Powell is under intense political pressure from the White House to cut interest rates aggressively – President Donald Trump has called for a cut of a full percentage point – to pre-empt a slowdown that has resulted largely from Washington’s own trade policy and the fading effects of its tax cuts.
The slowdown, visible for months in China, Japan and Europe, is reaching U.S. manufacturing too, with the IHS Markit purchasing managers index of activity dropping below 50 for the first time in nearly 10 years in August.
However, the ongoing strength of U.S. domestic demand - evident in a string of strong reports from U.S. retailers in recent weeks - has so far stopped Fed officials from easing monetary policy aggressively. Kansas City Fed President Esther George, one of two dissenters from last month’s decision to cut the Fed funds rate by 25 basis points last month, repeated her opposition to any more easing on Thursday, as did Philadelphia Fed President Patrick Harker, who doesn’t have a vote on Fed decisions this year.
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