The FED remain reluctant to raise interest rates despite a huge improvement in the US economy. With less than 2 months until either Trump or Clinton assumes office, its questionable whether the FED will act at their next meeting on the 2nd of November.
Trump criticises Yellen over ‘market bubble’
Trump made comments about Chairlady Yellen this week, questioning her role in keeping interest rates low for 10 years. Whilst many criticised his views there were also some that agreed with his position. The FED have had some time to raise interest rates, but have remained reluctant to do so even when the economy was performing exceptionally well.
And it remains questionable as to whether such a hike will take place so close to a presidential election, especially one with a wildcard such as Trump at play.
From a personal view markets could react negatively to a Trump victory. And whilst the FED are independent from political intervention they would struggle to ignore the impact of a Trump victory on the economy.
Will the FED raise interest rates in December?
It would seem more likely that they would raise interest rates in December depending on the outcome of the US elections. Whilst many deny the possibility of a Trump victory one only needs to look at the recent Brexit vote to establish just how uncertain this year has been. A Clinton victory is more likely to provide stability for markets and would allow the FED to review their decision with comfort.
However, a Trump victory is not unlikely given the recent polls and I am expecting the US Dollar to weaken significantly in the event of a Trump victory. The longer term implications of a Trump victory could push investors to pull out of the US Dollar as hopes of a FED hike diminish.
In any event, her meeting this afternoon with congress will allow for Q&A, there could be some clues as to how the FED will act in the coming weeks. But with no clear winner in this election, I would remain cautious of holding off on a currency transfer for much longer.