Fed officials worry that trade war poses the biggest threat to ‘strong’ economy

Federal Reserve officials see ongoing global trade tensions as the biggest threat to otherwise strong U.S. economic growth, according to an account of the central bank’s most recent meeting.

Minutes from the July 31-Aug. 1 Federal Open Market Committee gathering indicated that members remain fairly confident that the “strong” economic growth of late will continue at least over the near term. Officials said it would “likely soon be appropriate to take another step in removing policy accommodation,” an indicator for a looming rate hike that is widely expected by markets.

However, they indicated that tariffs, imposed on a range of goods by President Donald Trump, pose dangers across a variety of areas.

The meeting summary showed that “all participants pointed to ongoing trade disagreements and proposed trade measures as an important source of uncertainty and risks. Participants observed that if a large-scale and prolonged dispute over trade policies developed, there would likely be adverse effects on business sentiment, investment spending, and employment.”

Along with the trade issues came a conversation on inflation that indicated members are divided over the current trend and how to respond policy-wise.

The FOMC at the meeting declined to raise the Fed’s target interest rate from its current range of 1.75 percent to 2 percent. Market participants widely anticipate a hike at the September meeting and possibly one more in December.

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