Fed officials to watch trade risks closely

Federal Reserve officials on Friday said they want to see more details about new tariff policies before deciding whether any policy response is warranted, holding to their view that more interest rate hikes are needed.

The Trump administration on Thursday unveiled plans to raise tariffs on up to $60 billion of Chinese imports, although the measures have a 30-day consultation period before they take effect.

New tariffs could create headaches for the Fed, which is tasked with fostering stable prices and full employment. New US tariffs would boost prices for US consumers while tariffs imposed by other countries could hurt US exporters.

“I am concerned about it. It bears watching,” Dallas Federal Reserve Robert Kaplan told reporters in Austin when asked how new tariffs could impact the policy outlook. “I am going to counsel patience. From a policy point of view from the Fed, let’s see how this unfolds.”

Kaplan said recent threats about tariffs might be more a negotiating technique than a sign of future policy.

Atlanta Federal Reserve Bank President Raphael Bostic said a separate round of US tariff hikes were not as extensive as initially thought.

“Don’t react to the first sound of a policy but actually wait to see what policy actually gets put in place,” Bostic said at the Knoxville Economic Forum, noting that steel and aluminum tariffs imposed by the Trump administration are being applied to a much smaller group of countries than when they were first announced.

The Fed’s recently installed chairman, Jerome Powell, said on Wednesday following a decision to raise interest rates that the central bank’s business contacts have expressed concern over trade tensions between the United States and other countries.

But Fed policymakers still haven’t changed their views on the economic outlook based on trade risks, Powell said.

New tariffs could create headaches for the Fed, which is tasked with fostering stable prices and full employment