They will be paying attention to what the world's top central bankers will say during their annual conference at Jackson Hole, in the USA state of Wyoming - with Reserve Bank governor Philip Lowe speaking on Saturday.
Philadelphia Fed President Patrick Harker weighed in with the hawks in a Jackson Hole interview, saying lower rates wouldn't boost the economy when the concern is a trade war. The reading prompted concern among some investors that economic weakness overseas and an escalating trade war with China could drag down the U.S. economy.
"We have seen further evidence of a global slowdown, notably in Germany and China".
But Powell emphasized to a room of central bankers and economists that there's "no recent precedents" for the Fed to guide how policymakers should account for such trade policy uncertainty. -China trade war. Investors have priced in a quarter percentage-point US rate cut next month, but dissenting Fed voices may limit the prospects for the larger move that some have advocated, including President Donald Trump.
If the trade wars have disrupted business investment and confidence and contributed to "deteriorating" global growth, Powell said the Fed could not set all that right through monetary policy.
"At this point, if the economy continues where it is, I would probably say we should keep things where they are, but I am very attuned to the downside risks of the economy", Mester said in an interview Friday with CNBC television. She said her decision on a possible future rate cut would depend on forthcoming data releases.
The confusion only heightened in the days leading to the Jackson Hole conference, at which Powell gave the keynote address.
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Federal Reserve Chairman Jerome Powell said the USA economy is in a favorable place but faces "significant risks" as growth overseas slows amid trade uncertainty.
Since 2010, the Fed has faced a new worry, Powell said: lower interest rates and an inability to predict exactly where the neutral rate for an economy should be.
Robert Kaplan, president of the Fed's Dallas branch indicated that he might be prepared to support further rate cuts. Bullard asked in an earlier interview Friday with CNBC television.
The central bank reduced rates in July in what Powell referred to as a mid-cycle adjustment.
The stock market dropped more than 400 points after Trump's response. Trump tweeted on Friday, after Powell announced that he would "sustain the expansion" of the U.S. economy, but not by slashing interest rates by a whole percentage point, as Trump has repeatedly called for.
The 2-year/10-year yield curve tripped to negative territory earlier in the session and for a third consecutive day.