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Fed will act ‘as appropriate’ to sustain US expansion: Powell

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Federal Reserve Chair Jerome Powell stressed Friday that the central bank will act to ensure the US economic expansion continues, even in the face of “significant risks” posed by slowing global growth.

But as Beijing stepped up retaliation in the US-China trade war, Powell warned that trade tensions are exacerbating the global slowdown and the Fed doesn’t have a “rulebook” for dealing with the uncertainties.

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Powell at the same time played down concerns that further stimulus could spark a surge in inflation, saying, “Low inflation seems to be the problem of this era, not high inflation.”

President Donald Trump’s trade war with China has escalated for months, undercutting business confidence and curtailing investment, while causing wild swings on global stock markets.

The Fed cut the benchmark interest rate last month for the first time in more than a decade, partly due to the anticipated impact of trade uncertainties on the growth.

But in his hotly-anticipated speech, Powell made clear the central bank has limited tools to respond to a trade war.

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“The three weeks since our July FOMC meeting have been eventful, beginning with the announcement of new tariffs on imports from China,” he said in a speech prepared for delivery to an annual central banking conference in Jackson Hole, Wyoming.

“The global growth outlook has been deteriorating since the middle of last year. Trade policy uncertainty seems to be playing a role in the global slowdown and in weak manufacturing and capital spending in the United States,” Powell said.

The US economy “is now in a favorable place,” but given the “significant risks we have been monitoring,” the Fed “will act as appropriate to sustain the expansion,” he said.

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He warned, however, that there is no “settled rulebook for international trade … no recent precedents to guide any policy response to the current situation.”

Several Fed officials at the conference repeated their opposition to further rate cuts to boost the economy, in part due to the potential to spark an upsurge in prices.

But Powell said, “Low inflation seems to be the problem of this era, not high inflation.”

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And he said, “in the unlikely event that signs of too-high inflation return, we have proven tools to address such a situation.”


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2020 Election

A historian of Nazi Germany explains why the divided opposition to Trump should terrify you

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As we witnessed in the third Democratic primary debate last week, Democratic presidential candidates are struggling to distinguish themselves from their party rivals and competing for endorsements. Their horizontal vision in these disagreements diverts their gaze from the peril we face as Donald Trump dismantles the norms that have guided our political life since 1776.

Whatever their differences, Democratic candidates must agree to broad principles related to key issues, for example, immigration, health care, and the growing wealth gap. A general consensus would leave plenty of room for healthy debates about implementation, but failure to emphasize shared ideals in relationship to two or three major questions will blunt Democrats’ offensive against a candidate whose campaign is based on slander and fear.

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2020 Election

Trump’s longshot bid to win New Mexico has political leaders baffled: ‘He’s a batsh*t racist’

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Despite losing New Mexico by eight points in the 2016 presidential election, Donald Trump and his campaign manager Brad Pascale are making big plans to win the state in 2020 -- and that has political observers baffled.

With Trump appearing in New Mexico on Monday night, Politico reports the president has his work cut out for him in a state that saw the GOP lose the governorship and one House seat in 2018.

"The Land of Enchantment has voted for a Republican presidential candidate only once since 1992. With a considerable nonwhite voter population and all-Democratic congressional delegation, it’s not exactly fertile ground for a surprise GOP victory," the report notes before adding that Parscale feels they can make inroads this go-around.

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Commentary

Why won’t the Democrats talk openly about impeachment?

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The ABC/Univision Democratic debate last week ran a bit more smoothly than the previous two, even managing to squeeze in a decent discussion on climate change and Afghanistan policy. These events are always more theater than substance, particularly with so many people on the stage. But early debates in the primary season are where engaged partisan voters outside the early states get a chance to see the larger field of candidates and develop a sense of where the party's center of gravity is in the current election cycle.

This article was originally published at Salon

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