The Federal Reserve warned the markets about the uncertainty that fiscal policy of the President-elected, Donald Trump, poses to the country's economy.
Paraphrasing the minutes of the Federal Open Market Committee, it says: "When discussing their economic forecasts, the participants stressed the significant uncertainty regarding the timing, size and composition of any future fiscal and other economic measures, as well as how these measures can affect the aggregate demand and supply. Several participants noted that, depending on changes in taxes, spending, regulatory and other measures, economic growth may be faster or slower than currently anticipated”.
The US dollar fell slightly against foreign currencies compared to the level at which it remained until the publication of the protocol as the regulator’s statements were less impulsive than that the market expected.
Although the document does not directly indicate Trump, it notes that the outlook for changes in the US monetary policy takes into account the "expectations of more expansionary fiscal policy in the period after the elections."
Trump's policy is to introduce new measures to stimulate the economy, in particular, an increase in fiscal spending and tax cuts. Such measures can accelerate the growth of the US economy and contribute to an increase in inflation to the target level of 2%.
"According to the document, the Fed's optimism is based largely on the ability of Trump to realize his campaign promises of significant tax cuts and escalating costs. In other words, the Fed is counting on Donald Trump, which is a risky gamble, "- says Kathy Lien, chief executive of the currency strategy unit at BK Asset Management.
Some representatives of the regulator recognized the risk, so they are officially approved a "gradual increase in interest rates." Most still believe that the Fed may have to raise rates more quickly, as the labor market are likely to show excellent results thanks to the development of business and the growth of consumer spending.
The FOMX raised the rates at the December meeting, which was the only time in 2016 - up to 0.5-0.75%. In addition, the regulator improved forecasts for the country's economy for 2016-2017. The central bank also said that in 2017 it expects to increase the rate three times instead of two, to an average of 1.375% (the current average is 0.625%).
The next meeting of the regulator is planned on January 31- February 1.