Fed officials say China-US reprieve lowers risks

The US-China deal to lower the most aggressive import tariffs between the world's two largest economies could lessen the impact of their trade war, though the levies left in place are still steep and will leave a mark on the economy, Federal Reserve officials said on Monday.

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Federal Reserve Governor Adriana Kugler said the 90-day pause on import levies at levels that threatened to shut down bilateral trade reduces chances that the US central bank will need to lower interest rates in response to an economic slowdown.

The outcome of the weekend meetings between Chinese and US officials "obviously... is an improvement as far as trade between the two countries" is concerned, Ms. Kugler said at a Central Bank of Ireland symposium in Dublin.

She said the tariff rates, now 30% on Chinese imports for the next 90 days, were still "pretty high" and she expected "definitely an increase in prices and a slowdown in the economy" as a result.

But Ms. Kugler expects those impacts to be more muted. "My basic outlook, in some sense, may have changed in terms of the extent to which we need to use our tools, and the magnitude," she said.

In separate comments to the New York Times, Chicago Fed President Austan Goolsbee agreed the weekend deal would lower the impact tariffs have on the economy - for now.