Fed Officials Fear Extreme Impact of Trade War on US Economy

According to Fed officials, the country’s economic expansion reflects the potential growth of the central bank’s benchmark interest rate in the future, which strongly indicates that rate will increase in September. However, the minutes of meeting published on Wednesday and showed concerns that the intensifying trade conflict would likely affect the US economy.

The Fed had raised its rates for the seventh time since late 2015 to ensure that minimum jobless rate in almost 50 years will not stir up undesired inflation. The Fed had a rate hike in March and June this year, which further helped the federal funds rate to reach about 1.75 to 2 percent. The rate hovered at a record low of near zero for the past seven years from 2008 to 2015.

During the session, officials maintained steady rates as they release the policy statement on focusing on a stronger economy supported by stable growth and modest unemployment rate. Also, the minutes revealed escalating worries towards the effect of trade policies imposed by US President Trump, which account for billions of dollars in imports. Because of this, the US trading partners including China decided to retaliate.