Federal Reserve’s tough test
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.