Fed’s Eric Rosengren says trade war is a ‘prominent downside risk’

The escalating trade war between China and the U.S. could increase pressure on the overall economy, according to Boston Fed President Eric Rosengren.

The central bank official said in prepared remarks Tuesday that the ongoing conflict between the world’s largest economies is a “prominent downside risk,” adding it seems to be an “important reason for policymaker patience until this source of uncertainty is more resolved.”

Rosengren, a voting member of the policymaking Federal Open Market Committee, said that prolonged tariffs threaten economic growth and could increase market volatility.

“While my baseline forecast assumes that a trade agreement will occur without seriously disrupting global trade or global economies, it may be some time before that uncertainty is resolved,” he said.

China and the U.S. hiked tariffs on billions of dollars worth of each other’s products earlier this month. Those moves have pushed the S&P 500 down 2.8% for May. The large-cap U.S. stock index is also on pace to snap a four-month winning streak.

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