The Financial Express

Fed official sees biggest risk to US economy from tariffs, trade

| Updated: November 24, 2019 16:54:19

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File photo of President of the Federal Reserve Bank on Minneapolis Neel Kashkari. (Collected) File photo of President of the Federal Reserve Bank on Minneapolis Neel Kashkari. (Collected)

The biggest risk to the overall US economy remains tariffs and trade as businesses have cut back on investment, a US Federal Reserve official has said.

"Right now, overall, my base case scenario is continued economic growth, I'm not forecasting recession," Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said during an event at Minnesota Chamber of Commerce on Thursday.

Kashkari said, "But there are risks on the horizon, the biggest risks being around tariffs and trade and the uncertainty that creates," reports Xinhua.

While the US consumer is still strong and wages are growing, forward-looking indicators "are a little more cautious" as businesses have pulled back on their investment, said the Fed official.

"We're seeing this regionally, we're seeing this nationally, businesses are nervous about the future, especially those that are exposed to the global economy," he said.

Neel believed that business investment could pick up if there are resolutions in the trade wars.

"Hopefully if there are resolutions in the trade wars and the tariffs, that'll give business more confidence, you'll see more investment and that can lead to stronger growth in the future," he said.

US economic growth slowed to an annual rate of 1.9 per cent in the third quarter of the year, partly due to trade tensions. That was lower than the 2-percent growth rate in the second quarter and the 3.1-per cent growth rate in the first quarter.

The Fed has already lowered interest rates three times since July, amid growing risks and uncertainties stemming from trade tensions, the weakness in global growth and muted inflation pressures.

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