A drop in the consumer outlook for inflation and intensifying trade tensions dre...
WASHINGTON - A drop in the consumer outlook for inflation and intensifying trade tensions drew caution from Federal Reserve officials on Monday as policymakers faced fresh market volatility and a renewed set of risks.
Fed officials have largely discounted the trade war in their economic and policy outlooks, arguing that the likely impact on growth in U.S. gross domestic product would be small unless the trade tensions persist and intensify. In an interview on Boston’s WBUR radio, Boston Fed President Eric Rosengren said that while the United States is “strong enough” to weather the trade storm, “if it starts to be a situation where we expect tariffs to be high for a long period of time, it does start to disrupt trade patterns.”“You cannot game what two leaders...
A further complication: The inflation outlook among U.S. consumers dipped sharply in April, countering Fed policymaker hopes that inflation dynamics will improve and the pace of price increases soon rise toward their target level. But a drop in inflation expectations is another matter, and could be evidence that households and businesses are losing faith in the Fed’s ability to deliver on its inflation goal - a worrying development for central bankers who feel their ability to keep expectations set around their inflation target is critical to meeting the goal.
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