Boston Fed President Eric Rosengren said Fed is well prepared to react if Trump’s trade war with China causes slowdown in the economy. He said, “if the impact of the tariffs – and whatever financial market reaction to those tariffs is – causes more of a slowdown, then we do have the tools available to us, including lower interest rates”.
But for now, “it’s hard for the Fed to react until we have better information, so in terms of us viewing our policies as being patient, I’m not sure this alters our view of that until we have a better sense of whether this is going to have more long-lasting effects,” Rosengren added.
Separately, Minneapolis Fed President Neel Kashkari said the “relative to China, the US is in a very strong position.” “”Not only is our economy bigger, our economy is much less sensitive to trade. Trade is important to the U.S. economy, but it’s much more important to the Chinese economy, just as a share of its economy,” he added.
Hence, Kashkari said “if there’s a tit-for-tat strategy, and I’m not advocating it, but a tit-for-tat strategy would seem to lean toward the U.S. strength rather than the China strength.”
