Powell 'joins' the dovish camp, citing economic risks provide stronger reasons for rate cuts
Federal Reserve Chairman Powell stated that the constantly 'changing' economic risks have given the Fed more sufficient reasons to cut rates.
These remarks indicate that Powell has aligned himself with the 'dovish' camp within the Federal Open Market Committee that sets interest rates, and also signal that he may support a 25 basis point rate cut at the Fed's next meeting in September.
Although Powell acknowledged that the government's trade war has had a 'clear and visible' impact on consumer prices, he suggested that this impact is unlikely to persist and may only be 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, (the result of sustained inflation) seems unlikely to occur.' He also added, 'Inflation faces upside risks, while employment faces downside risks, which is quite a challenging situation.'