WASHINGTON — Federal Reserve Chairman Jerome Powell said “the case for raising rates has weakened somewhat” in a press conference that followed the Fed’s first rate-setting meeting of 2019, confirming reports that two increases planned for this year would be suspended. He stressed that domestic economic indicators, including unemployment, remain strong.
“We believe we can best support the economy by being patient and evaluating the outlook before making any future adjustment to policy,” Powell told reporters, citing numerous, mostly global concerns, including U.S.-China trade tensions, the Brexit debacle, and a general economic slowdown in Europe and Asia.
Powell said the 35-day federal government shutdown will leave “some sort of imprint” on U.S. gross domestic product but won’t have a permanent effect. The Congressional Budget Office this week estimated the shutdown will result in a $3 billion loss.
Powell denied the Fed’s decision was swayed by overt pressure from President Donald Trump to cancel the hikes.
“My only motivation is to do the right thing for the economy and the American people. That’s it,” said Powell. “The situation calls for patience, I think it does. That stance of policy is appropriate. We see these uncertainties. We see a time where we have the luxury of being able to wait.”
The federal funds rate, which influences the cost of auto loans and other forms of consumer borrowing, remains at a range of 2.25% to 2.5% following seven incremental hikes since 2015. Jim Bianco of Bianco Research LLC told Bloomberg that Powell is “definitely listening to markets” and could be persuaded to reverse, rather than hold, course.
The Fed’s next adjustment “will probably be a cut at this point, probably later this year, like December or the first quarter of 2020,” Bianco said.