Trump's victory: Implications for the FOMC - Westpac

Analysts at Westpac offered their implications for the FOMC on Trump's victory.

Key Quotes:

"We have long held the view that the US Federal Reserve has been positioning for a rate hike at its December meeting.

However, the uncertainty that this political development will inevitably exert over not only the US economy but also the global economy means that the FED will now hold fire until it can more accurately assess the likely growth profile for the US economy.

The initial focus of markets on the Trump ascension will be on its implications for trade. Those implications are unambiguously negative and that negativity can be expected to persist until we see the results of his “first 100 days”(mid 2017). Once markets have sufficient information to assess the likely extent and “damage” of these trade policies, they will focus on the (likely significant) fiscal policy changes and whether such radical changes will get the support of the fiscally conservative Republican House and Senate.

Markets may flirt with prospects of a huge increase in the deficit and a strong lift in inflationary pressures, but will be reluctant to price such developments until there is more certainty around the new president’s capacity to push such changes through the Congress."