Trade uncertainty may be sapping business investment

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Uncertainty about President Donald Trump trading strategies is the “most obvious risk” that the U.S. economy and may be asked to keep company you to return on investment, Atlanta Fed President Raphael Bostic said on Wednesday.

In one of the most outspoken Fed is criticized, the White house, trading tactics, Bostic said, the conversations with business officials in its southern district, have raised the possibility that a delayed investment because of the trading risks reductions under the anticipated effect of recent corporate tax.

Stronger economic growth is expected from these tax reductions based in part on higher investments by the company.

But “swelling optimism about the tax policy in the beginning of the year, it has now been almost completely replaced by uncertainty regarding the proposed rates and the possibility of a trade war,” Bostic said in remarks to the Jacksonville World Affairs Council. “I ex plans to immediately feel that for now, many companies are responding to increased uncertainty by moving to the side line in relation to the new cap.”

He said it also appears consumers are increasing spending significantly, because of the recent income tax cut.

Bostic said he still sees the economy growing about potential for now, and recently, rates said two more times this year, should rise. The Inflation is in the vicinity of their target-and labor markets are tight, if not “overheated.”

He said the inflation may also percent of the in violation of the Fed’s two-goal and for it to remain “for a while,” something that was not considered an urgent problem, given the long period of inflation below this level, said Bostic.

But the price pressure may build to said Bostic. The most recent surveys among companies, pressure on prices reported to be increasing, and some companies say they are now able to maintain the profit margins by increasing the prices, a return of pricing power felt to be absent in the last few years.

This appears especially for companies exposed to potential fares, said Bostic, the other under the consequences of the increasing trade tensions.

To act In a new approach, “the question is always whether the policy…to be able to intervene with sufficient precision to act the thing better. We have all the phrase “unintended consequences”, and we understand the potential for the action to leave, the situation is worse,” he said.