Federal Reserve Chairman Jerome Powell said the downside risks to the U.S. economy have increased recently, reinforcing the case among policy makers for somewhat lower interest rates.

“Crosscurrents have reemerged, with apparent progress on trade turning to greater uncertainty and with incoming data raising renewed concerns about the strength of the global economy,” Powell told the Council on Foreign Relations in New York on Tuesday.

“Many FOMC participants judge that the case for somewhat more accommodative policy has strengthened,” he added.

His comments echoed those he made last week following the Federal Open Market Committee meeting -- a point he underlined on Tuesday before taking questions from the audience.

“The things I say about monetary policy here today are intended to be fully consistent with the message that I delivered” last week, he said.

Stocks in the U.S. initially bounced off lows after Powell’s comments before declining further. Treasury 10-year yields fell back below 2%.

A consensus is building that Powell and his colleagues will cut interest rates in coming months, as trade disputes hurt the outlook for the world economy. That’s what investors and analysts now expect -- and what President Donald Trump is loudly demanding.

Fed Independence

Powell did not mention Trump by name in his opening remarks to the council. But he did highlight the importance of the central bank’s autonomy from political interference.

“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.”

Asked later about Trump’s attacks, Powell again stressed the benefits to be gained from protecting the central bank from political interference, while acknowledging that policy makers weren’t perfect.

“We’re human. We’ll make mistakes,” he added. “But we won’t make mistakes of integrity or character.”

Trump has criticized the central bank for making credit more costly last year 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.”

Powell brushed aside arguments by Trump and others that the Fed had erred in raising rates last year. “A lot changed has changed since December,” he said, noting that forecasts of global growth have come down “substantially.”

Trade Tensions

Companies recently also have become much more concerned about the impact of trade tensions on their businesses, Powell said. “The limited available evidence we have suggests that investment by businesses has slowed from the pace earlier in the year,” he said.

Some Fed policy makers did advocate for a rate cut at last week’s FOMC 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.

While Kashkari has called for a half percentage point rate cut, Bullard said on Tuesday that an insurance cut of 25 basis points would be enough to protect against a sharper-than-expected slowdown in economic growth.

“I think 50 basis points would be overdone,’’ Bullard said in an interview with Bloomberg Television’s Kathleen Hays from the bank’s headquarters. “I don’t think the situation really calls for that. But I would be willing to go 25.’’

Powell didn’t directly address the question of the size of any potential cut during his appearance at the Council on Foreign Relations.

But he did say that it would be better for the central bank to act preemptively. “If you see weakness, it’s better to come in earlier than later,” he said.

Weak Inflation

The Fed chief sounded sympathetic to arguments by both Kashkari and Bullard that the central bank should cut rates to help raise inflation and inflation expectations.

“More policy accommodation, lower interest rates, would support economic activity, which would put more upward pressure on inflation,” he said. “I would say that is an argument for lower interest rates.”

The Fed has failed to convincingly hit its 2% inflation objective since 2012. What’s more, inflation expectations, particularly in financial markets, have fallen recently and Fed officials themselves have marked down their forecast of price rises this year, to 1.5%, from 1.8% in March.

Economic Data

Meanwhile, 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 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. The FOMC “will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2% objective.”