Markets rise on firm rate-cut expectations as trade woes loom

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Following the hearing on Wednesday, the Fed is to release the minutes from its last policy meeting, which should show the extent to which the thinking at the central bank shifted in the days following Trump's Mexico tariff threat, and how the discussion was shaped by other concerns including weak inflation.

"That's why we're so committed to using our tools to sustain the expansion", he said in response to a question. This year it has fallen farther below that goal.

US Federal Reserve Chairman Jerome Powell said on Wednesday that Facebook's plan to build a digital currency called Libra "cannot go forward" until serious concerns were addressed.

That gives the Fed more room to cut rates. The president reportedly looked into firing Powell after the Fed's last interest rate hike, in December.

Speaking to the House Financial Services Committee, Powell said wages ought to be rising much faster in an economy growing at this rate. Trump has also explored the legality of demoting Powell from the Fed chair and claimed he has that authority.

"Many FOMC participants saw that the case for a somewhat more accommodative monetary policy had strengthened". Powell insisted he would not step down even if Trump asked him to resign.

"I have kind of said what I meant to say on the subject and what I said is the law clearly gives me a four-year term and I fully into to serve it", Powell said.

A number of Democrats also signaled their support for Powell and for the Fed's independence from political interference.

"We're learning that interest rates - that the neutral interest rate - is lower than we had thought and I think we're learning that the natural rate of unemployment is lower than we thought", he said.

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Sen. Richard Shelby, R-Alabama, told Powell on Thursday, "Thank you for keeping the Federal Reserve independent of both parties".

"You've assigned us the job of two direct real economy objectives: maximum employment and stable prices", he said.

US stocks ended higher on Wednesday and the S&P 500 briefly crossed 3,000 points for the first time following Powell's remarks.

Typically in the past, when unemployment has fallen very low - such as to the current 3.7% - employers are compelled to offer higher pay to attract and keep workers.

Having raised the key borrowing rate nine times since 2015 as the economy expanded, most recently in December previous year, the Fed last month opened the door to a rate cut amid signs of slowing.

Eric Winograd, senior US economist at Alliance Bernstein, noted that both vehicles and apparel "had been negative for the last few months and so the bounce this month is more likely payback for previous weakness rather than the start of a new trend".

"We are in the camp and have been all year, and arguably wrongly, that the Fed becoming more dovish and cutting rates is not good for risk assets", said Neil Dwane, global strategist and portfolio manager at Allianz Global Investors.

"I think we're learning all of those things", he said.