FOMC Minutes Point Heavily to Risks in Trade and Tariffs

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If you thought that Federal Reserve’s FOMC meeting for July 31 and August 1 was all over and done, guess again. Wednesday brought the release of the FOMC minutes. Despite the information being about three weeks old and despite Fed presidents having spoken since, the financial markets were given one more chance to interpret and react to otherwise old information.

The Federal Reserve staffers have revised their 2018 and 2019 growth expectations higher than in prior meetings than in June. That said, FOMC participants generally expected that GDP growth would likely slow from its second-quarter rate but would still exceed that of potential output.

While the FOMC talked up a strong labor market and addressed inflation issues, there was a very different feel around the outlook from business contacts and from the Federal Reserve in these minutes. That was around international trade issues, tariffs, disputes and the like. Still, the members are still effectively pointing to another rate hike as soon as the next FOMC meeting.

24/7 Wall St. used a word search regarding trade issues and tariffs to see just how prevalent this was. We backed out the “trade” terms that were not directly relating to the issues that have been front and center in the media and in Washington, D.C. in recent months. These were shown as follows:

  • “Tariff” was used 5 times.
  • “Trade” was used 20 times when it comes to trade tension and trade disputes.
  • “Trading” was also used in one instance pertaining to the same.
  • “Uncertainty” was used 8 times, but this was not always pertaining to trade.

On Gross Domestic Product and the risks to the economy ahead, some in the meeting stressed that the boost in real GDP growth in the second quarter may have been boosted by transitory factors.

The outlook portion of the minutes for the second half of the year pointed to a number of favorable economic factors that were supporting above-trend GDP growth. Still, meeting participants generally viewed the risks to the economic outlook as roughly balanced.