The Federal Reserve reiterated its openness to cutting interest rates to extend the longest U.S. economic expansion on record while noting that the pace of growth had slowed in the second quarter of 2019.
“Data for the second quarter suggest a moderation in GDP growth — despite a pickup in consumption — as the contributions from net exports and inventories reverse and the impetus from business investment wanes further,” the Fed said in its semi- annual Monetary Policy Report to Congress released Friday in Washington.
The report repeated wording from the June Federal Open Market Committee statement saying officials would closely monitor incoming data and “act as appropriate to sustain the expansion.”
It was completed before the release of Labor Department data on Friday showing employers added 224,000 jobs in June, a strong rebound from a disappointing payrolls tally for May.
Fed Chairman Jerome Powell on Wednesday will kick off two days of highly anticipated testimony before lawmakers, the same day the central bank is scheduled to release the minutes of its last policy meeting. His remarks, and clues to where officials stood on June 18-19, should continue to shape investors’ expectations for what policy makers might do at their July 30-31 gathering.
Friday’s report acknowledged inflation has been running below the Fed’s longer-run 2% objective, but also characterized weak readings early in the year as appearing to reflect “transitory influences.”
Proponents of a rate cut have pointed to weak inflation as another reason to ease policy. After seven years of mostly falling below the central bank’s target, the Fed’s favorite gauge of inflation stood at 1.5% in the 12 months through May. In addition, measures of expectations for future inflation have slipped in recent months, both among investors and the public.