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Former Fed governor on Powell speech, possible US interest rate cuts

A pedestrian walks through the Federal Reserve building on Constitution Avenue in Washington, on March 19, 2019.

Leah Millis | Reuters

The Federal Reserve of the United States has sent a "very strong signal" that it is ready to consider the reduction of the interest rates, according to a former governor of the Fed.

Sarah Bloom Raskin, who served on the Fed's board from 2010 to 2014, offered that analysis in light of President Jerome Powell's recent speech in which he said the central bank "will act accordingly to sustain the expansion."

"I think that President Powell has given a message to the markets that indicates that a rate cut is taking place, which is, in essence, a very clear signal that the FOMC is really ready to talk about cut rates." Raskin, who is now a senior fellow at Duke University, told CNBC's "Squawk Box" on Wednesday.

The Federal Open Market Committee (FOMC), which is responsible for establishing US monetary policy, is scheduled for the next meeting June 18-19 to decide on interest rates.

Investors have been predicting that the Fed would cut interest rates, although the central bank had previously indicated that it expected to maintain a stable monetary policy throughout the year. Investors calling for rate cuts argued that the current trade war between Washington and Beijing threatens to slow the world economy, which in turn would hurt the US. UU

Raskin said the tariff struggle between the United States and China is a risk to the US economy because it could end up hurting manufacturers and consumers. She added: "Of course, we have the elephant in the room, which are these rates and the unpredictable nature of them."

The threat of commercial war is reaching an already slowing economy, he added.

The former central banker cited several indicators, such as business investment and demand for goods made in the United States, which have shown signs of moderation.

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