Fed Chief Powell Says Trade Policy Is Weighing On Investment Decisions

Federal Reserve Chairman Jerome Powell said Friday that the trade war between China and the U.S. is weighing down companies' investment decisions.

"I think it is the case that uncertainty around trade policy is causing some companies to hold back now on investment," Powell said in Switzerland. "We've been hearing quite a bit about uncertainty. So for businesses, to particularly make longer-term investments in plants or equipment or software, they want some certainty that the demand will be there."

China and the U.S. have been engaged in a trade war that has rattled financial markets since last year. In August, an escalation between the two countries led U.S. equities to their biggest one-month loss since May.

Tensions between China and the U.S. thawed slightly this week after Chinese trade officials said they would fly to Washington next month to continue negotiations. However, expectations of the two sides reaching a deal are low.

The uncertainty around trade has contributed to the Fed easing its stance on monetary policy, following other central banks overseas. The Fed cut rates by 25 basis points in July and is expected to trim rates again later this month.

Powell said lower rates are helping to keep the U.S. economy in a good place. The U.S. services sector expanded at a faster-than-expected rate in August, according to data from the Institute of Supply Management released Thursday. However, the U.S. manufacturing sector contracted for the first time since 2016 last month.

The chairman also said he does not expect the U.S. economy to fall into a recession.

—CNBC's Tom Franck contributed to this report.

Subscribe to CNBC on YouTube.

RECENT NEWS

Stocks Rise After Better-than-expected Jobs Report To Close Out Winning Week

Stocks rose on Thursday following a better-than-expected U.S. jobs report as the economy tries to recover from the coron... Read more

Record Jobs Gain Of 4.8 Million In June Smashes Expectations; Unemployment Rate Falls To 11.1%

Another big contributor to the decline of the jobless rate was a plunge in those on temporary layoff. That total fell by... Read more

17.6 Million Unemployed Americans Probably Won't Return To Their Pre-pandemic Jobs

The share of the workforce currently out of work with no reasonable chance of returning to their jobs is about 11%, or a... Read more

GM, Fiat Chrysler U.S. Auto Sales Tank In Second Quarter As Coronavirus Saps Demand

U.S. vehicle sales in the second quarter for General Motors, Toyota Motor and Fiat Chrysler plunged by more than 30% Read more

Mortgage Demand Falls For The Second Straight Week, Signaling A Potential Slowdown In The Housing Recovery

The surge in mortgage demand from homebuyers over the past two months appears to be waning, even as mortgage rates conti... Read more

Fed's Bullard Warns Of Financial Crisis Risks As Virus Cases Spike, FT Reports

St. Louis Federal Reserve Bank president James Bullard has warned that a growing number of bankruptcies due to the coron... Read more