Economists expect the reduction will likely be a quarter-point.
Rising prices for housing, used cars and medical care helped drive U.S. consumer inflation higher last month despite flat or falling costs for food and fuel, the government reported Thursday. Instead, he highlighted the fact that very low unemployment wasn't pushing up wages quickly enough to lift prices, and suggested that meant hiring and economic growth could continue without fear the economy would overheat and push up inflation. The Fed is getting closer to lower rates to take out "insurance" that does not happen.
Powell used an appearance https://www.federalreserve.gov/newsevents/testimony/powell20190710a.htm before his congressional overseers on Wednesday to confirm that the USA economy is still under threat from disappointing factory activity, tame inflation and a simmering trade war.
Since Fed officials met last month, when they made a decision to hold rates steady, "uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook", he wrote.
The thirty-year bond auction drew a high yield of 2.644 percent and a bid-to-cover ratio of 2.13, while the ten previous thirty-year bond auctions had an average bid-to-cover ratio of 2.26. The data did not change expectations for a rate cut from the Fed, however.
After Powell's announcement, . the Dow rallied on Wednesday, . and the S&P 500 crossed the 3-thousand point mark for the first time in history.
Following the release of Powell's prepared remarks, short-dated Treasury rates fell sharply along with the U.S. Dollar.
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With Fed rate cut odds climbing again, the US Dollar (via the DXY Index) has been knocked lower, keeping the threat of a major US Dollar top in place.
"Despite the fact that core prices were a little bit stronger than expected, I don't really see this as a sign of any resurgence in inflation", said Gregory Daco, chief US economist at Oxford Economics.
Powell focused on "broad" global weakness, rather than good news, insisting that pledges by Washington and Beijing in recent weeks to return to the negotiating table to iron out their differences on trade failed to remove uncertainty.
The FOMC minutes were published at the same time and most of the members thought that rising risks from global concern and flagging business confidence supported a rate cut, but that such a cut would "risk financial imbalances".
"My sense is that Powell is more concerned about global financial conditions ... than he is pacified by a strong USA labor market", said Jim Caron from Morgan Stanley Investment Management.
Powell told Senators that the so-called "neutral rate", or policy rate that keeps the economy on an even keel, is lower than past estimates have put it - meaning monetary policy has been too restrictive.
Powell has worked hard to build his relationships with lawmakers. Since last month, Powell has signaled that officials are open to cutting rates when they gather at the end of July. A 25-basis point cut remains fully priced.