Fed's Barkin sees risks to US economy

Fed's Barkin sees risks to US economy

Between strong job growth and inflation, he believes, stable and close to the Fed's 2% target, current conditions are "a 'keeper, '" Bostic said. "That is very broad across Europe and around Asia, and that continues to weigh", the head of the US central bank said.

Fed staff concluded the rise in world tariffs had a likely "material" impact on the slowdown in global trade past year, and that "uncertainty surrounding trade policy could be leading firms to delay investment decisions and reduce capital expenditures". We have agreed to begin (trade) discussions again with China, and that is a constructive step.

To the suggestion that the current low US unemployment rate could lead to a breakout of inflation, Powell noted that the overall pace of price increases remains "muted" and wage gains remain modest, signs the Fed could reduce rates without risk of an overheating economy. "To call something hot we need to see some heat".

U.S. Federal Reserve officials saw a "strengthened" case for the central bank to lower interest rates in the near term when they gathered in June, according to the minutes of the Fed's latest monetary policy meeting.

He said his business contacts are not cutting their spending but they are not dramatically expanding their investments either.

At least a couple regional Fed bank presidents do support a rate cut, including St. Louis Fed Bank President James Bullard, and Minneapolis Fed President Neel Kashkari who on Thursday said he is advocating the "stronger medicine" of a half-percent rate cut. The US Dollar Index didn't react to these remarks and was last virtually flat on the day at 97.07.

Government bond yields dipped, with two-year Treasuries US2YT=RR falling below 1.87%, from around 1.93% earlier on Wednesday.

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"Powell's testimony made sure that there is a rate cut on the cards this month".

Earlier today the Fed's chairman, Jerome Powell, signalled he would cut interest rates again for the first time since the Global Financial Crisis while, in the same breath, insisting the economy was basically OK.

Powell's statement Wednesday boosted the US stock market as it confirmed for many investors their expectations that the Fed will cut short-term rates for the first time in a decade at its next meeting in late July.

Powell has pointed to a number of national surveys as evidence business confidence took a hit recently, particularly in May after President Donald Trump threatened to impose tariffs on Mexican imports unless his demands about tougher immigration enforcement were met. "Powell's testimony last night is giving gold a significant lift, with the market taking an indication that there is going to be a rate cut of 25 basis points coming soon", said Ross Norman, chief executive at bullion dealer Sharps Pixley.

The Fed is due to release the minutes from its last policy meeting at 2 p.m. EDT (1800 GMT) on Wednesday.

The minutes showed widespread concern that the economy is losing steam.

Earlier rounds of USA tariffs on trading partners including China had been dismissed by the Fed as of little macroeconomic importance, with central bankers in early May still anticipating its policy rate would remain unchanged for the rest of the year.