A potential trade war is casting doubt over how many times the U.S. central bank will need to raise interest rates this year, according to Federal Reserve Bank of Atlanta President Raphael Bostic, who said it might offset momentum from fiscal stimulus.
“Some of the developments with the trade policy has introduced some uncertainty as to how the economy is going to perform, so I am really taking a wait-and-see attitude,’’ Bostic told reporters Wednesday in Fort Lauderdale, Florida. Asked whether he was deciding between two or three increases, or three or four, he said, “Everything is on the table.’’
(Related: Trump’s Tariff Announcement Unnerves Markets)
Policy makers penciled in three moves this year when they cast projections in December that will be revised later this month. Newly-installed Fed Chairman Jerome Powell told Congress last week that headwinds to U.S. growth had become tailwinds, prompting investors to up their bets that he’ll move four times in 2018. Governor Lael Brainard reinforced that message on Tuesday.
But that outlook could be thwarted if U.S. trade partners retaliate against sweeping tariffs on steel and aluminum planned by President Donald Trump.
“We would take into account developments if they proved to be material to the outlook,” Brainard told a dinner audience in New York. “It’s early to tell what the broader implications could be, so I see it as an uncertainty, but not something that would materially change my outlook, today.”