The ongoing battle between Federal Reserve Chair Janet Yellen and President-elect Donald Trump is about to escalate to a new level on Wednesday once the Fed announces the future of interest rates.
The market is already sold on the idea of an interest rake hike in December, as seen here and here. Plus, the minutes from the November meeting certainly seem to point in that direction.
Trump’s victory only fueled the battle since his win made a rate rise even more imperative, an article in Quartz stated.
From the article:
The US economy is now in reflationary “Trump boom” mode. Investors have driven stock markets to record highs, betting that Trump and the Republican Congress will pass a huge fiscal stimulus, focused in large part on infrastructure spending.
A Trump boom that boosts US economic potential by spurring business investment will not necessarily be dangerously inflationary, all else being equal. However, as employment and investment rise, prices will inevitably rise—even more so if Trump raises trade barriers as promised.
It will fall to Yellen to keep the lid on inflation.
After Trump won the election on Nov, 8, experts speculated over whether Yellen would resign from her position immediately, especially since Trump said “If I win, Yellen's days at the Fed will be numbered.”
But after Trump's election, one of his advisors announced that Trump does not expect Yellen to resign before her term ends.
Yellen later ended that suspicion herself, saying she fully intends to serve out her four-year term.
