The benchmark S&P 500 has climbed about 19% this year and briefly breached the 3,000 point mark for the first time on Wednesday. This signalled to United States dollars investors that a rate cut this month is highly likely.
At the same time, in the view of Fed officials, Trump's policies - including higher tariffs and an unpredictable governing style - have increased economic risks and led them to consider the same rate reductions Trump has demanded. As the economy recovered the central bank began slowly raising rates.
In his prepared remarks, Powell made no mention of the president's criticism. He did thank Congress for the "independence" it has given the Fed to operate free of political intrusion. "But over the last decade, the Federal Reserve has been banging the inflation beehive with a baseball bat and the bees haven't come out, so they figure keep trying this until something happens". She also referred to published reports that Trump had discussed firing Powell.
"Of course I would not do that", Powell responded, and went on to say, "The law clearly gives me a four year term and I fully intend to serve it".
Fed Chairman Jerome Powell told lawmakers in testimony Wednesday that the economic outlook hasn't improved since June's meeting.
That leaves the central bank chief to his all-important two-day testimony to Congress beginning tomorrow to shed some light on how dovish he and his FOMC team might be at their July 30-31 monthly meeting.
Powell said while the US labor market remains strong and consumer spending has been stable, the business investment growth rate has "slowed notably".
In his testimony, Powell said the economy has performed "reasonably well" over the first half of the year.
This time addressing members of the Senate Banking Committee, Powell repeated his litany that three main risks threaten what is now a record-long US economic expansion: trade uncertainty, slowing growth overseas and stubbornly low inflation.
On the other hand, he noted that business investment has slowed "notably", and that there was uncertainty over trade and global growth. As such, the Fed will "act as appropriate" to sustain the economic expansion. Unfortunately, a rate cut at this stage of the business cycle does nothing but undermine confidence for me because we have seen a recession immediately follow every rate cut that occurred when the unemployment rate was below 4%, as it is today.
Powell has been heavily criticised by President Donald Trump, but last night insisted he will not be forced out of the job.
This was despite last week's strong U.S. jobs figures and an easing of trade tensions with China.
He also noted that slower growth by some large foreign economies "could affect the USA economy".
The comments come amidst heightened tensions between Powell and the president, who's repeatedly lashed out at the US central bank for raising interest rates too frequently in 2018 - while also urging policymakers to cut rates at the upcoming July meeting.
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