UNITED STATES (OBSERVATORY) – Policymakers have discussed raising interest rates soon to counteract excessive power in the economy, but they also looked at the potential impact of global trade disputes on businesses and consumers, the latest Federal Reserve meeting showed.
The Fed has been gradually raising interest rates since 2015 and policymakers are now worried that the economy is too strong and inflation will rise unabated above the central bank’s 2 percent target.
Reserve officials kept interest rates unchanged at their meeting on July 31 and August 1, but their discussions made it clear that they were considering a rate hike soon. The Fed has increased borrowing costs twice this year.
“Many participants have suggested that if the next data continue to support their existing economic outlook, it is likely to be appropriate soon to take another step to remove monetary easing,” according to the minutes of the meeting on Wednesday.
Policymakers generally acknowledged that consumer spending and US companies had “significant momentum”.
Reserve officials expected the economy to grow fast enough to push inflation higher after coming close to the central bank’s target. With interest rates rising, many policymakers say the Fed will soon have to stop describing monetary policy as giving the economy a boost.
Policy makers also discussed at length the risks of trade tensions on the economy. Trump has raised tariffs on imports from countries such as China and EU members, triggering retaliatory charges for US exports.
The debate highlighted the difficult situation the Fed may find itself in if trade disputes intensify as US companies may have to cut back on employment while consumers face higher prices on imported goods.
The US Federal Reserve’s mandate is to take care of full employment and price stability.