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Reluctant Fed Likely to Cut Rates Again as Trade War Intensifies

August 5, 2019

The Federal Reserve will be leaning closer to reducing interest rates again next month after President Donald Trump ratcheted up his trade war with China and the central bank may even have to cut more steeply than it did last week.

 

Fed Chairman Jerome Powell called last week’s quarter-point reduction a “mid-cycle adjustment to policy,’’ not the first in a long series of moves. Yet the ratcheting up of global tensions -- which stands to hit consumers harder than in the first year of the tariff battle -- has further boosted uncertainty for businesses and sent stocks and U.S. Treasury yields plummeting.

 

“I am certainly monitoring developments very closely,” Fed Governor Lael Brainard said at a Kansas City Fed event Monday in response to an audience question on the sharp market movements, adding “we’re committed to sustaining the expansion.”

 

FULL REPORT

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