Fed’s Bullard Says December Rate Hike Still on Track

The Republican sweep of the White House and Congress could break the current gridlock over national policy in a potential boon to the U.S. economy, St. Louis Federal Reserve bank president James Bullard said on Thursday

Bullard said the potential positives from Tuesday’s outcome, including the possibility of regulatory reform and a boost to growth through new infrastructure spending, for now outweighed any concern about volatility in financial markets surrounding President-elect Donald Trump’s surprise victory.

“It is not a level of volatility that is troubling … It certainly breaks gridlock in Washington, which has been a key complaint of how the economy has operated,” Bullard said to reporters after a morning presentation here. “We are basically on track the same way we were before the election.”

The Fed has positioned itself for a likely interest rate increase in December. Despite expectations that a Trump victory might disrupt financial markets, or even threaten a trade war with his promise of new tariffs, equity markets have moved higher so far and investors maintained their expectation that the Fed will move next month.

Trump had been critical of the Fed during the campaign, and his victory coupled with Republican control of Congress could open the door for approval of a variety of proposals to bring the central bank under closer control of Congress.

The central bank has two open seats on its seven-person board of governors, and Trump will have the chance to appoint a new chair in 2018, when Chair Janet Yellen’s term expires.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza