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Jay Powell hints at rate cuts

The Fed chairman said yesterday that the central bank was prepared to act to sustain the economic expansion if President Trump’s trade disputes weakened the economy, Jeanna Smialek and Matt Phillips of the NYT write.

“We do not know how or when these issues will be resolved,” Mr. Powell said of the trade disputes. “We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion.”

He did not say explicitly that the Fed would cut rates. “But his comments sent a signal that the central bank was watching Mr. Trump’s trade wars warily, ready to fend off any economic damage,” Ms. Smialek and Mr. Phillips write. Futures markets for Fed funds now place a probability of more than 60 percent on a cut in interest rates at the Fed meeting at the end of July.

Wall Street celebrated. Markets posted big gains after his statement. The S&P 500 rose 2.1 percent, its second-best daily gain of 2019. The rally was broad, with tech companies, financial firms and industrial producers all seeing gains. The rebound even coaxed some investors from the safety of government bonds.