Federal Reserve chairman signals cut in US interest rates

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Reuters

The head of the US central bank has signalled that a cut interest rates is coming after he warned of growing risks to the global economy.

Federal Reserve chairman Jerome Powell said “uncertainties about the outlook have increased in recent months”.

This was despite last week’s strong US jobs figures and an easing of trade tensions with China.

Mr Powell, giving evidence to a hearing in Washington, has come under pressure from Donald Trump to cut rates.

In a series of comments and tweets the US president has accused the Fed of unnecessarily slowing the economy by not cutting rates.

Mr Powell, in written testimony ahead of his appearance at the House of Representatives Financial Services Committee, said he expected continued US growth.

‘Greater uncertainty’

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

“Concerns about the strength of the global economy continue to weigh on the US outlook,” Mr Powell said.

“Apparent progress on trade turned to greater uncertainty, and our contacts in business and agriculture reported heightened concerns over trade developments.”

The Fed has kept its current benchmark overnight interest rate in a range of between 2.25% and 2.50% since December.

But since criticism of the Fed by Mr Trump in May, both investors and the central bank have begun shifting their stance, with markets now expecting a cut of at least a quarter of a percentage point when Fed policymakers meet at the end of the month.

Following Mr Powell’s comments, the dollar fell against a basket of currencies and the major share indexes opened higher.