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The quarterly cost of federal officials declined, most likely at the July meeting



Federal Reserve officials said they were willing to cut interest rates by a quarter of a percentage point at their upcoming meeting, pointing to the potential for further cuts because they were concerned about the slowdown in global growth, the growing uncertainty in trade policy

Officials are not prepared for bold action by halving, as analysts and traders have speculated in recent days, according to recent public statements and interviews with employees.

for a bigger move seems unlikely for now because officials said the recent economic events did not signal a close decline.

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Fed Chairman Jerome Powell closed the cut-off phase last week during testimony in Congress when he expressed concern about global growth and the risk of a longer shortage of inflation from the Fed's 2% target. These changes have enhanced the situation for an easier political position, he said.

The result is that ̵

1; without expecting unexpected economic changes between now and the meeting of 30-31 July – the larger debate will focus on how to signal our plans and prospects. after July.

Market expectations for a half-point decline in the Fed rose on Thursday afternoon after New York President Fed John Williams delivered a speech that puts 20 years of theory and practice showing that the economy is justified when the economy is justified .

A testimony to the Senate Banking Committee in July, Federal Reserve Chairman Jerome Powell signaled again that the central bank is ready to cut interest rates later this month. Photo: AP

n. Williams's words bear a heavy burden on the markets, partly because he is the deputy chairman of the Federal Open Market Committee. As the markets began to expect a greater reduction in interest rates, the Fed in New York issued a rare clarification that the speech was not meant to provide a specific signal for short-term political action.

"This was an academic speech for 20 years of research. It was not about potential political action at the forthcoming FOMC meeting, "a Fed spokeswoman in New York said on Thursday evening in response to questions from reporters. Williams, a leading academic thinker, highlighted the points he made public before. But the context of his remarks – he speaks close to the beginning of the usual early Fed period, which begins on Saturday – fueled an unintended market reaction. "We have not seen anything like that before and honestly, we are not sure what they think," said Neil Dutta, head of the economy at Renaissance Macro Research LLC, in a customer announcement Friday morning. "Of course, the market would have taken such a speech – with focus and time – just before the July conference."

President Trump, who regularly calls for multiple cuts, said on Friday in a pair of tweets. that he prefers "Mr Williams first statement much better than his second one." He repeated his call to the Fed to aggressively cut interest rates: "Do not blow it!"

Fed employees will have other developments to consider coming up with the events. 10 days, including the European Central Bank political decision next Thursday, and reports on economic growth and inflation in the second quarter of the United States. , St Louis President James Bullard, who did not agree with the June decision to keep interest rates as he preferred a cut in interest rates, said in an interview that he would "listen to arguments" for a half point, but added: "Sitting here today, I just do not think the situation really requires this aggressive step. "

The President of the Dallas Fed, Robert Kaplan, said in an interview Tuesday that he could support a" tactical "cut in interest rates due to the recent decline in long-term bond yields. , but any such move must be "modest, limited [and] limited." He said he was worried about the potential to trigger asset price bubbles by providing unnecessary incentives. examples from 1995 and 1998 when the Fed took out "insurance policies" by lowering interest rates when the economy was still healthy. In both cases, the Fed's authorities initiated what would turn into a series of three interest rate cuts with quarterly intervals in a few months. a further reduction of half a point, but officials would still retain the possibility of further cuts.

Ethan Harris, head of the global economy at Bank of America Merrill Lynch, said the half-point cut and wider issues that Mr Williams raised on Thursday were better suited to a situation where the economy obviously shrinks.

and the approach of awe is the wrong tool for this problem, "said Mr. Harris. "It's not for you when you are facing a slowdown or disappointment on the inflation target."

Interest rate cuts began to build in May following the escalation of trade pressures from Mr Trump, first with China and later with Mexico. Surveys have shown that business moods are worsening, leading to worries about stronger investment pressure. "It was a shock of confidence," Mr. Powell said last week.

At the Federal Reserve session in June, eight out of 17 officials predicted a cut in interest rates this year, with seven out of eight expecting a positive rate by the end of the year. Currently, the percentage is in the range between 2.25% and 2.5%.

A larger group of 14 employees said they see rising risks that growth will be weaker than expected, most since the Fed started its final round of bond purchases. 2012 to stimulate economic growth.

Lewis Alexander, chief economist at Nomura Securities, said he had received disagreement among officials about whether and how much interest would be cut that would make it easier to reach an agreement to cut by a quarter of a half. "If what you are doing signals, it has the advantage of having a stronger consensus that sends a cleaner message," he said.

Reporting the justification for a larger incision can be difficult because of a relatively tough economic data, says William English, a former Fed chief economist who is now teaching at Yale University. He said it was more reasonable now to lower interest rates with less growth and to keep the possibility of further moves later.

"A strong political response is needed to stop the recent sharp economic downturn," a Morgan Stanley economist writes in a report calling for a half-hour reduction last week.

Interest rate cuts are likely to lead to a debate about whether the Fed should limit its $ 3,8 trillion portfolio slump. But Mr. Powell also said they do not want the drain – a form of lifting the incentives from the economy – to contradict their tariff policy, the main way they seek to deliver or remove mulus.

Write to Nick Timiris at nick.timiraos@wsj.com

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