President Elect Donald Trump’s Monetary Policy
When the results started pouring in after the Nov 8 election, the financial markets dwindled. This is more or less expected. However, after a day or two, things normalize, with the market starting to normalize big time. When Mr. Trump delivered his victory speech, it gave a sigh of relief to the investors and the business managers in general. Things aren’t bleak, most of them thought. After all, getting the right economic measures in place at the right time is what Donald Trump is known for. So, all the cheers and jubilation is not uncalled for.
Although, Mr. Donald Trump didn’t say it, but the fiscal policy he hint at seems to resemble the one currently being pursued by Japan. More spending and tax cuts is what the Americans can look forward to. This is in terms of their fiscal and monetary policy adherents. For now, the markets and the investors aren’t willing to call their shots just as yet. They will wait until it becomes clear who becomes in charge of the fiscal management under the new administration. Once everything finalise, the investors will have a clearer view. They will be able to see the actual economic policies that they will implement.
The State of Unpredictability
The situation is pretty much unpredictable, particularly because of the statements made by Mr. Trump about the Fed as an organization, and it’s chair Janet Yellen. What you need to know is the fact that real estate is different from monetary policy. The dynamics are different and running each of these requires expertise of its own kind. Fed bashing may have been the typical Republican rhetoric, but it’s still early to jump to any conclusions regarding the monetary policy in store for the U.S. in 2017. Yellen’s term will expire in 2018, but irrespective of the audacious moves, forcing her to resign doesn’t seem to be the way to go for the new administration.
What to expect?
So, what to expect? It all depends on whether Mr. Trump decides to incorporate a hawkish fiscal and monetary policy. What seems obvious is that the new administration is going to try and strengthen the dollar by means of tighter monetary policy and looser fiscal policy. Protectionism is something the President elect has vouched for vociferously. If he decides to go that way, then it can actually pose risks for the economy and weaken the dollar, altogether. All it requires is a perfect balance between the fiscal and the monetary policy, and you wouldn’t have to wait much to see the results.
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