Thursday, September 19, 2019 | ePaper

Trump attacks, economic fears focus spotlight on Fed's Powell speech

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AFP, Washington :
When the leader of the Federal Reserve speaks, the world listens. But the relentless attacks by US President Donald Trump ensure Fed Chair Jerome Powell's speech Friday will be subjected to an even more intense spotlight.
Powell is walking a very narrow path as he tries to defend the Fed's independence from political interference, do the right thing for the economy with limited ammunition, and manage divisions within the central bank itself over the correct course for interest rates.
And as warning signs about a possible recession flash red, any misstep threatens to roil financial markets - which are expecting, even demanding, more rate cuts - and that would be sure to stoke Trump's anger anew.
After some communication misfires, the Fed chief will have another opportunity to send a clear message in a highly-anticipated speech Friday at an annual gathering of central bankers and economists in Jackson Hole, Wyoming.
But even there, against the backdrop of the majestic Grand Teton mountains, Powell won't be safe from the Twitter screeds by Trump.
"The only problem we have is Jay Powell and the Fed," Trump tweeted on Wednesday.
Trump appointed Powell to his position, but has excoriated him almost daily for raising the key interest rate too quickly last year. He has called on the Fed to cut rates drastically to help the economy and weaken the US dollar.
"Big U.S. growth if he does the right thing, BIG CUT - but don't count on him! So far he has called it wrong, and only let us down," he tweeted.
But it is Trump's trade war with Beijing that has stoked fears of an economic downturn, especially coming on top of Brexit's impact on Europe, and a slowdown in China and Germany.
The International Monetary Fund has downgraded global growth, and the minutes of the Fed's last policy meeting revealed that officials fear the blowback from continue trade uncertainty will come back to bite the US economy.
Trump's renewed attack targeting $300 billion in Chinese goods for new tariffs, on top of $250 billion already hit by punitive duties, sent markets reeling, and pushing the yield on the 10-year Treasury below shorter term debt: a move that has been a reliable warning of impending recession.

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