Economic uncertainties have increased in recent months and the Federal Reserve is prepared to act, Chairman Jerome Powell told the House Financial Services Committee on Wednesday, hinting at a rate cut.
Mr. Powell's testimony, part of his semiannual monetary policy report to Congress, was similar to his press conference three weeks ago when the Federal Open Market Committee left the federal funds rate unchanged at 2.25% to 2.5%. After raising rates four times in 2018, the FOMC has remained patient this year.
Although Mr. Powell said he expects economic growth to remain solid and labor markets to stay strong, uncertainties persist.
"Economic momentum appears to have slowed in some major foreign economies, and that weakness could affect the U.S. economy," Mr. Powell said. "Moreover, a number of government policy issues have yet to be resolved, including trade developments, the federal debt ceiling and Brexit. And there is a risk that weak inflation will be even more persistent than we currently anticipate. We are carefully monitoring these developments, and we will continue to assess their implications for the U.S. economic outlook and inflation."
James McCann, senior global economist at Aberdeen Standard Investments, said Mr. Powell's testimony indicates a rate cut at the FOMC's next meeting later this month is all but certain.
"It's more of a case of them being worried about what might happen to growth in the future," Mr. McCann said. "That's a bit worrying because the Fed is reacting to what might happen rather than what is actually happening, but it probably sees little to lose from acting proactively at this stage."
Several committee members asked Mr. Powell about Facebook Inc.'s plans to launch a cryptocurrency, Libra. Mr. Powell said the Fed supports responsible financial-services innovation but Libra raises concerns about privacy, money laundering, consumer protection and financial stability. "The process of addressing these concerns should be a patient and careful one and not a sprint to implementation," Mr. Powell said.
Another topic that lawmakers were curious about was Mr. Powell's reaction to criticism from President Donald Trump, who has taken issue with the Fed raising rates during his time in office. When Chairwoman Maxine Waters, D-Calif., asked what he would do if the president were to fire him, Mr. Powell said he would not leave because the law gives him a four-year term and "I intend to serve it."
Mr. Powell reiterated that the Fed is an independent body and makes decisions solely based on data.
Mr. Powell will testify Thursday before the Senate Banking Committee. The FOMC's next meeting is July 30-31.