Powell to Trump: Now it's your turn
By Howard Schneider WASHINGTON (Reuters) - Tucked into Fed Chair Jerome Powell's news conference on Wednesday was a not-so-subtle message for President Donald Trump: the economy is holding up because the U.S.
By Howard Schneider
WASHINGTON (Reuters) - Tucked into Fed Chair Jerome Powell's news conference on Wednesday was a not-so-subtle message for President Donald Trump: the economy is holding up because the U.S. central bank has acted to support it through a volatile patch, and whether that continues is now in the president's lap.
In a buck-stops-over-there-now performance, Powell indicated that the Fed's two rate cuts this year are likely adequate as insurance against the rising global risks posed by Trump's whipsaw trade negotiations with China, and that going forward the Fed sees little need to move unless those risks materialize in the form of weaker U.S. economic data.
"Trade developments have been up and down and then up, I guess, back up perhaps over the course of this interview," Powell said in a reference to Trump's sometimes unpredictable trade war with China and, on occasion, other countries.
"I do believe our shifting to a more accommodative stance over the course of the year has been one of the reasons why the outlook has remained favourable," Powell said, citing reasonably strong U.S. data. Going forward "we are going to be highly data-dependent" in deciding on further rate moves.
The Fed cut its benchmark overnight lending rate by a quarter of a percentage point on Wednesday, the second such move this year, but new policymaker projections showed no further cuts were anticipated in 2019.
The comments continue a subtle push back by Powell against a chief executive who has used personal insults and a steady stream of Twitter invective to demand the Fed slash rates to recession levels and take other out-of-the-norm steps to boost the economy.
At a keynote speech at a central bankers conference in Jackson Hole, Wyoming, last month, Powell said the U.S. central bank had "no recent precedents" to set monetary policy when the rules of global trade had become so unpredictable and begun to sap business confidence and depress global growth.
The United States, the world's largest importer, has been locked in often contentious negotiations with its top trading partners since the Trump administration imposed tariffs on steel and aluminium imports in March, 2018. The escalating U.S. tariff war with China has shut down Chinese imports of petroleum and many agricultural products, and uncertainty about when trade talks could be resolved is dampening capital expenditure.
The International Monetary Fund said in July that global trade slowed in the first quarter of 2019 to the lowest level since 2012. Tariffs applied in the U.S.-China trade war could shave 0.5% off global economic growth in 2020, the IMF said.
Whether that starts to effect a still-relatively optimistic Fed outlook will depend mightily on whether Trump's trade talks with China end on a note that restores what the Fed said is "weakened" business investment, or leave the world stalled and guessing.
"It is an unusual situation," Powell said. "The U.S. economy in itself is strong. ... The difference here is we have significant risks" that elected officials will have to manage.
(Reporting by Howard Schneider; Additional reporting by Heather Timmons; Editing by Paul Simao)
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By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States
BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.