Powell Says Fed Has Room to Cut, May Have Kept Policy Too Tight

• Markets have a July rate cut from the Federal Reserve as the base case following Chair Jerome Powell’s two-day testimony to Congress.
• Federal Reserve Chairman Jerome Powell suggested that the central bank has room to ease monetary policy as the tie between the inflation and jobless rates have broken down.
• “The relationship between unemployment and inflation became weak” about 20 years ago, Powell told the Senate Banking Committee Thursday. “It’s become weaker and weaker and weaker.”
• Two regional Fed governors are pushing back, with Atlanta’s Raphael Bostic and Richmond’s Thomas Barkin disputing the need for stimulus right now. Each of them cited the Dallas Fed’s trimmed mean measure of inflation which has come in close to 2% in recent months.
• As neither of them are voting on the FOMC this year, their arguments could well get lost as Powell gets on with being the world’s central banker.

(Source: Bloomberg)