The Fed has its eyes on Trump

Akin Oyedele

Business Insider

5th January 2017

’ ’ ’ The Federal Reserve is watching for the effect of fiscal policy on economic growth and on how quickly it raises interest rates, according to the minutes of the Federal Open Market Committee meeting held in December. ’ ’ More than half of all officials included in their forecasts an . ’ ’ Donald Trump has proposed billions in infrastructure spending, and tax cuts for corporations and individuals.

After his win in November, markets became optimistic that these measures would boost profits and economic growth. ’ ” If growth and inflation take off amid Trump’s fiscal policy, the Fed may be prompted to raise interest rates faster than it expects. ” ’ (emphasis added): ’ ’’ ’ The minutes added that many FOMC members thought the Fed may need to raise rates faster than expected to halt a buildup in inflation that may arise if the unemployment rate undershoots its normal level.

The risk of that undershoot had ”increased somewhat.” Inflation remains below the Fed’’s 2% target. ’ ’ The FOMC added that a stronger dollar could be a drag on faster economic growth.

’ ’ After much insinuation, the FOMC voted unanimously at the December meeting to . ’ ” Federal Reserve Board Chair dwelled considerably on the possible effect of Trump’s administration on the Fed and the economy. Nobody — including Yellen — really knows what Trump will end up doing, so many of her responses reflected that uncertainty.

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