Powell 'joins' the dovish camp, citing economic risks as stronger reasons for rate cuts
Federal Reserve Chairman Powell stated that the continuously 'changing' economic risks provide the Federal Reserve with more substantial reasons for rate cuts. This statement indicates that Powell has aligned himself with the 'dovish' camp within the Federal Open Market Committee responsible for setting interest rates and sends a signal that he may support a 25 basis point rate cut at the Fed's next meeting in September. Although Powell acknowledged that the impact of the government's trade war on consumer prices is now 'clearly visible', he hinted that this impact is unlikely to persist and may be merely a one-time shock that the central bank can overlook. He stated, 'Given that the labor market is not particularly tight and faces increasing downside risks, this outcome (of persistent rising inflation) seems unlikely to occur.' He also added, 'Inflation faces upside risks, while employment faces downside risks, which is quite a challenging situation.'
