Fed all Set to Inaugurate the Trump-Era with Rate Hike

Fed all Set to Inaugurate the Trump-Era with Rate Hike

It is during the second week of December, 2016 that the Federal Reserve will initiate the Trump era along with an interest rate hike which is nearly certain. New forecasts to the US economy offer the laymen and the lawmakers a first glimpse into whether or not the winning of Donald Trump has rejuvenated the growth of Central Bank and the overall outlook of inflation. The futures fund of the Federal Reserve show a strong chance (98% probability) that the Fed will give a hike to the rates by a slight mark during the end of their 2-day meeting, as per the CME group. There are a total of 120 economists surveyed in a Reuters poll which predict a hike in the rate during the beginning of a solid US economic recovery.

Different measures of US economy zoom in various directions

Soon after the election of Donald Trump as the President-elect, it seems that all sorts of US economy measures, starting from expectations of inflation to bond market to consumer confidence, everything is moving in different directions. The most recent example of such extreme feedback of the US economy came from a survey done on consumer confidence in the University of Michigan. Although as per the survey, the index went through a quantum leap to the highest level since the last few years, at the same time, it also showed that the country’s mood was all bisected.

They were asked what kind of news that received on the recent developments in the economy. Majority of the respondents spontaneously claimed that they expected a positive effect of the brand new policies of the economy than what was ever recorded in the history of America. On the other hand, there were also another equal number of people who didn’t hesitate to give in their negative judgments regarding the about-to-be-implemented economic policies. However, it should also be noted at the same time that the number of negative references were much less than half of the positive references.

To put it in another sense, though there were equal positive and negative responses, the rate of positive replies were twice higher than the same kind of survey which was done previously. On an alarming note, the groups which were mostly pessimistic about the potential economic policies were those who were new into college and those resided in the North East.

Will the victory of Donald Trump push the Fed towards a point of inflection?

The financial analysts are also wondering whether or not the stock market rally will show yet another hike in yields on bonds which might as well push the Federal Reserve to a point of inflection on its own. The new Republican who has been elected the new President of US is inheriting an indeed good economy, which increased by 3.5% in Q3, which was the fastest pace within the last 2 years. However, there were also increased concerns about his new plan to bring about a welcome change to the tax code of America, curb regulation and bring about an increase in infrastructure expense. Experts thought that these steps couldn’t just improve the economy but also give birth to inflation.

A massive swing in the economy post-election

There was a Gallup poll done on Americans regarding the outlook on the US economy and it has been seen that there is an immense swing in the economy post-election. There is an increased optimism between the Democrats and Republicans and the latter is now claiming to be more confident than they seemed to be any time before the election. Democrats on the other hand have become pretty less optimistic. This makes sense as they constantly supported one candidate and when he ultimately lost, they lost all their confidence in the economy.

The stock market has given some all-time highs, almost everyday after the election and after Donald Trump won the election. It is rather surprising to note that the Dow Jones has recently struck a new record when it closed as high as 13 among 21 trading days since the winning moment of Trump. Investors are also on the watch out for potential positives and they expect Donald Trump to roll back on business regulations and reduce corporate tax rate by at least 30 points.

Ultimately, President-elect Donald Trump should offer perfect proof that the economy is moving towards a positive note and he should also take immediate steps to maintain and live up to the expectations of the consumers which are aligned with his performance. The level of economic policy uncertainty under the rule of Donald Trump is pretty high and hence the first reaction of the entire nation might not turn out to be a true one. The result of 2016’s election and its following upshots are yet to be seen as we welcome 2017.

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