With a new rise of interest rates and forecast that three new climbs may come to happen in 2017, the Federal Reserve confirmed on Wednesday that, after several hesitations, is ready to finally leave monetary policy ultra-expansionary adopted since the beginning of the international financial crisis in 2008. However, a doubt remains: "the cloud of uncertainty" which represents the election of Donald Trump for president of the United States.
The decision to climb the main reference interest rate of the Fed at 0.25 percentage points to a range situated between 0.5% and 0.75% was expected by most analysts.
therefore, the focus in the markets turned very quickly to the forecasts – disclosed by each of the members of the Edf: the number of new increases in the expected rates for next year. Here, we have noticed an increased aggressiveness on the part of the monetary authority in its strategy of withdrawal of stimulus measures. Instead of the two projected rises in September, now the leaders of the Fed point on average for three climbs in the coming year.
what justifies this change? It will be only the improvement of the economy or the prospect of a presidency Trump that promises stimulus measures to the economy as tax cuts and increased public investment?
In the press conference that followed the announcement of the decision to rise rates, the president of the Fed stated that the reason behind the decisions of the Fed is the improvement of the economic situation mainly at the level of the labour market, stating that the rise in rates "is a vote of confidence" in the north american economy, and laying out a scenario in which the economy is growing, unemployment continues falling and inflation remains under control.
Janet Yellen strove also to avoid a direct confrontation with the president-elect of the United States, that during the election campaign the criticized on several occasions. The responsible maximum of the Edf, however, could not avoid passing some signs that the relationship between the monetary authority and the future the White House will not be easy.
After much pressure to give indications of how policies Trump may come to influence the decisions taken, Yellen admitted that the Fed "is currently operating under a cloud of uncertainty", since it is not possible to know for sure what the economic strategy that will in fact be implemented by the Administration to Trump.
In the markets, one of the ideas most discussed is the assumption if you come to watch a cut of the taxes the significant and the launch of an ambitious plan of public investment may lead the Fed to be more quick to rise interest rates to prevent a rise in inflation above the expected. Yellen, even insisting that she does not want to give advice to the new administration, has always been stating that is not favorable to a policy that put the economy "under high pressure", arguing that "at this time, it is not obvious that it is necessary a stimulus of fiscal policy to bring back the economy to full employment.
Another area of potential confrontation between the Fed and the presidency is the policy of financial regulation, which Trump says need to be smooth. Yellen defended the imposition of greater restrictions on the actions of the banks, stating that this is the way to avoid a new crisis of great dimension.
Questioned about the way how you will deal with a president who is known to publicly express their opinion on the most diverse subjects, both in social networks as in the press, the chairman of the Fed took the opportunity to mark the ground in relation to possible future clashes. "I believe very much in the independence of the Fed," he said.
Janet Yellen will conclude its current mandate in the Fed in 2018, and the greater part of the bets will in the sense of not be chosen by Trump to lead the Fed from that point. "I recognize that I can be indicated or not for a second term," said Janet Yellen, but with a smile, made it clear to those who heard it (including Trump) that is determined to finish his first term. The next two years in the Fed promise to be agitated.
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