Asia shares cautious ahead of Fed chief’s Congressional testimony

Lloyd Doyle
July 11, 2019

Federal Reserve officials judged uncertainties and downside risks to the outlook for the US economy had increased significantly when they gathered in June, strengthening the case for an interest-rate cut.

Trump has spoken out, both in public remarks and on Twitter, several times against the central bank, pressuring for lower interest rates. Powell said Wednesday he would not resign if asked to do so by Trump.

Powell also said that while USA unemployment remains low at 3.7%, wage growth is not indicating an overheated jobs market and inflation "continues to be muted".

Powell and the Fed have recently made clear they will do whatever they deem "appropriate" to sustain the economic expansion - a message that traders have interpreted to mean a coming rate cut.

The remarks bolstered market expectations for imminent rate cuts from the US central bank.

Powell will nearly certainly face questions about Fed independence, given that the bank has relatively quickly - if begrudgingly - shifted its stance to align with Trump's demands for reduced interest rates. We have agreed to begin (trade) discussions again with China, and that is a constructive step.

Powell said any regulatory review of the project should be "patient and careful".

But he warned of economic weakness in other major economies, and a downturn in business investment driven by trade war worries.

Federal Reserve Chairman Jerome Powell says that Facebook's new digital currency, Libra, "raises many serious concerns" and will be closely monitored by USA and overseas regulators.

He said that growth in business investment "seems to have slowed notably", possibly because of concerns over slowing global growth and the trade battle between the Trump administration and China.

"The markets had hoped for Powell to express dovish views and they got what they wanted", said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui DS Asset Management.

'I can't hear you, ' Waters said, urging a more enthusiastic response from the Federal Reserve chairman.

The S&P 500 index of financial shares including banks, which tend to benefit in a higher interest rate environment, retreated 0.5% after Powell's comments. Bond yields fell, sending the yield on the 10-year Treasury note down to 2.05% from 2.10% just before Powell's remarks were released.

The S&P 500 index and the Dow Jones Industrial Average each rose about 0.6% in the first half-hour of trading Wednesday.

Powell's description Wednesday of a more downbeat economic landscape led most economists to conclude that a quarter-point rate cut is a virtual certainty at the Fed's meeting in three weeks, with many forecasting further rate cuts to come.

The Fed, which hiked rates four times previous year, has kept its current benchmark overnight interest rate in a range of between 2.25 and 2.50 per cent since December.

The strong comments from the most powerful USA financial regulator underscored the growing regulatory hurdles facing the proposed cryptocurrency, which has drawn scrutiny from policy-makers globally.

Other reports by Iphone Fresh

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