Federal Reserve Board Chairman Jerome Powell says an interest rate cut could soon be on the cards (NICHOLAS KAMM)

Washington (AFP) – America’s grinding trade wars are darkening the economic horizon and could justify a decrease in interest rates, Federal Reserve Chairman Jerome Powell said Tuesday.

“The question my colleagues and I are grappling with is whether these uncertainties will continue to weigh on the outlook and thus call for additional policy accommodation,” Powell said, according to remarks prepared for a speech in New York.

But he also insisted the central bank was “insulated” from political pressures despite persistent antagonism from President Donald Trump, including sharp criticism from the Republican leader on Monday.

Trump has repeatedly — and publicly — demanded looser monetary policy, even though the Fed is meant to be above the political fray.

The Fed last week held steady on interest rates for the fourth time this year. 

But policymakers have signaled in recent weeks that they may be open to cutting rates for the first time in a decade as the global economy slows and Trump’s trade wars begin to dent business confidence.

With US unemployment near historic lows and inflation forecast to rise only slowly, the outlook remained generally “favorable,” Powell said.

But risks to that outlook have grown, he added, as recent progress on resolving trade disputes had deteriorated, producing greater uncertainty.

Powell said business people have voiced “heightened concern” over trade, which may have hit confidence and could also be turning up in economic data, such as weakening investment by companies.

While he cautioned against overreacting to short-term swings in individual data points, he said “many” members of the Fed’s rate-setting Federal Open Market Committee believe the case for cutting rates had “strengthened.”

Markets overwhelmingly expect the central bank to adopt a rate cut at its next meeting in July.

Disclaimer: Validity of the above story is for 7 Days from original date of publishing. Source: AFP.