The Federal Reserve (Fed) said today that the country’s companies remain optimistic about their activity, despite the escalating trade tension between Washington and Beijing and its possible economic impact.
“While concerns over tariffs and trade policy uncertainty continued, most companies remained optimistic about short-term prospects,” said the Fed in its “beige book,” which gathers information on recent economic activity.
Companies made this assessment before Donald Trump’s government imposed a 15% levy on imports of clothing, tools, electronics and other products from China on September 1st, while Beijing retaliated with new tariffs on the country’s soybeans, crude oil and pharmaceuticals.
However, the trade war between the two powers has already had several rounds of tariffs and, for the time being, appears not to have had a major effect on the US.
In principle, a Chinese government delegation will travel to Washington this month to try to reconcile positions on a possible trade agreement between the two powers, although the latest round of levies has shown that the pact is still far from being reached.
On the other hand, the Fed’s report also noted that the US economy expanded “at a modest pace” until the end of August.
By sectors, the agency headed by Jerome Powell stressed that car sales accelerated and that the tourism sector remained “solid” in recent months, while home sales and manufacturing activity declined.
According to official data, the national economy advanced at an annual rate of 2% in the second quarter, one tenth below the official preliminary calculation for that period.
Inflation, on the other hand, has softened in 2019 below the Fed’s annual target of 2%, calling into question the economic orthodoxy that dictates that a tight labour market and sustained economic expansion should generate further price increases.
At their last meeting in July, central bank officials decided to cut interest rates to between 2 and 2.25%.
This was the first cut in the price of money in the country in more than a decade, as the previous one came just after the acute financial crisis at the end of 2008.
The next monetary policy meeting of the US central bank is scheduled for 17-18 September and will present the country’s new macroeconomic projections.