US Fed sees case building for interest rate cuts this year

23 June, 2019 12:00 AM printer

Washington: The US Federal Reserve has signalled interest rate cuts beginning as early as July, saying it is ready to battle growing global and domestic economic risks as it took stock of rising trade tensions and growing concerns about weak inflation.

Even as the US central bank left its benchmark interest rate unchanged for now, the shift in sentiment since its last policy meeting was marked, report agencies.

The bulk of Fed policymakers slashed their rate outlook for the rest of the year by roughly half a percentage point, and Fed chairman Jerome Powell said others agree the case for lower rates is building.

The Fed dropped its pledge to be "patient" before rate moves in a sign it was poised to act, and Mr Powell stopped referring to weak inflation as "transient".

Although economic growth is expected to continue, he said policymakers' concerns congealed in the few weeks since the Fed last met in early May, with the unpredictable outcome of US President Donald Trump's trade dispute with China and other countries at the top of their minds.

Mr Trump slapped new tariffs on China on May 5, took other steps that upended markets, and yet of late has sent hopeful signals of progress in the dispute when he meets Chinese officials next week - difficult terrain for the Fed to navigate.

The US president has repeatedly accused the Fed of undermining his administration's efforts to boost economic growth and has repeatedly demanded that rates be cut.

"Seven weeks ago, we had a great jobs report and came out of the last meeting feeling that the economy and our policy are in a good place," Mr Powell said.

"News about trade has been an important driver of sentiment in the interim. We are quite mindful of the risks to the outlook and are prepared to move and use our tools as needed," he said in a press conference following the release of a policy statement in which the central bank said it "will act as appropriate to sustain" a nearly 10-year economic expansion.