Powell says Fed will ‘sustain this expansion,’ bolstering hopes for interest-rate cut

Federal Reserve Chairman Jerome H. Powell said the most likely outlook for the U.S. and world economy is continued moderate growth, but the U.S. central bank was monitoring “significant risks.”

“We’re going to continue to watch all of these factors, and all the geopolitical things that are happening, and we’re going to continue to act as appropriate to sustain this expansion,” Powell said Friday in Zurich, Switzerland. “Our main expectation is not at all that there will be a recession” either in the U.S. or the global economy, he added.

Powell’s remarks did little to change investors’ expectations for an interest-rate cut when U.S. central bankers gather in Washington on Sept. 17-18. Those expectations remained in place after the Labor Department reported that employers added 130,000 new jobs in August, falling somewhat short of economists’ estimates.

U.S. stocks remained higher and Treasuries were mixed as Powell spoke, with the S&P 500 adding to a second straight weekly gain.

Powell said the labor market was in quite a strong position and described the latest jobs data, released earlier Friday, as “consistent” with that picture.

For months, Powell and his Fed colleagues have warned that trade tensions and slower global growth represented a mounting set of risks for the U.S. economy. To guard against those risks and to boost below-target inflation, the Fed cut rates by a quarter point in July — a move Powell, at the time, called a “mid-cycle adjustment” and “not the beginning of a long series of rate cuts.”

In recent weeks, however, evidence has grown that President Trump’s ongoing trade disputes are causing not only uncertainty but also real damage to the U.S. economy.

Powell continued to characterize the economy in mostly positive terms, saying that it is in a “good place” with the caveat that uncertainty around trade policy, as well as slowing global growth and persistently low inflation, posed threats to the outlook.