President Donald Trump has repeatedly sought to blame the Federal Reserve for signs of a slowdown in U.S. economy growth, but the head of the central bank has argued the Fed’s shift toward lower interest rates is actually supporting the economy.
Federal Reserve Chairman Jerome Powell suggested Friday during a forum in Zurich, Switzerland, that the central has helped keep the economy on solid ground amid the uncertainty caused by Trump’s trade war with China.
“The Fed has through the course of the year seen fit to lower the expected path of interest rates,” Powell said. “That has supported the economy. That is one of the reasons why the outlook is still a favorable one.”
Meanwhile, Powell argued that the uncertainty caused by the escalating trade dispute between the U.S. and China has caused some companies to hold back on investment
“We’ve been hearing quite a bit about uncertainty,” Powell said. “So for businesses, to particularly make longer-term investments in plants or equipment or software, they want some certainty that the demand will be there.”
Despite the uncertainty cause by the trade war, Powell noted the Fed does not currently anticipate a recession, noting the labor market and consumer spending remain strong.
“We’re not forecasting or expecting a recession,” the Fed chief said. “The most likely outlook is still moderate growth, a strong labor market and inflation continuing to move back up.”
Powell also reiterated his oft-repeated pledge that the Fed will “act as appropriate” to sustain the U.S. economic expansion.
Ahead of Powell’s remarks, Trump continued his attacks on the Fed and specifically his nominee to lead the central bank in a post on Twitter.
“They were WAY too early to raise, and Way too late to cut – and big dose quantitative tightening didn’t exactly help either,” Trump tweeted. “Where did I find this guy Jerome? Oh well, you can’t win them all!”
Trump has repeatedly urged the Fed to slash interest rates, claiming the central bank is holding the U.S. economy back and questioning whether Powell is a “bigger enemy” than Chinese President Xi Jinping.
For his part, Powell said the Fed is “committed to nonpolitical decision-making based on the best analysis we can muster.”
“It’s a great place that has a very strong ethic and very high morale because of that commitment to nonpolitical public service,” he added.
After cutting interest rates by a quarter point at its last monetary policy meeting in July, the Fed is widely expected to cut rates by another quarter point at its next meeting later this month.
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