The Federal Reserve has detected rising concern among US business about the potentially harmful impact of tariffs as growing trade tensions prompt some executives to freeze investment plans.

The minutes were released on Thursday, a day before the US is due to start imposing tariffs on $34bn of imports from China on Friday, with Beijing set to target an equal amount as a nascent trade war between the two largest economies takes centre stage in an escalating series of disputes.

Trade worries are not, however, eclipsing more positive news about the US economy. At the meeting on June 12-13, Fed officials lifted interest rates by a quarter point to a 1.75-2 per cent range and signalled that two more increases are likely in 2018 as they gave a bullish assessment of the US economy.

With growth and job creation accelerating, the minutes said incoming data suggested GDP growth had strengthened in the second quarter as consumer spending picked up after slowing down earlier in the year.

Overall, Fed officials said indicators were consistent with a “strong economy” evolving roughly as they had expected. But they noted pinch points as some businesses said supply constraints for labour and infrastructure were limiting expansion plans — alongside trade worries.

Officials also highlighted the importance of monitoring the slope of the yield curve, which measures the difference between short-dated and long-dated treasury yields. A flat or inverted yield curve has traditionally been seen as a warning sign for recession and market players have been watching the flattening curve with alarm.

The difference between two-year treasury yields and 10-year yields fell to 28 basis points on Thursday, the lowest level since July 2007.


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