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Thomas Barkin said that lessening uncertainty on trade and “lowering the volume” would provide a big boost to the economy.Ann Saphir/Reuters

The U.S. Federal Reserve should hold interest rates steady for the time being after last week’s cut in borrowing costs and assess how the economy evolves, Richmond Fed President Thomas Barkin said on Tuesday.

“I think where we’ve gone now is that we’ve taken out some insurance and that insurance, I hope, we will see over the next six months the kind of impact you want to have on that. I think it’s a good time though to pause...and that’s what I am looking to do,” Barkin told reporters following an economic outlook conference in Baltimore.

Earlier in a speech he said conflicting signals make it difficult to get a handle on the true health of the U.S. economy and reducing uncertainty for businesses would provide a shot in the arm to growth.

The U.S. central bank last week cut interest rates for the third time this year but made plain that it does not expect to lower borrowing costs further unless the U.S. economic outlook materially deteriorates. The overnight benchmark lending rate is currently in a target range of between 1.50% and 1.75%.

Fed Chair Jerome Powell has characterized the cuts as insurance against ongoing risks from slowing global growth and the impact of the 16-month U.S.-China trade war.

Barkin said that he is closely watching whether this year’s cuts have the intended effect on the U.S. economy, which he believed would be apparent within six to nine months, and had already boosted the housing market and auto spending.

However, he also noted it is possible that the heightened uncertainty caused by ongoing trade tensions could cause the economy to deteriorate.

“I don’t discount the idea that we could talk ourselves into a recession – particularly if the uncertainty begins to affect consumer confidence and spending,” Barkin said.

He added that he believed that going into the Fed’s October rate-setting meeting, uncertainty, while still high, had lessened compared to at the prior meeting in September, although it still looms large.

“I think it’s far from gone away. I intentionally do not make myself think that trade or Brexit or geopolitical issues are going to go away,” Barkin said.

On Friday, a stronger-than-expected monthly jobs report assuaged concerns that recent data showing a drop in business investment and a slump in the manufacturing sector may be spreading to the broader economy. U.S. employers added 128,000 jobs in October, Labor Department data showed.

That said, the U.S.-China trade war is still simmering and global economies slowing, both of which have the potential to further impact the United States.

China is pushing the United States to remove more tariffs imposed in September as part of a “phase one” trade deal, people familiar with the negotiations said on Monday.

Any deal, which may be signed this month, is widely expected to include a U.S. pledge to scrap tariffs scheduled for Dec. 15 on about $156 billion worth of Chinese imports, including cellphones, laptop computers and toys.

Barkin said that lessening uncertainty on trade and “lowering the volume” would provide a big boost to the economy.

“That would build business confidence, build consumer confidence and lead to increased investment, spending and hiring,” he said. “American businesses are creative. Give them the rules – almost any set of rules – and they will make things happen.”

Barkin does not have a vote on monetary policy this year but he participates in the Fed’s policy discussions.

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