‘Crosscurrents’ are weighing on the economy so Fed will ‘act as appropriate’

Finance


Jerome Powell testifies before the Senate Banking, Housing and Urban Affairs Committee on his nomination to become chairman of the U.S. Federal Reserve in Washington, November 28, 2017.

Joshua Roberts | Getty Images

Business investments across the U.S. have slowed recently as uncertainties over the economic outlook linger, Federal Reserve Chair Jerome Powell said Wednesday in prepared testimony to the House House Financial Services Committee.

“Crosscurrents have reemerged,” Powell said in his testimony, noting that investments slowed down “notably.” He also said that the outlook has not improved in recent weeks. 

“Overall growth in the second quarter appears to have moderated,” Powell said in the prepared remarks. “The slowdown in business fixed investment may reflect concerns about trade tensions and slower growth in the global economy.”

Inflation remains muted but should move back towards the Fed’s 2% objective over time, he said. Powell added the central bank will “act as appropriate” to maintain the current economic expansion.

His testimony comes after the Fed opened the door to cutting rates at its previous monetary policy meeting in June. Back then, the Fed said it will “act as appropriate” to maintain the current economic expansion.

Markets cheered the central bank’s remarks, reaching all-time highs last week. Traders are also pricing in a 100% probability of a rate cut before the end of July, according to the CME Group’s FedWatch tool.

However, the latest U.S. jobs report raised questions about whether the Fed will move forward with lowering rates at its July meeting. The U.S. economy added 224,000 jobs in June, easily topping economist expectations.

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