If Fed Raises Rates, Signals Weaker Economy To Come Due To Trade Wars

Federal Reserve Board Chair Jerome Powell testifies before the Senate Committee on Banking, Housing, and Urban Affairs on 'The Semiannual Monetary Policy Report to the Congress', at Capitol Hill in Washington on Tuesday, July 17, 2018. (AP Photo/Jose Luis Magana)
Jose Luis Magana/FR159526 AP

WASHINGTON (AP) — The Federal Reserve is set Wednesday to raise interest rates for a third time this year and possibly modify the likely direction of rates in the months ahead.

The big question is whether the strong U.S. economy, which has been fueled this year by tax cuts and increased government spending, could weaken next year, especially if President Donald Trump’s trade fights begin to inflict damage and the benefits of tax cuts start to fade.

If the Fed finds that prospect likely, it might signal Wednesday that it expects to slow its rate increases next year.

The Fed’s key short-term rate now stands in a range of 1.75-2 percent after two quarter-point increases in March and June. A similar rate hike Wednesday would raise that range to a still-low 2-2.25 percent.

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