem to have continued to weigh on the outlook for the U.S. economy, based on data and other changes," Powell said.
At the June 18-19 meeting, some Fed policy-makers feared that action might be necessary to boost inflation and dispel widespread pessimism that inhibits corporate investment, minutes showed. Inflation in the United States has been falling short of the Federal Reserve's 2% target. According to the summary of the meeting minutes on the hypothetical situation of interest rate reduction, interest rate reduction may "cushion the impact of trade wars".
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