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What are Fed Officials saying as the Trade War Heats Up?

May 14, 2019

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  • When investors look at the growing tension between the US and China and responses from each such as tariffs they wonder how it may affect 2 things: growth and inflation
  • Both growth and inflation are the main focal points of the Federal Reserve as it carries out its mandate
  • How the Fed views both of those variables in the economy frames, in a large part, how it approaches when and if it makes a change to the Fed Funds rate
  • So, we are looking at recent comment from Fed officials to glean how they view the present trade-related tensions the US economy is facing
  • The next Fed rate decision is June 19th

 

Federal Reserve Bank of New York President John Williams

  • The US economy is in a "good place" right now, though US tariffs have already begun to push up inflation
  • "The economy is well positioned to deal with whatever events happen in the future," he said in a Bloomberg interview
  • He is focused on sentiment indicators for any change that could risk the current US expansion

 

Federal Reserve Bank of Dallas President Robert Kaplan

  • Tariffs are "sand in the gears" of the global economy
  • Tariffs "will have some chilling effects on business"

 

Federal Reserve Bank of Boston President Eric Rosengren

  • If the current US-China trade tension goes on for an extended period then "it does start to disrupt trade patterns"
  • Referring to that dynamic, he added, "That isn't costless"

 

Federal Reserve Bank of Atlanta President Raphael Bostic

  • The Fed may need "a different calculus" if the tariffs remain for a prolonged period and costs are passed on to consumers, denting demand

 

 

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