Investors will especially want to hear whether Powell addresses the central question of whether any of those developments might lead the Fed to alter its plan to raise interest rates two more times this year and to keep raising them next year as well.
Powell's speech discussed at length the challenges of monetary policy at a time when economic benchmarks - such as estimates of full employment or the neutral policy rate - are uncertain. On Thursday, two top Fed officials made clear Thursday that Trump's criticism won't affect their decisions on whether to continue raising rates. This gradual approach is the wisest policy for the Fed as it tries to navigate between the risks of raising rates too fast, thus "needlessly shortening the expansion", and moving too slowly and risking an overheated economy. Most market participants had expected the central bank to raise rates again in September and December.
Powell's remarks about inflation were seen by some as a signal that the Fed has little need to push rates beyond the bank's perceived level of the neutral rate, or where the federal funds rate reaches an equilibrium where it neither stimulates nor suppresses economic growth.
Mester and Bullard give opposing views on the outlook for interest rates New paper says don't blame lax antitrust for dominant companies Two regional Federal Reserve bank chiefs say they favor further interest-rate increases and Trump criticism wouldn't influence US central bank policy.
In the past, at a similar stage in the economic cycle, the U.S. central bank eventually tightened monetary policy too much, he argued, as it underestimated the delayed effects of past rate hikes. "The unemployment rate has declined steadily for nearly nine years and, at 3.9 percent, is now near a 20-year low".
Despite the risks from trade disputes, George said in her interview that she believes the economy is performing strongly and regards further Fed rate hikes as justified.
Since then the Fed has raised rates three times, and the gap has narrowed as longer-term rates have not risen in tandem with short-term rates.
Questioning Fed actions is normally off limits for U.S. politicians, since it could raise fears central bankers would feel political pressure and fail to act to head off rising inflation. "Inflation has moved up and is now near the Federal Open Market Committee's (FOMC) objective of 2 percent after running generally below that level for six years". While the trade conflict between Washington and Beijing darkens the economic outlook, the supply versus demand position in oil markets remains relatively tight -especially because of the looming US sanctions against Iran. The current path of gradual rate hikes would be continued only "if the strong growth in income and jobs continues".
Powell's careful comments aren't likely to convince Trump, who insiders say is concerned that a rate-driven economic slowdown could hit right as he's gearing up for a 2020 re-election campaign. Trump also criticized Powell - who was selected by the president to replace Janet Yellen as Fed chair - saying he was "not thrilled" with him.
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