Businesses hit pause on spending amid trade uncertainty: Fed minutes

Businesses hit pause on spending amid trade uncertainty: Fed minutes

Businesses hit pause on spending amid trade uncertainty: Fed minutes

The Federal Reserve Building stands in Washington April 3, 2012.

Federal Reserve officials last month discussed the impact of further hikes in interest rates, saying that by next year they could be at levels that might begin to slow economic growth.

The minutes covered the discussions at the Fed's June 12-13 meeting in which the central bank boosted its key rate for a second time this year to a new range of 1.75 percent to 2 percent.

In minutes of their June meeting released on Thursday, central bankers said "uncertainty and risks associated with trade policy had intensified, adding they "were concerned that such uncertainty and risks eventually could have negative effects on business sentiment and investment spending".

The Federal Reserve's business contacts echoed the unease and expressed plans to scale down their investments.

The current stance of the Fed's monetary policy reflects its confidence in the strength of the USA economy and its belief that inflation is on course to rise above 2% on a sustained basis.

Severe Thunderstorm Watch In Effect
Ahead of the rain, Environment Canada issued a severe thunderstorm watch for the City of Toronto and parts of the GTA. It looks like London's in for one final day of extreme heat before a cold front moves in, Environment Canada says.

The Trump administration has slapped tariffs on aluminum and steel products and threatened levies on more products from major partners including Mexico, Canada, Europe and China, on whom tariffs on $34 billion of goods are scheduled to go into force early Friday.

Trump has staked out a tougher approach on trade in an effort to achieve his goal of dramatically shrinking America's huge trade deficits, which he has blamed for the loss of millions of USA factory jobs.

Despite the warnings, the June minutes noted a general strengthening of the United States economy and at its meeting of June 12-13, Fed officials lifted USA interest rates by a quarter point, taking the rate into the 1-75 to 2 percent range following what is the second increase this year.

Staffers who presented the new gauge, "noted that this measure may be less affected by numerous factors that have contributed to the flattening of the yield curve, such as depressed term premiums at longer horizons. Several participants cautioned that yield curve movements should be interpreted within the broader context of financial conditions and the outlook, and would be only one among many considerations in forming an assessment of appropriate policy".

The document released on Thursday did not indicate whether policymakers took either the yield curve or the information from the staff presentation as pointing toward an impending recession.

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