US Fed says growth to ‘step down,’ global risks on the rise

Washington, Feb 20: The Federal Reserve believes US growth will “step down” this year from last year's rapid pace amid rising global risks, including from tense trade relations, according to minutes released Wednesday.

The central bankers said they were not sure what their next move would be, the minutes of their last policy meeting January 29-30 said.

While the economy is expected to remain solid, the waning stimulus from last year's tax cuts will contribute to the slowing, with “GDP in 2019 to step down somewhat from the pace seen over 2018,” the minutes said.

The Fed raised the benchmark lending rate four times last year, but after the last increase in December “the economic outlook had become more uncertain,” they said.

As financial markets became roiled amid the trade war between the United States and China, policymakers kept interest rates on hold last month, and sent clear signals that they would be in no hurry to raise them again soon.

The global economy “continued to record slower growth, and consumer and business sentiment had deteriorated,” the report noted, adding that Brexit, the trade tensions and the recent partial federal government shutdown also were seen as “contributing to uncertainty about the economic outlook.”

The Fed's statement last month said explicitly that they were prepared to remain patient before deciding on the next move, and the minutes said that posture “would allow time for a clearer picture of the international trade policy situation and the state of the global economy to emerge,” in particular regarding “the extent and persistence of the economic slowdown in Europe and China.”

Amid the greater uncertainty, which has caused US business and consumer confidence to wane and led firms to hold off on new investments, Fed officials “suggested that it was not yet clear” what adjustments in the policy interest rate “may be appropriate later this year.”

Inflation has so far remained muted, despite a very tight labor market that has cut the unemployment rate to a nearly 50-year low, but up another rate increase may be warranted if price pressures pick up, some officials said, according to the minutes.

(AFP/APP)

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