WASHINGTON: President Donald Trump’s aggressive trade actions sparked a “shock” to business confidence which could impact the economy, and contributes to the case for cutting rates, Federal Reserve Chairman Jerome Powell said on Wednesday.
While sentiment has recovered some in recent weeks, businesses around the country have been telling the Fed about their concerns about material prices and access to supplies, Powell told a Senate committee.
Business confidence surveys turned “quite negative” in May — when Trump’s trade negotiations with China collapsed amid bitter accusations — and was “a bit of a confidence shock,” he said.
That concern among manufacturers, in particular the threat to their global supply chains, prompted the Fed to “indicate at our last meeting we were looking at changing rates.” The Fed open the door last month to cutting the benchmark lending rate, and economists and investors are convinced it will happen at the end of July.
Powell confirmed that the Fed is considering adjusting its stance to help the economy continue to grow.
“The bottom line is the economy is in a very good place and we want to use our tools to keep it there. It’s very important this expansion continue as long as possible,” Powell said.