Powell Promises to Act 'As Appropriate to Sustain the Expansion'

Federal Reserve Chairman Jerome Powell said Friday that the central bank will provide stimulus if trade tensions and global economic sluggishness appear to hurt the U.S. economy.

Powell said that the Fed’s role was not to set trade policy but to adjust monetary policy in light of how the U.S. economy is affected.

“Setting trade policy is the business of Congress and the Administration, not that of the Fed. Our assignment is to use monetary policy to foster our statutory goals,” Powell said in a speech at the Kansas City Fed’s annual research conference in Jackson Hole, Wyoming.

He added that dealing the impact of trade uncertainty was a new problem for the Fed.

“There are, however, no recent precedents to guide any policy response to the current situation. Moreover, while monetary policy is a powerful tool that works to support consumer spending, business investment and public confidence, it cannot provide a settled rulebook for international trade,” he said.

By taking this stance, Powell appeared to push back on critics who have accused the Fed of “enabling” the Trump administration’s trade fight with China by demonstrating a willingness to cut rates to offset any drag from tariffs and the global economic slowdown.

Powell also indicated that recent events may have changed his outlook on the strength of the economy.

“The three weeks since our July FOMC meeting have been eventful, beginning with the announcement of new tariffs on imports from China. We have seen further evidence of a global slowdown, notably in Germany and China,” Powell said.

Powell did not, however, promise the Fed would be more aggressive in providing stimulus. Instead, he indicated that the Fed stood ready to react to data showing sluggishness.

“Based on our assessment of the implications of these developments, we will act as appropriate to sustain the expansion,” Powell said.

Powell’s remarks followed the surprise announcement by China on Friday that it would hike tariff rates on $75 billion of U.S. goods. President Trump reacted by saying it was time for the Federal Reserve to act to bolster the economy, the latest of the president’s many recent declarations that the Fed should cut rates.