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Analysts at Nomura suggest that anecdotal evidence on trade tensions will be a key focus for the Beige Book prepared for the 31 July FOMC meeting.

Key Quotes

“The minutes from the June FOMC meeting noted that “contacts in some Districts indicated that plans for capital spending had been scaled back or postponed as a result of uncertainty over trade policy.” Any additional evidence on disruptions caused by trade uncertainty will be of interest as the June minutes indicated that “most participants noted that uncertainty and risks associated with trade policy had intensified.”

“At the moment, it appears that stimulative fiscal policy is offsetting the Committee’s angst on trade policy. However, further escalation in the US-China trade dispute, with a subsequent response from district business contacts, could eventually begin to tilt the balance of risk to the downside for some participants. However, apart from trade uncertainty, we expect the Beige Book to indicate sustained growth and solid employment gains given strong underlying momentum in the economy.”