Fed survey finds worries over restrictions' impact

WASHINGTON－The Federal Reserve's latest national survey has found that US businesses are growing increasingly concerned about the impact higher tariffs could have on their companies and the overall economy.

The Fed reported recently that the economic outlook remains positive, with growth continuing at a moderate pace in the central bank's 12 regions.

But its latest survey of economic conditions around the country also found that various industries－from manufacturing to farming and transportation－are worried about possible penalty tariffs on China and those already slapped on imports of steel and aluminum.

The report cites widespread reports that steel prices are already rising, "sometimes dramatically".

The report, known as the beige book, will be considered by Fed officials when they next meet on May 1-2 to discuss interest rates. The Fed boosted rates at its last meeting in March and the widespread expectation is that the central bank will keep rates unchanged in May but will raise them again in June.

After seven years of keeping its key rate at a record low near zero, the Fed in December 2015 started raising rates at a gradual pace that has left its benchmark rate at a still low 1.5 to 1.75 percent. It signaled last month that it expects to raise rates two more times this year. But many private analysts believe the Fed will slightly accelerate its rate actions to possibly four hikes this year, reflecting stronger growth and rising inflation.

The Fed's goal is to raise interest rates enough to keep the economy from overheating but not so much that it pushes the country into a recession.

In addition to higher prices for steel, the beige book found that prices were also rising briskly for building materials, especially lumber, drywall and concrete. The report said that the Fed's business contacts generally expect further price increases in the months ahead, particularly for steel and building materials.

In the discussion on worries about trade tensions, the Fed's Dallas regional bank reported, "Numerous contracts expressed concern about new tariffs and trade policy uncertainty, although outlooks overall were still positive."

Trade frictions with the United States have a limited and controllable impact on the Chinese economy, an official from China's top economic regulator said recently.

"China has prepared multi-level response plans and backup policies for the US-initiated trade frictions," Yan Pengcheng, spokesman of the National Development and Reform Commission, told a press conference.

Supply-side structural reform and new growth momentum have laid a solid foundation to prepare China for the external impact, he said, citing the reassuring performance of China's economy in the first quarter.

China's economy demonstrated its resilience by delivering a solid start to the year with GDP expanding 6.8 percent year-on-year at comparable prices in the first quarter, official data showed.

"China, with a population of nearly 1.4 billion, has a huge domestic market, and even if the east goes dark, the west still shines," he said.

"We are confident and capable of sustaining the stable development of our economy," he said.

AP - Xinhua