Donald Trump’s presidential victory introduces significant uncertainty for the Federal Reserve’s (Fed) future policies, according to The Straits Times.
Trump’s proposed economic reforms could affect the Fed’s plans for rate cuts in 2025. His pledges to impose high tariffs on imports, provide tax breaks for businesses, and restrict migration increase inflationary pressures.
Election results have already driven up yields on U.S. medium- and long-term government bonds and impacted global gold prices. Investors worry that Trump’s reforms could accelerate inflation, prompting the Fed to adopt tighter monetary policies.
Analyst Jim Grant disagrees. In an interview with Bloomberg, Grant noted Trump’s frequent calls for low Fed rates, seeing accommodative monetary policy as beneficial to the economy by making credit accessible for businesses and bolstering consumer demand.
Additionally, Trump’s reforms may necessitate increased government debt, making borrowing costs more burdensome if rates rise.
Yet, Trump’s preference for low rates could clash with the Fed’s inflation control measures. Trump has previously criticized Fed leadership and suggested reducing its independence from the executive branch.
