Fed's Powell Reiterates Stronger Case for Cut Amid Economic Risks

"The Fed is insulated from short-term political pressures — what is often referred to as our independence," Powell said. "Congress chose to insulate the Fed this way because it had seen the damage that often arises when policy bends to short-term political interests."

Trump has criticized the central bank for keeping credit too costly and for failing to lower interest rates last week. Policy makers "blew it" on June 19 when they kept the benchmark overnight rate unchanged at just under 2.5%, Trump tweeted on Monday. He compared the Fed to a "stubborn child."

Some of those policy makers did in fact advocate for a rate cut at last week's meeting, including St. Louis Fed chief James Bullard and the Minneapolis Fed's Neel Kashkari. They were driven by concern that inflation is stuck below the central bank's 2% target — suggesting that there's room to stimulate the economy, helping to create more jobs and boost wages, without pushing prices too high.

Economic Data

The U.S. economy is slowing after a stronger than expected first quarter. Sales of new U.S. homes fell to a five-month low in May while consumer confidence dropped in June to its lowest level since September 2017, according to reports Tuesday.

"The limited available evidence we have suggests that investment by businesses has slowed from the pace earlier in the year," Powell said.

The Fed chairman said the economic outlook basically remained promising, with unemployment near historic lows.

"However, the risks to this favorable baseline outlook appear to have grown,'' he said.

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