Fed’s Cook says geopolitical tensions could change US economic outlook

DUBLIN Nov 8 (Reuters) – Escalating geopolitical tensions around the world could worsen already subdued growth in Europe and China and change the trajectory of the U.S. economy, Federal Reserve Governor Lisa Cook said on Wednesday.

„What happens to the rest of the world affects the United States and now economic growth is very low among our major trading partners,” Cook said during a panel discussion at a conference hosted by the Central Bank of Ireland in Dublin.

„We’re not just seeing lower growth, we’re seeing geopolitical tensions that we’ve all been talking about that could change the outlook in the U.S. and the global economy.”

Cook added that geopolitical tensions in the current high interest rate environment could disrupt commodity markets and access to credit in particular.

„Any shock could worsen the situation we’re already in… and destabilize commodity markets, disrupt the credit system,” Cook said. „We’re watching and waiting. We’re being vigilant.”

He detailed several international risks, including conflicts in Ukraine and the Middle East, persistent inflationary pressures abroad and further economic slowdown in China. .

He did not elaborate on his view of the U.S. economic outlook or his view on the Fed’s policy interest rate, and he did not give a sense of how likely those potential risks were to turn into reality.

Much of his speech was repeated on Monday, in which he was in a better position than in the mid-2000s, albeit with non-bank financial institutions and a handful of risks. A decline in commercial real estate values ​​and an often strong housing sector is creating some pressure among those with low credit scores.

But in an additional segment, Cook described a number of new risks from abroad, including the possibility of an unexpected policy rate hike if inflationary pressures persist, international spillovers if China’s economic slowdown worsens, and the possibility of heightened tensions in Russia, the Middle East and China. Risk to global markets.

„More broadly, rising geopolitical tensions will lead to lower economic activity and increased fragmentation of global trade flows and financial intermediaries, raising financing and production costs and contributing to more sustained supply chain challenges and inflationary pressures,” Cook said.

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