Strong US economy may lead to downturn: Fed

By Ovunc Kutlu

NEW YORK

The American economy running too strong may increase inflationary pressure and lead to a downturn, the Federal Reserves said Thursday.

"A prolonged period in which the economy operated beyond potential could give rise to heightened inflationary pressures or to financial imbalances that could lead eventually to a significant economic downturn," according to the minutes from the Fed's June 12-13 meeting.

Most members of the Federal Open Market Committee (FOMC) agreed to continue raising interest rates gradually in order to keep the economy in check, the minutes said.

The central bank increased its benchmark interest rate by 25 basis points June 13. It was the second rate hike this year and the seventh since December 2015. The bank made three rate hikes last year and one in December 2016.

Some members of the FOMC also stressed in the minutes that uncertainty and risks about trade policy have intensified, and warned they could have negative effects on business sentiment and investment spending.

Recent changes in Washington's trade policy have brought the U.S. against China in a potential trade war, and could hurt growth in the American economy if importers are forced to pay higher duties.