No Fed Rate Hike In First Meeting Of Trump Era

No Fed Rate Hike In First Meeting Of Trump Era

The Federal Reserve isn't rocking the boat yet in the Trump era.

America's central bank didn't raise its key interest rate Wednesday at the end of its two-day meeting. The decision was widely expected by investors and economists.

Fed officials are committed to raising interest rates slowly.

The Fed said in a statement that it "expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace."

But President Trump's policies may force the Fed to move faster.

Trump's plan for a major infrastructure bill could ramp up demand for U.S. goods. That could quickly push up inflation, which has been sleepy in recent years. Faster inflation means a faster pace of rate hikes.

Right now the Fed is forecasting three rate hikes in 2017. It raised rates once each in 2015 and 2016 -- the first rate increases in a decade.

If the Fed starts raising rates faster, that would affect millions of Americans seeking home mortgages, auto loans and paying off credit card debt. It could also trigger volatility in global financial markets -- investors expected "slow and steady" for years. Any surprise from the Fed likely would not go over well.

Trump and Republicans may force the Fed's hand in other ways.

Trump is mulling a 20% tax on Mexican imports to pay for the border wall. Trade experts say goods imported from Mexico -- from cars to avocados -- would become significantly more expensive, triggering inflation.

House Republicans are pushing for something called a border adjustment tax. Supporters say it wouldn't make imports more expensive but critics are wary this tax will work as perfectly as that.

Some experts believe Trump's impact on the Fed will more likely come through executive actions than legislation, which has to be pushed through gridlock in Congress.

"Anything he can do by executive order has the potential to move the Fed faster than they're currently forecasting," says Michael Arone, chief investment strategist at State Street Global Advisors.

Fed leaders haven't spoken much about tariffs and border adjustment. But one did note that if Trump's fiscal plan to rebuild America's roads and bridges sparks inflation, that the Fed will need to step on the pedal.

"If the economy ends up for whatever reason — fiscal policy or other things — growing faster, if we have more job growth and inflationary pressures pick up, then we will have to raise rates faster," San Francisco Fed President John Williams told the Financial Times on Jan. 9.

The Fed next meets March 14-15. Investors only see about a 30% chance of a rate hike in March, according to CME Group.

Laurie and Harvey Marcus Headshot
Phone: 954-540-9863
Dated: February 1st 2017
Views: 80
About Laurie and Harvey: ...

Property Search

RSS Feed

View our latest blog posts in your RSS reader. Click here to access. RSS

Search Blog

Recent Blogs

Townhouse Just Listed - http://margarita
Parkland Florida 15th Safest Town In The United States - Parkland Florida before yesterday
Villa In Boynton Beach For Sale 2bedroom 2 Bathroom 1 Car Garage 55 Plus - Asking $174,900 Immaculate 2/2
Feb 15 2018 45017 1 - My Heart and prayers goes out

Saved Properties

This is a list of your favorite properties. We will email you if a property is reduced or leaves the market.

Click 'Save' to add a property to this list.

Register / Login

New & returning visitors please enter your information to login.

By clicking 'register' you are agreeing to our terms of use & giving us expressed written consent to contact you.

Questions? Comments? Complaints?

This message will go directly to the head of our team.

Location & Address

Exit Realty Premier Elite
8961 Hypoluxo Road
Lake Worth, FL

Other Locations