Trump's Election And The Fed

Once again, it looks like events may have waylaid the best laid plans at the Fed. The expectation is that the Fed is poised to raise rates in December but you really have to wonder if they will pull the trigger now that Donald Trump has been elected. Trump is so thoroughly unvetted that no one really has any clear idea of the details of the policies he is likely to pursue, only the broad outlines and even those are subject to change. Does the Fed really want to risk raising rates and put the recovery at risk when Trump could sink the economy a few months later? It will be interesting to hear what the governors have to say between now and the December meeting. And their is plenty of data to be absorbed before then as well.

In addition, the Fed’s own independence will now be under attack from Republicans. I’m sure we will start hearing about “auditing the Fed” again in the new year. Just to be clear, auditing the Fed does NOT mean a conventional audit. It does mean that Congress can get access to the Fed’s deliberations about specific actions and, armed with that information, exert even more pressure on the agency to bend to their will. It is essentially about restricting some of the Fed’s independence. And it is just another example of the Republican party’s attack on the norms of governance.