Federal reserve Chairman Jerome Powell is starting to sound like he’s the world’s central banker, while global economy risk rise.
“There’s something going on with the growth around the world, particularly around manufacturing and investment and trade,” he told the House Financial Services Committee on Wednesday as he all but promised an interest-rate cut at the end of this month.
“There are limited tools available in the global central-bank community, putting the spotlight on the Fed to ease and underpin global growth and financial conditions,” Bank of America economist Michelle Meyer and her colleagues wrote in a July 10 note.
The Fed has shifted its stance in response to change outside the U.S. Powell is just trying to undo the damage President’s Donald Trump’s trade pocilicies have caused for the world economy.
“What’s a little bit unusual this time is the U.S. is much closer to where it wants to be in terms of both employment and inflation than are other major economies,” Clarida said in a June 21 Bloomberg Television interview.
The result: The Fed, with interest rates close to 2.5%, has much more leeway to promote growth than either the Bank of Japan or the European Central Bank; both have negative rates.
“The global picture more generally probably is impacting my decision making,” said Bullard, who dissented in favor of lower interest rates at the Fed’s June meeting. “Europe in particular is certainly one facet of the global scene, and European data has been disappointing.”
“People are very concerned about global growth, and we will feel that over time,” Powell told the Senate Banking Committee on Thursday. “That’s the main thing I worry about.”
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