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Powell: 'Crosscurrents' are weighing on the economy, so Fed will 'act as appropriate'

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Fed chairman Jerome Powell testifies before Congress

Business investments across the U.S. have slowed recently as uncertainties over the economic outlook linger, Federal Reserve Chair Jerome Powell said Wednesday in prepared testimony to the House Financial Services Committee.

"Inflation has been running below the Federal Open Market Committee's (FOMC) symmetric 2 percent objective, and crosscurrents, such as trade tensions and concerns about global growth, have been weighing on economic activity and the outlook," Powell said in his testimony, reiterating the central bank will "act as appropriate" to sustain the current economic expansion.

The Fed chief also noted that business investment has slowed down "notably," adding the outlook has not improved in recent weeks. Powell will deliver his testimony at 10 a.m. ET and answer questions from lawmakers.

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Powell: Since June, uncertainty has continued to weigh on the outlook

Powell's prepared testimony appeared to confirm the market's rate-cut expectations. Stock futures turned positive after the remarks were released. The Dow Jones Industrial Average was headed for a gain of more than 100 points at the open.

"There is a risk that weak inflation will be even more persistent than we currently anticipate," Powell added, further bolstering the case for a rate cut.

"Overall growth in the second quarter appears to have moderated," Powell said in the prepared remarks. "Many FOMC participants saw that the case for a somewhat more accommodative monetary policy had strengthened. Since then, based on incoming data and other developments, it appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook."

U.S. President Donald Trump speaks as Jerome Powell, governor of the U.S. Federal Reserve and Trumps nominee as chairman of the Federal Reserve, left, listens during a nomination announcement in the Rose Garden of the White House in Washington, D.C., U.S., on Thursday, Nov. 2, 2017.
Andrew Harrer| Bloomberg | Getty Images

The U.S. and China have been engaged in a trade war for more than a year. Late last month, the two countries agreed to restart trade negotiations in an effort to end the spat. Meanwhile, data from overseas — especially in Europe — are showing weakening economic activity.

Powell noted the economy "performed reasonably well" in the first half of 2019, with consumer spending rebounding in the second quarter after being weak in the first quarter.

Powell's testimony comes after the Fed opened the door to cutting rates at its previous monetary policy meeting in June.

Markets cheered the central bank's remarks, with stock indexes reaching all-time highs last week. Traders are also pricing in a 100% probability of a rate cut before the end of July, according to the CME Group's FedWatch tool.

— CNBC's Jeff Cox and Patti Domm contributed to this report.

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