Fed official says low inflation, slow growth justify US rate cut

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Looking ahead, expect European markets to maintain their focus on the Fed and the dollar but as mentioned above, things may not seem all that bad for the greenback given how pessimistic markets have been coming into yesterday's FOMC meeting.

Mr Trump told ABC News last week that he disagreed with Mr Powell "entirely", adding that "if we had a different person in the Federal Reserve that wouldn't have raised interest rates so much", economic growth would have been stronger. That word had been removed from the latest statement.

The Fed continued to regard the labor market as "strong" and said "sustained expansion of economic activity" and eventually rising inflation were still "the most likely outcomes". The FOMC statement said that while household spending appeared to have picked up from earlier in the year, "indicators of business fixed investment have been soft".

It tries to meet these goals primarily through its ability to set benchmark interest rates, which requires careful balancing the economy's many different needs.

The biggest risk to the US economy and the FOMC outlook is global trade relations.

At the previous Fed meeting the general expectation was that China and the USA were on course to sign a trade deal. Trump, in turn, accused Draghi of currency manipulation.

Since then negotiations have come to a virtual standstill.

Traders work on the floor of the New York Stock Exchange on Thursday.

Even though Fed Chair Powell also mentioned escalating trade tensions and concerns of a potential slowdown in global economic growth, the slide in inflation remains a larger concern as far as the U.S. economy is concerned.

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On Wall Street, the Dow Jones Industrial Average rose 38.46 points, or 0.15 percent, to 26,504, the S&P 500 gained 8.71 points, or 0.30 percent, to 2,926.46 and the Nasdaq Composite added 33.44 points, or 0.42 percent, to 7,987.32.

Speaking on Wednesday, chairman Jerome Powell noted that apparent progress on trade talks had "turned to greater uncertainty" and many Fed officials "now see that the case for somewhat more accommodative policy has strengthened".

While the nine other voting members made a decision to hold rates, they are moving in the same direction as Bullard.

Mr. Powell, asked after this week's policy meeting about the danger of delaying any policy move, said, "I don't think the risk of waiting too long is prominent right now". Tariffs are taxes, and taxes have a more direct impact on growth than monetary policy. Yields on benchmark 10-year Treasuries fell to 2.03%.

The news comes on the heels of Powell's comment that he intends to serve his full four-year term despite Trump's continuing criticism of current Federal Reserve policy. In a Twitter post at the weekend, he predicted "market crash the likes of which has not been seen before" if he were not returned in 2020.

In March, the European Central Bank cut its 2019 economic growth forecast for the Eurozone from 1.7% to 1.1% and announced a third round of bank stimulus that will begin in September and run through March 2021.

The softer slant from the U.S. central bank provided more support to global investors, who were already in buoyant mood after Donald Trump flagged positive talks with China's Xi Jinping and said they would meet next week.

The euro bounced to $1.1254 after the Fed's dovish signals undermined the dollar's yield attraction, pushing the common currency away from this week's low of $1.1181 touched on Tuesday.