S&P 500 hits 3000 as Powell's comment lifts rate cut hopes

Daniel Fowler
July 10, 2019

This became apparent after some Fed communication and a strong U.S. job report last week. But the economy is likely slowing.

While traders had all but abandoned bets of a 50 basis-point reduction, Powell's comments pushed them 5% higher, CME Group's FedWatch tool showed. The Fed's benchmark rate now stands in a range of 2.25 per cent to 2.5 per cent after the central bank boosted rates four times a year ago, moves that brought increasing attacks from President Donald Trump.

At the moment, the economic landscape is a mixed one: The U.S. job market appears resilient but overall economic growth is slowing with many forecasters predicting growth has slowed to around 2 per cent in the just completed April-June quarter. Trump wrote on Twitter earlier this month, the latest in a series of unprecedented attacks on the independence of the Fed by a sitting president.

However, as Powell noted, "crosscurrents" concerning trade policies and global growth have reared their head.

Shares were treading water on Wednesday while rising Treasury yields kept the dollar steady, as investors waited to hear whether the world's most powerful central banker would confirm or confound expectations for a US rate cut this month. Some Fed watchers have suggested that cutting rates now would serve as a kind of insurance policy by the central bank against a potential economic downturn. Despite a current trade war truce with China, he continued to stress downside risks to the outlook.

"Apparent progress on trade turned to greater uncertainty, and our contacts in business and agriculture reported heightened concerns over trade developments". "Growth indicators from around the world have disappointed on net, raising concerns that weakness in the global economy will continue to affect the US economy".

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On Tuesday, lawmakers narrowly approved a measure that could make it harder for the next prime minister to suspend parliament. "I think the idea of proroguing parliament is utterly and totally unacceptable from any British parliamentarian or democrat".

"The Q&A portion of today's testimony will likely be Mr. Powell's moment to talk down the prospect of a 50 basis points rate cut at the July meeting", O'Hare said. The Fed has raised rates nine times since 2015, four increases coming under Powell's leadership. "He's not doing that". "Pack up. It's time to go'".

"I hope everyone heard that."
Powell said, a touch louder: "My answer would be no".

Federal Reserve Chairman Jerome Powell says "many" Fed officials believe a weakening global economy and rising trade tensions have bolstered the case for looser interest-rate policies.

Wall Street is all but certain that the end of the Federal Reserve's three-year hiking campaign is here.

President Trump has repeatedly argued that the US economy would be growing faster if the Fed lowered interest rates.

- CBS News' Irina Ivanova contributed reporting.

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