While the headwinds facing the U.S. economy are on the rise, the Federal Reserve will "act as appropriate to sustain the expansion," Chairman Jerome Powell said Friday.
In prepared remarks at the Kansas City Fed's annual economic symposium in Jackson Hole, Wyo., Mr. Powell did not indicate if he's in favor of another rate cut at the Fed's next meeting on Sept. 17-18. In July, the Federal Open Market Committee lowered the target range for the federal funds rate by 25 basis points to 2% to 2.25%.
In 2019, the Fed has been monitoring slowing global growth, trade policy uncertainty and muted inflation, Mr. Powell said. "The global growth outlook has been deteriorating since the middle of last year," he said. "Trade policy uncertainty seems to be playing a role in the global slowdown and in weak manufacturing and capital spending in the United States. Inflation fell below our objective at the start of the year. It appears to be moving back up closer to our symmetric 2% objective, but there are concerns about a more prolonged shortfall."
As trade tensions between the U.S. and China have ratcheted up in recent months, including an announcement from China shortly before Mr. Powell's speech that it would impose tariffs on $75 billion in U.S. goods, the Fed has taken note of the potential impacts, Mr. Powell said.
"While monetary policy is a powerful tool that works to support consumer spending, business investment, and public confidence, it cannot provide a settled rulebook for international trade," he said. "We can, however, try to look through what may be passing events, focus on how trade developments are affecting the outlook, and adjust policy to promote our objectives."
James McCann, senior global economist at Aberdeen Standard Investments, said Mr. Powell was trying to take a "measured approach" in his speech Friday. "You've got the administration calling almost on a daily basis for aggressive easing; the market is obviously pricing in a lot of that," he said. "I think what Powell is doing here is signaling that the FOMC is ready to act, but it's keen to do that at its own pace."
President Donald Trump, who would like rates to be cut further, has consistently criticized the Fed and Mr. Powell. In a tweet shortly after Mr. Powell's speech, the president said, "We have a very strong dollar but a very weak Fed."
Mr. Trump concluded his tweet thread by asking: "My only question is, who is our bigger enemy, Jay Powell or (China's) Chairman Xi?"
Mr. McCann believes, Mr. Powell is trying to strike a delicate balance. "There is a desire not to pre-commit, not to completely endorse market pricing, not to show sensitivity to what the political influences are at present," Mr. McCann said. "Just a consistent and steady message that the Fed is prepared to sustain the expansion."
Another rate cut is widely expected at the Fed's next meeting in September.