Powell Gives the Green Light to an Interest Rate Cut


The Dow hit 27,000 points for the first time ever on Wednesday, as stocks climb higher on hopes of an interest rate cut later this month.

The yield on Australia's benchmark 10-year note, which moves inversely to its price, surged 10-1/2 basis points to 1.445 percent, the yield on the long-term 30-year bond jumped 11-1/2 basis points to 2.092 percent and the yield on short-term 2-year traded almost 4-1/2 basis points to 0.997 percent by 04:30GMT. The core consumer price index (CPI), excluding food and energy prices, rose 0.3% in June over the month prior, exceeding expectations. The Nasdaq Composite, which closed at a new all-time high of 8,203 points on Wednesday, slipped into negative territory.

Stock futures pared some gains after a Labor Department report showed US underlying consumer prices increased by the most in almost 1-1/2 years in June.

But that sentiment changed in early 2019 as the Fed expressed concern that the global economy was slowing and interest rates, for the time being at least, didn't need to rise further.

He said: 'Libra raises many serious concerns regarding privacy, money laundering, consumer protection and financial stability'.

'The answer would be, 'No, " Powell said.

Giving evidence to Congress, Powell said that many Fed members saw the case for action during its June meeting.

Since Fed officials met last month, when they chose to hold rates steady, "uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the United States economic outlook", he wrote.

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He repeated that the central bank would act appropriately to sustain the expansion, which last week became the longest in history. The US central bank sees the uncertainty around trade tensions as a key factor in lowering rates.

"The market has certainly been fueled by a dovish turn not only in the USA but central banks around the world", said Mike Stritch, chief investment officer at BMO Wealth Management.

The Dow rose to a fresh all-time intraday high before pulling back slightly.

"Fed not only focused on concerns within the USA economy, but also took into consideration the global economy, negative impact from trade wars and basically hitting all the right buttons for gold bulls".

US crude rose 0.1% to $60.26 per barrel.

Powell is due to appear before the Senate Banking Committee on Thursday but his testimony is not expected to have the same sort of impact. "By way of an update, the Chair just confirmed that things have gotten worse".

Federal Reserve Board Chairman Jerome Powell gave the markets what they wanted while also tossing some red meat the way of House Democrats.

Powell said Fed officials were mindful of ongoing crosscurrents from global growth and trade at the May FOMC meeting, adding that since then "these crosscurrents have re-emerged, creating greater uncertainty".