If Trump wins the US presidential election this week, the Federal Reserve may pause its easing cycle in December at the least, as Trump’s expansionary fiscal policy plans will push up inflation and prevent interest rates from falling, said David Kelly, Chief Global Strategist at JPMorgan Asset Management.
If the Republicans win a big victory in Trump’s win, there will be more expansionary fiscal policies coming out, which could trigger a trade war, widen the deficit, leading to higher interest rates,he said.
Trump’s proposed universal tariffs and the proposals to curb immigration are widely believed to increase inflation, and the plans will involve a large amount of federal spending, deepen the federal budget deficit and prompt the Federal Reserve to pause rate cuts, he said.
However, if Vice President Harris wins, the economy may continue on its path of a soft landing and in this scenario, the Fed may stick to its expected loose policy path, he added.