Facebook currency project 'cannot go forward' until concerns addressed: Powell

Facebook currency project 'cannot go forward' until concerns addressed: Powell

Chairman Jerome Powell signaled Wednesday that the Federal Reserve is likely to cut interest rates late this month for the first time in a decade in light of a weakening global economy and rising trade tensions.

In prepared testimony ahead of a House hearing, Powell highlighted continued uncertainty about trade as a drag on USA growth, amplifying his message from recent appearances that have been widely seen by investors as opening the door to an interest rate cut. While the latest jobs data fuelled doubts policy makers will reduce borrowing costs this month, President Donald Trump continued to apply pressure on Fed Chair Jerome Powell to do just that, saying the current monetary policy has put the USA at a disadvantage versus Europe.

The Trump appointee told the panel at a House Financial Service committee hearing that he would not comply with the president if he were to call and ask him to pack up and leave his post at the Fed.

"I guess chairman Powell feels there is more downside risk to the economy and the Fed needs to accommodate that", said Kim Forrest, chief investment officer at Bokeh Capital Partners.

"Apparent progress on trade turned to greater uncertainty, and our contacts in business and agriculture reported heightened concerns over trade developments".


The Fed's benchmark rate now stands in a range of 2.25% to 2.5% after the central bank boosted rates four times previous year.

When the stock markets crash last winter amid threats of tariffs against China, Trump began to ask his advisers if he could remove Powell from his post at the central bank.

That added a full additional rate cut to the one investors already had expected, and added market pressure to the Fed's growing list of concerns.

"Uncertainties about the outlook have increased in recent months", he wrote.

Powell said the Fed has established a working group to follow the project and is coordinating with other central banks across the globe.


The cooling in USA rate fever has seen bonds give back just a little of their huge rally, with yields on two-year Treasuries rising to 1.917% from the recent trough of 1.696%.

A cut could lift home and auto sales by lowering the borrowing costs for major purchases.

Powell indicated during his prepared remarks before Congress Wednesday that a rate cut is impending due to worldwide economic turmoil.

The greenback is under pressure in the early day, likely from some profit taking ahead of Fed Chair Powell's Testimony later today.

Though the threatened tariffs on Mexico never materialised and China and the U.S. have agreed to resume talks to reach a trade deal, that "did little to alleviate the uncertainty that Fed officials believe is contributing to cooling momentum in global trade and domestic capex plans", Deutsche Bank's United States economics team wrote this week.


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