Federal Reserve Sees Inflation Risk Under Trump

The majority of the United States Federal Reserve officials consider that the economy of the country would expand faster due to the new administration’s fiscal policies, and many are anticipating quicker hikes in interest rates. These were revealed by the central bank’s meeting minutes recorded last month.

The Wednesday-released minutes showed how vast the Fed outlook is changing as a response to President-elect Donald J. Trump’s stance of boosting infrastructure spending, reducing levy, and revising regulations.

Policymakers of America emphasized that their perspective for those provisions is still unsure, but they could, once enforced, stir up increased inflation that would cause the central bank to raise interest rates sharply.

According to the minutes of the meeting held on December 13 to 14 last year, around 50 percent of the 17 policymakers showed a projection of more expansionary fiscal regulations. The meeting record also stated that the estimations’ positive risks for economic expansion had increased.

Last month, the Fed raised the borrowing costs unanimously by 0.25 percent. The officials of the central bank also indicated faster increases in interest rate this year than previously anticipated. The stance of the Federal Reserve is considered its first response to the surprise win of Trump on November 8.

Nonetheless, the meeting minutes showed Fed officials might hint an even more belligerent trend of rate hikes if pressures on inflation climb are seen. The new U.S. President has promised to re-develop the infrastructure of America and increase economic growth by 100 percent.

Paul Ashworth, Capital Economics Economist in Toronto, considers the minutes a merely aggressive set of statements.

The perspective of the Fed policymakers disclosed last month is directed to the stir in workforce improvement more than its standard level.

However, the minutes provided a view that many participants considered a bare growth in the measurable shortfall of the normal employment rate for long term. Also, the meeting record also showed that the Fed authority may have to increase the rate of funds more quickly.

Additionally, the Fed meeting highlighted the considerable dubiety of the officials about the upcoming changes in economic policy.

On January 20, Trump will take office and has yet to detail his plans for the nation.

Following the disclosure of Fed meeting minutes, the short-term interest rate futures climbed marginally, but not sufficient to indicate changes in projections for the hike route by the central bank for 2017.

This year, market participants resumed valuing the two rate hikes and settled on under 50 percent possibility of a third raise. This was shown by the value of fed funds futures contracts at CME Group’s Chicago Board of Trade.

About the Author
The Stock Signals Philippines is the online news media arm of Equilyst Analytics. Inc., an SEC-registered stock market consultancy firm in the Philippines that guides Filipinos on long-term investing and short-term trading and offers mentoring services.

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