WASHINGTON -- The Latest on Federal Reserve Chairman Jerome Powell's presentation of the Fed's semi-annual monetary report to Congress. (all times local)
Testimony by Chairman Jerome Powell to a House Committee about the economic outlook led investors to send stock prices up, bond yields down and the value of the U.S. dollar lower on expectations of lower interest rates. The S&P 500 index briefly traded over 3,000 for the first time.
Expectations of a pending rate cut drew additional support Wednesday when the Fed released the minutes of its June 18-19 meeting.
Some businesses, particularly in manufacturing, have pulled back on spending and hiring because of greater uncertainty about U.S. trade disputes, Fed officials said, as slower global growth is also dragging on exports.
The central bank held rates unchanged then, but the minutes showed that some officials felt looser credit could soon be needed to address economic weakness.
Rising federal budget deficits will eventually push up U.S. interest rates, Federal Reserve Chairman Jerome Powell says, though it may not happen until "way out in the future."
"The federal budget is on an unsustainable path," Powell says in testimony before the House Financial Services Committee. "Ultimately, there's a price to pay here in higher rates, there has to be."
Yet Powell also acknowledges that Japan currently has higher public debt, as a percentage of its economy, than the United States, but still has very low borrowing costs.
"It's hard to say" how U.S. deficits will play out, Powell says.
Worker pay isn't rising fast enough to push up inflation, Federal Reserve Chairman Jerome Powell says, even with the unemployment rate near a five-decade low. Little inflation pressure makes it easier for the Fed to cut short-term interest rates.
"We don't have any basis, or any evidence, for calling this a hot labor market," Powell says during testimony before the House Financial Services Committee. "To call something hot you need to see some heat."
Powell acknowledges that many businesses complain they cannot find enough workers to fill their open jobs. But he adds that average hourly pay, which grew 3.1% in June from a year earlier, is rising more slowly than it has in previous expansions. That is a sign that companies could raise pay further to attract workers.
Federal Reserve Chairman Jerome Powell says that Facebook's new digital currency, Libra, "raises many serious concerns" and will be closely monitored by U.S. and overseas regulators.
Powell says that Libra could be used for money laundering and terrorist financing, and could also threaten financial stability given that Facebook's huge user base may result in Libra's wide adoption.
"The process of addressing these concerns should be a patient and careful one," Powell says in response to questions from Rep. Maxine Waters, the California Democrat who chairs the House Financial Services Committee.
Powell also says the Fed is coordinating with other regulators, such as the Treasury Department, and other central banks overseas.
Democrats in the House are letting Powell know that they do not appreciate the attacks President Donald Trump has leveled against the Federal Reserve.
Rep. Maxine Waters, chair of the Financial Services Committee, says she wanted to begin the hearing by addressing "the elephant in the room."
"This president has made it clear that he has no understanding or respect for the independence of the Federal Reserve," Waters says.
She notes published reports that Trump had discussed firing Powell. She tells Powell that it was essential that he and other Fed official refuse to "submit to these high pressure tactics."
Asked by Waters what he would do if Trump said he wanted to fire him, Powell says that he intends to serve his full four-year term.
Stocks rose and bond yields fell after Federal Reserve Chairman Jerome Powell indicated that the central is ready to cut interest rates for the first time in a decade to help shore up the economy.
The S&P 500 index and the Dow Jones Industrial Average each rose about 0.6% in the first half-hour of trading Wednesday. The gains came after Powell's semi-annual monetary report to Congress was released.
Bond prices rose sharply as traders anticipated that the Fed would take on a looser policy on interest rates. 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 dollar also fell against other currencies in anticipation that U.S. interest rates would fall.
Federal Reserve Chairman Jerome Powell says "many" Fed officials believe a weakening global economy and rising trade tensions have bolstered the case for looser interest-rate policies.
Delivering the Fed's semi-annual monetary report to Congress, Powell sends the strongest signal yet that the central bank is ready to cut interest rates for the first time in a decade, possibly as soon as the July meeting.
Powell says that since Fed officials met last month, "uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook." Meanwhile, inflation has fallen further below the Fed's annual target of 2%.
Many investors have put the odds of a rate cut this month at 100%.
Powell, who has been under increasing attack by President Donald Trump, makes no mention of the president's criticism in his prepared testimony but does thank Congress for the "independence" it has given the central bank to operate.
Every sentence Federal Reserve Chairman Jerome Powell speaks to Congress this week is sure to be parsed by investors who expect — and hope — the Fed will cut interest rates later this month for the first time in a decade.
Powell will testify for two days starting Wednesday at a time when the economic landscape is a mixed one: The U.S. job market appears resilient. Consumer spending and home sales look solid. But the economy is likely slowing. President Donald Trump's trade wars have magnified uncertainties. And inflation remains chronically below the Fed's target level.
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.