Jerome Powell: US economy continues to perform well but faces risks

A signpost greets travellers at the Gros Ventre entrance to Grand Teton National Park in Jackson Hole Wyoming U.S

Traders of fed funds futures extended slightly the amount of easing they expect from the US central bank this year after Powell's remarks.

The U.S. economy is in a "favourable place" and the Federal Reserve will "act as appropriate" to keep the current economic expansion on track, Fed chair Jerome Powell said on Friday in remarks that gave few clues about whether the central bank will cut interest rates at its next meeting or not. The Trump administration sanctioned three Chinese Fentanyl suppliers on Wednesday, and Trump has accused Chinese President Xi Jinping of not doing enough to curb the supply of the killer narcotic.

"As usual, the Fed did NOTHING!". Trump tweeted, initially misspelling Powell's last name before changing it. Trump made no secret of this on Friday, asking "who is our bigger enemy, Jay Powell or Chairman Xi?" .

Traders were also digesting another inversion of the U.S. yield curve seen Thursday, when the return on 10-year notes fell below that of two-year notes, which is often seen as a precursor to recession.

"We have seen further evidence of a global slowdown, notably in Germany and China". Trump said, misspelling the Fed chief's name in an unprecedented attack on the independent central bank.

Powell did not directly respond to Trump's complaints of the Federal Reserve failing to lower interest rates in the wake of economic jitters surrounding the trade fight with China.

Powell said President Donald Trump's trade wars have complicated the Fed's ability to set interest rates and have contributed to a global economic slowdown.

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"Powell's speech comes against the backdrop of a vulnerable economy, with the financial world seeking clarity on whether last month's rate decision likely marked the start of a period of easier credit". China announced earlier Friday that it would retaliate against the USA with new tariffs on thousands of American products.

Powell seemed to be making an economic case for some further stimulus - possibly to ward off concerns he is bowing to the relentless pressure from Trump to drastically cut rates - but he also noted the generally healthy state of the USA economy, a possible signal he does not foresee a series of cuts.

"The US economy has continued to perform well", Powell said at the mountain retreat. Yields on USA 10-year Treasury notes have plunged toward record lows.

Robert Kaplan, president of the Fed's Dallas branch indicated that he might be prepared to support further rate cuts.

Trump's tweet-storm prompted a sell-off on the stock market, as investors who had initially liked the sound of Powell's speech quickly sold off shares as the rhetoric ratcheted up.

"The global growth outlook has been deteriorating since the middle of previous year".

Renewed U.S. -China trade tensions and pressure from the White House complicate the Fed's job going into its September 17-18 rate-setting meeting.

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