Fed­eral Re­serve’s tough test

China Daily (Hong Kong) - - COMMENT - — BEI­JING YOUTH DAILY

As the mem­bers of the US Fed­eral Re­serve Com­mit­tee are due to meet this week for the last time this year, there is a di­ver­gence of opin­ion, with some an­a­lysts an­tic­i­pat­ing they will raise in­ter­est rates, and others sug­gest­ing a de­ci­sion will not be made un­til pres­i­dent-elect Don­ald Trump clar­i­fies his tax cuts and an­nounces his plan for large-scale in­fra­struc­ture spend­ing.

How­ever, no mat­ter when it comes, a rise in in­ter­est rates will un­avoid­ably have reper­cus­sions for the global mar­ket.

Dur­ing his cam­paign, Trump promised to launch tax cuts and in­ten­sify in­fra­struc­ture con­struc­tion to im­prove the liveli­hoods of peo­ple in the United States. He also threat­ened to im­pose higher taxes on US en­ter­prises that sell their prod­ucts back to the US while re­lo­cat­ing fac­to­ries to other coun­tries and em­ploy­ing for­eign work­ers, as a way of forc­ing US man­u­fac­tur­ers to re­turn home and cre­ate more do­mes­tic jobs.

Such mea­sures, if im­ple­mented, will pose a rig­or­ous test to US en­ter­prises that have pro­duc­tion bases over­seas. Be­sides, the se­vere pro­tec­tion­ist moves Trump has promised to in­tro­duce as a higher thresh­old for for­eign prod­ucts and anti-sub­sidy and an­tidump­ing in­ves­ti­ga­tions, are also ex­pected to ig­nite trade wars world­wide.

A se­ries of sce­nar­ios that may fol­low the Trump ad­min­is­tra­tion’s en­try into of­fice de­cides that any US mon­e­tary pol­icy ad­just­ment is a com­pli­cated is­sue. For ex­am­ple, Trump’s vowed in­vest­ment ex­pan­sion con­tra­dicts any in­ter­est rate hike.

Trump has con­tin­ued to dis­play his out­spo­ken and elu­sive per­son­al­ity since be­ing elected as the next US pres­i­dent. Whether he con­tin­ues to chal­lenge con­ven­tion on tak­ing of­fice, how he will gov­ern the US, and what ways he will em­ploy to stim­u­late the US econ­omy and deal with other coun­tries are all fac­tors in­flu­enc­ing the Fed­eral Re­serve’s de­ci­sion on in­ter­est rates.

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