Donald Trump’s election has created a considerable uncertainty over the policies he is likely to pursue once he is sworn in as president. Thus, it is quite soon for the federal judges to plan on whether his policies are for gradual interest rates and if it requires some adjustments. The president of New York, William Dudley, painted a benevolent picture of the current economy of the USA in his speech that discussed the fiscal policy including the rising debt levels and other predictable actions made in the president’s elect manifesto. The Fed president indicated that the wages are likely to grow since he expected improvements in the labor market and in the high inflation as compared to the Fed target of 2 percent.
The Fed president indicates that if the economy remains on this trajectory, he would make monetary policies that are declining in their accommodative nature resulting in high interest levels. The president indicates that uncertainty on fiscal policy exists after the election of Trump. Thus, it is quite difficult to reach a conclusion (Grundman, 2016). After the election of Trump, the stock and bond yields, as well as, the price of a dollar have increased tremendously resulting in a tight marketing condition. However, not any of the changes in the fiscal policy is concerned with Trump but instead the changes noted are because of the expectations of more spending by the government that would boost the economy broadly.
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Several uncertainties have faced the global markets of finance as most of the investors await without any expectation of the future of the USA economic policies following the winning of the president-elect, Donald Trump (Grunstein, 2016). The president called for low taxes railed against the trade agreements in the world and called an end to immigration especially from Mexico. Such policies stipulated by the president-elect are likely to result in a depressed global economy since trade would be restricted further after the UK’s move to leave the European Union. I addition to that, in his manifesto, the presidents elect suggested implementing a tariff of 45 percent for products coming from China and 35 percent of those coming from Mexico. In a case that these policies are adhered to, the policies are likely to lower free trade in the USA, low taxes and protectionist measures that detrimental to the global markets.
The trade-led restrictions of the president elect are likely to result in tipping back Europe into a full-blown economic recession. The economy of Europe is not rigid thus; the trade policies liable to be implemented by Trump are likely to result in a banking crisis in Europe. Some of the effects of the uncertainties caused by president Trump’s victory would lead to a negative spiral since its effects on the emerging markets, as well as, the developing countries would be significant. Possibly, Trump’s presidency will result in the investors taking time to make sense and math out how the policies likely to be implemented will affect the economy. Thus, the policies uncertainties are preventing further investments into the country due to the unlikelihood of the future economy.
The money policy is term referring to the actions likely to be taken by the Federal Reserve to influence the money and credit in the economy of the USA. The changes made to the amount of money are likely to affect the interest rates, as well as, the USA economy in general. In a case where a cost of credit is lowered, most of the firms are liable to borrowing money leading to a heated up economy (Mont, 2016). Some of the goals of the Fed Reserve is to open the market operations whereby the Fed buys and sells the government securities of the USA in the financial market leading to the influence in the reserves present in the bank. The term open market shows that the Fed reserve does not limit itself to a particular market. Secondly, the other goal of the Fed Reserve is to set the discount rate. In most cases, the rates of discounts appear to be lower as compared to the federal funds rate despite their close relations. Lastly, the Fed Reserves aims to set various requirements, which is the amount of the physical funds necessary for holding in reserves against the deposits in the bank accounts.
Raising the interest rates now would help the economy instead of hurting it. Despite the fact that most people may assume that a rise in the economy would result in an increased inflation, the Fed would have to work in a way that might endanger growth. A small step on the rates of interest may be appropriate because it is likely to prolong the expansion. The monetary policies have a grievous effect on the economy. Therefore, policy actions would require to be taken before the Fed meets its policy goals. Lack of another hike similar to that of the year 2015 would lead America to a period of economic downturn. Thus, this shows that a gradual increase in rates in critical and would come along with an improving economy.
In conclusion, Trump’s win has brought in various uncertainties in both the trade and the fiscal policies. The period of his victory has led to the increase in the dollar rates. His high business rates on goods emanating from China and Mexico are likely to bar trade in those countries. The Fed has taken measures and plans to raise the interest rates that would prevent the state from economic recession. The idea of increasing the rates of interest is useful as it helps in prolonging the expansion of the state.
References
Grundman, S. (2016). Opinion: Defense Advice For President-elect Trump. Aviation Week & Space Technology , 1.
Grunstein, J. (2016). What Does Trump's Election Victory Mean? Learning to Live With Uncertainty. World Politics Review (Selective Content) , 1-3.
Mont, J. (2016). What President Trump means for regulation and regulators. Compliance Week , 13 (155), 20-28.
