Economy

U.S stocks: Futures higher after rally on Powell's dovish remarks

U.S stocks: Futures higher after rally on Powell's dovish remarks

Powell said the central bank stands ready to "act as appropriate" to support record U.S. economic growth.

Attentions are this morning on the lukewarm state of the U.S. economy, in the wake of Powell's latest comments which give granularity following June's "no change" interest rate call.

Powell, chosen by Trump to run the Fed but now out of his good graces, has worked hard to build relations among lawmakers, and even on a Democratic-controlled committee won plaudits and encouragement to stay on the job.

Investors expect the Fed will cut its benchmark rate, now in a range between 2.25% and 2.5%, by a quarter percentage point at its 30-31 July meeting. Although he expected continued USA growth, he warned of economic weakness in other major economies, and a downturn in business investment driven by trade war worries.

The Fed last cut rates in 2008 at the height of the financial crisis.

"Markets continue to price in a 25 basis point cut but it looks like sentiment is easing and the dollar rebounded", commented Benjamin Lu, an analyst at Phillip Futures. The minutes show FOMC member concern over soft economic data such as the weak jobs report from April, weakening indicators for business confidence and spending, decreased manufacturing activity and the ongoing trade tensions - mainly between China and the US. The Federal Reserve Act allows for Fed governors to be removed - but only "for cause" and not policy differences.

Investors say much of this year's gain for stocks has stemmed from a change in outlook by the Fed to more dovish on interest rate policy.

Asked Tuesday about Powell's status, White House counselor Kellyanne Conway told reporters Mr. Trump has made clear his unhappiness with the Fed's rate policies and believes "he has the power to fire Jay Powell, but he hasn't done that".

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He said that growth in business investment "seems to have slowed notably", possibly because of concerns over slowing global growth and the trade battle between the United States and China.

California Democratic Rep. Maxine Waters pressed Powell at a House Financial Services Committee hearing about whether he would comply if he were to get a phone call from Trump asking him to pack up his stuff and go.

Powell is appearing before the Senate Banking Committee on Thursday morning, where his two-day bi-annual testimony will conclude. He contends that the central bank made a huge mistake by tightening credit a year ago and should be cutting rates now.

Traders priced a 100 percent probability of a Fed rate cut in July, said the CME Group's FedWatch tool.

He said: 'The law gives me a four-year term and I fully intend to serve it'. Until very recently, the chance of a modest quarter-point cut was put at 70% and a steep half-point cut at 30%.

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He also noted that slower growth by some large foreign economies "could affect the US economy". 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. Both are regarded as highly likely to support Trump's drive to lower rates.