Minneapolis Fed President Kashkari advocated for 50 basis point rate cut

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Investors are betting on at least one interest rate cut this year, possibly as early as July. Another interesting thing was that he said the Fed has not yet discussed whether rate cuts should be 25bp or 50bp.

"In light of these uncertainties and muted inflation pressures, the Committee will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective", the statement said.

Other problems have cropped up for the Fed, most notably the unpredictable path of USA trade negotiations, and signs that global economic growth may be slowing.

Officials indicated that they expected to cut rates next year, reducing the median Fed funds rate forecast to 2.1% for 2020.

Only one voting member of the Federal Open Market Committee dissented against that decision: St. Louis Fed President James Bullard. Trump's public criticism, a highly unusual action for a president, has raised concern that he is undermining the Fed's independence as a central bank.

The Pound-to-Dollar exchange rate has recovered to levels above 1.26 on the overnight developments concerning the Fed, with the pair being quoted at 1.2713 at the time of writing, having been as low as 1.25061 earlier in the week.

"If this was a reaction to the Trump-Powell report, then it is likely we will see a reversal of some description".

Tuesday saw Trump launch his official re-election campaign, and he knows if the economy is sagging when Americans go to the polling booth he might be in trouble: Trump is again making the economy central to his campaign.

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The president has previously explored firing Powell.

Powell said the Fed made "significant changes" to its policy statement, which marked down its assessment of overall economic activity to "moderate" instead of "solid" as it did in May.

The focus now shifts to whether the United States and China can resolve their trade row at a summit in Japan next week of leaders from the Group of 20 leading world economies.

If so, for the first time in a long while, Canadian and US rates would be converging - not because Poloz would hike, but because Canada would hold steady while the USA cut.

According to reporter Jennifer Jacobs at Bloomberg, Trump told confidants as recently as Wednesday that he believes he has the authority to replace Jerome Powell as chairman of the Federal Reserve Board. This week, the Federal Reserve Bank of NY reported that an index it compiles of manufacturing in NY state plunged this month into negative territory - to its lowest point since 2016. The index reflects manufacturing conditions in the state. Trump also said that before his meeting with Xi, negotiators for the two sides will resume talks.

With interest rates so close to zero already, he said, research suggests central banks are better off cutting sooner rather than waiting too long in order "to prevent a weakening from turning into a prolonged weakening".

Draghi's comments sent the value of the euro tumbling against the dollar, prompting an angry tweet from Trump accusing the European Central Bank leader of acting to weaken the euro to gain a competitive trade advantage against the United States.

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