Trump-Federal Reserve

FILE - In this July 31, 2019, file photo, Federal Reserve Chairman Jerome Powell speaks during a news conference following a two-day Federal Open Market Committee meeting in Washington. President Donald Trump is calling on the Federal Reserve to cut interest rates by at least a full percentage-point “over a fairly short period of time,” saying such a move would make the U.S. economy even better and would also “greatly and quickly” enhance the global economy. In two tweets Monday, Aug. 19, Trump kept up his pressure on the Fed and Powell, saying the U.S. economy was strong “despite the horrendous lack of vision by Jay Powell and the Fed.” (AP Photo/Manuel Balce Ceneta, File)

By MARTIN CRUTSINGER AP Economics Writer

WASHINGTON — The economy is slowing, the trade war is raging and the president is repeatedly attacking.

Under the glare of a spotlight, Chairman Jerome Powell may signal Friday what the Federal Reserve will do — or can do — to strengthen the economy and restore confidence at a time of nagging uncertainties and global weaknesses.

Powell will give the keynote speech to an annual gathering of global central bankers in Jackson Hole, Wyoming. It comes at a time of concern that the risk of a recession over the next year or two is rising, in part because of Trump’s aggressive use of tariffs against China and other key trading partners. The financial markets will be hoping for a clear sign of forthcoming Fed interest rate cuts.

Investors have already baked in the expectation that the Fed will cut its benchmark short-term rate next month for the second time this year. The intent would be to encourage borrowing and spending by consumers and businesses.

The big question, though, is this: Would a Fed rate cut — or even multiple rate cuts over the next several months — really matter? Borrowing rates are already historically low. Few analysts think that reducing them a bit further would do much to revive the economy’s areas of weakness — from sluggish factories to a tepid housing market to anxious consumers to uncertainty among companies about how to respond to Trump’s mercurial trade policies.

On top of all that, the global economy may be edging toward recession, and some economists fear an eventual spillover into the United States. Even though the Fed might not be equipped to energize U.S. growth at this point, most economists see few alternative solutions at a time when Congress seems disinclined to take any action.

At its meeting last month, the Fed cut its key rate by a modest quarter-point for the first time in a decade to try to counter Trump’s trade wars, chronically low inflation and global weakness. It left open the possibility of future rate cuts, though perhaps not as many as Wall Street had hoped for. At a news conference, Powell characterized the move as a “mid-course correction” and struggled to articulate the Fed’s strategy and what might prompt future rate cuts.

Will Powell offer a clearer message Friday? Few are confident that he will, in part because the chairman lacks unanimity within the Fed’s policymaking committee that rate cuts are needed now. Last month, two committee members dissented from the decision to cut rates.

“I am expecting he will cautiously hint at another quarter point cut, but he doesn’t have everyone on board,” said Diane Swonk, chief economist at the accounting firm Grant Thornton.

Mark Zandi, chief economist at Moody’s Analytics, suggested that if Powell were to signal the likelihood of multiple rate cuts, he might actually weaken consumer and business confidence because fears could spread that the economy could be on the brink of recession.

“But at this point, I think he will want to err on the side of arguing that more rate cuts seem likely, just because the economy is slowing, and he doesn’t want to tip the economy over into a recession,” Zandi said.

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