Fed Up Friday: Fewer Regulations May Stimulate Post-Election Economy
As markets settle down following the week after the election, inflation continues to rise. Many continue to expect a December rate hike despite the potential volatility caused from state officials calling for Fed reform as early as Q1 2017.
New Trump Era Could Help Fed with More Inflation
Even as investors look for positive changes to come with a Trump presidency, there’s still a large amount of confusion and uncertainty surrounding the next administration’s monetary plans. Jack Caffrey of JPMorgan Private Bank told CNBC he saw a lot of promise in the President-Elect’s plans in terms of short-term productivity, but was less optimistic about how Trump would sustain productivity over the long-term.
In a separate interview, strategist Bob Doll expressed similar concerns: “Did we elect Donald Trump the tax-cutter and the pro-growth president or did we elect Donald Trump the protectionist with some tariffs, which is a tax increase?” Doll expects the former is more likely.
Fed’s Kashkari says Regulations Cause “Potentially Slower Economic Growth”
As speculation on Trump’s possible repeal of Dodd-Frank swirls around Washington, Minneapolis Fed President, Neel Kashkari, has unveiled a new plan that would require banks to substantially increase their capital holdings as much as 38%. The president’s plan is an effort to end systemic risks posed by “too big to fail” banks. Kashkari admits the plan comes with substantial risks to the economy, but is less destructive than the next financial crisis.
Will BOJ Stick to Zero Level Rates Following Soaring Global Yields?
When the Bank of Japan opted for a 0% bond yield rate in September, they weren’t expecting a Trump win or the spurring growth that would follow. Now as global yields begin soaring, all eyes have turned back to whether the BOJ will defend their net-zero levels in the midst of it all.
Staying where they are could result in needing to purchase more Japanese bonds than they originally intended, in turn creating a helicopter money situation in the region.
Reforming Fed “Remains a Top Priority” for House
Some in the House predict Fed reform measures could begin passing into the senate as soon as early 2017. One main reason for the reform push involves the lack of openness and accountability. Rep. Jeb Hensarling (R-Texas) said he thinks the Federal Reserve should “give the American people a greater accounting of its actions.” Republicans like Hensarling are taking advantage of Trump’s appeal to voters looking for establishment reforms. With a Republican-controlled government, the Fed may be first on the chopping block.