The U.S. government's trade policies may have negative impact on economic growth, the Federal Reserve warned in its minutes released Wednesday.
"On the downside, trade policies could move in a direction that would have significant negative effects on economic growth," the Fed said in its minutes from the meeting on July 31 - August 1 when it kept its benchmark interest rate unchanged between 1.75 percent to 2 percent.
The central bank said the escalating trade tensions between the U.S. and China have already prompted notable market moves, particularly in foreign exchange markets.
"Escalating trade tensions contributed to an unusually sharp depreciation of the Chinese renminbi," it said in the minutes.
"News on an agreement between the U.S. and the European Union to continue talks to resolve their trade disputes provided some support for global equity prices," it added.
However, the Fed said American businesses in some regions reported that uncertainty regarding trade policy had led to some reductions or delays in their investment spending.
"Nonetheless, a number of participants indicated that most businesses concerned about trade disputes had not yet cut back their capital expenditures or hiring but might do so if trade tensions were not resolved soon," it added.
The U.S.' 25 percent tariffs on $34 billion worth of Chinese goods have begun to be implemented in July, while an additional $16 billion will go into effect on Thursday.
President Donald Trump said last month that he is ready to increase tariffs on Chinese goods to $500 billion, almost the total value of goods the U.S. imported from China in 2017.
By Ovunc Kutlu in New York