Trump won, What´s that to the FED?

Hi everybody!

After Donald Trumps victory in the US presidential race, its evident the population discontent of the current economic situation regarding income inequality and how that affect their vote intentions. If there is that should be applauded of Trump is his uncanny ability to connect with those population sectors and made them think he is one of them, in other words his “outsider” disguise worked like a charm.

Once over the shocking results, the next issue is whether this will affect the chances of a FED rate hike in december or will they keep the synchronicity with last december hike? If there is one characteristic of Janet Yellen’s FED is  cautious has been the committee in their approach to the rate hikes, in their last press release the FED has argued that the case for hike has become strengthened in the last months, which seems to show a real intent by the FED to rise rates.

However, we are far from it, because even if the case has strengthened the committee has decided to wait for more evidence of the tendency, which itself may lend to believe the hike will come in december once the tendency has been confirmed. But this could change, according to Bloomberg polls before election day 84% of analyst thought there will be rate hike in december this week the percentage drop to 51%.

Graph made by the author. Data from investment.com
Graph made by the author. Data from investment.com

If we check the two macroeconomic variables the FED has keep track of, during this year is possible to note a very stable tendency of the employment and prices in the US economy. One of the Central Banks greatest fear is that a rate hike will lead to a drop in home consumption and eventually to a slowing economic growth. It wouldn’t be a mistake to think the US is near its unemployment natural rate, which is the rate minimum rate level according the structural way the economy works.

Finally, the real question is whether the FED is going to take into account the statistical support of a rate hike or will wait for the markets to settle down after Trumps election and wouldn’t take any action this year. My personal view in the matter is the FED hasn’t show any decisiveness this year and wouldn’t rise rates in december but will wait of the calm after the storm, unfortunately there are always new developments that disrupts the markets.

Thanks, that’s all for today and have a great weekend!

*This post reflects the author opinions and must not be taken as an investment advise.

One Reply to “Trump won, What´s that to the FED?”

  1. US People are concerned about income inequality and they chose Trump! I think it is a contradictory action. Let see what happens

    By the way, it is not a critic for your blog. It is something I am thinking about since the presidential results.

    I like your blog.Thanks for sharing your knowledge

    @danielgallo10

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