US Fed officials discuss possibility of faster future rate hikes

Former Fed Vice Chair Alice Rivlin discusses monetary policy the threat of a trade war and the U.S. budget deficit

A majority of Federal Reserve officials see USA trade rifts with China as a downside risk for the economy, according to minutes of their policy meeting held in March and released on Wednesday.

The readout of the meeting, at which the Fed unanimously voted to raise borrowing costs by a quarter percentage point, also showed that policy-makers were wary about the impact of the Trump administration's trade and fiscal policies.

Indeed, the government reported Wednesday that consumer prices rose 2.4 percent in March compared to a year ago, the fastest 12-month advance in a year and one of several signs that inflation has begun to rise on a sustained basis.

The minutes showed Fed officials were confident inflation would return to their 2% target, as tax cuts and increased government spending provide a boost to the economy. Many market players forecast the Fed will raise the key rate at their policy meeting in June.

Inflation, which has lagged the Fed's 2-percent target for years, has also begun to pick up in recent months, and Fed officials expect it to finally hit that goal and perhaps exceed it by next year, if not before.

Their views were laid out in the minutes of the bank's March meeting, published on Wednesday.

The meeting in March was the first led by Powell, who took over as chairman of the Fed in early February.

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However, the meeting minutes showed that already some Fed officials anxious the central bank would have to move faster than previously expected.

However, "a number of participants" said they expect stronger growth and inflation in the next few years, suggesting the path for interest rates "would likely be slightly steeper than they had previously expected", according to the minutes.

Trade tensions with Beijing have escalated in recent weeks since Trump announced the tariffs and targeted China for additional 25 per cent punitive duties on almost US$50 billion in goods for its alleged theft of USA intellectual property. Those tensions have roiled financial markets over potential damage to global growth.

Business contacts in numerous Fed's 12 regions reported concern about the tariffs, with the agriculture sector "feeling particularly vulnerable to retaliation", the minutes said.

They include possible retaliation by other countries in response to President Donald Trump's trade policies.

Since the March meeting, Fed officials have largely adopted a wait-and-see attitude to trade policy, noting it is not yet clear if the tariffs will go into effect and their eventual size if implemented.

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