Dow at record above 27,000 as US rate cuts look likely

President Trump has repeatedly argued that the USA economy would be growing faster if the Fed lowered interest rates.

While he steered clear of commenting on Trump's aggressive trade policies, especially against China, Powell said in his prepared testimony that businesses and farmers now "report heightened concerns" about the U.S. economy.

While the U.S. economy has performed "reasonably well" this year, "crosscurrents, such as trade tensions and concerns about global growth, have been weighing on economic activity and the outlook", Fed Chair Jerome Powell said in prepared remarks ahead of his two-day testimony before Congress. The developments provided a boost to the commodity, which took a hit earlier in the week as a stronger dollar added to ongoing worries about the trade war and soft global outlook.

"The dollar bounced back as the strong US CPI got the market to question the Fed's view on prices and whether inflation was really as weak as projected", said Takuya Kanda, general manager at Gaitame.Com Research Institute. But over the last decade, the Federal Reserve has been banging the inflation beehive with a baseball bat and the bees haven't come out.

US stock index futures were slightly higher Friday morning, amid optimism rooted in expectations of a Federal Reserve rate cut later this month.

Outside of the core retail categories, used auto prices rebounded strongly (+1.6%) in June after four consecutive months of large declines.

Many investors have put the odds of a rate cut this month at 100%.

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.

The chairman said the Fed doesn't pay attention to any of the negative commentary and criticism from the president.

Trump has criticized Powell and his colleagues on a regular basis for nearly a full year - first calling on the Fed to stop, and then to reverse, its 2018 interest-rate increases.

The Dollar drew support Thursday from official figures that showed inflation rising faster than was expected during June, potentially leading some investors to conclude that elevated consumer price pressures could prevent the Federal Reserve (Fed) from cutting its interest rate as much as markets expect. This counters the trend of USA economic data tending to disappoint as of late.

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".

Yet according to the Fed's preferred inflation gauge, it has been below 2% for almost the entire seven years since the central bank chose that target.

"If we had a Fed that would lower interest rates, we'd be like a rocket ship", he told reporters last week.

Powell on Thursday delivered to the senators an oral testimony identical to the one he made in front of the House representatives the previous day.

  • Zachary Reyes