Trump will pressure the central bank to lift rates higher than they would like

Will Trump’s Policies Boost The US Dollar Along With Inflation?

Donald Trump is set to embark on some wild economic policies when he takes over the presidency in January, with some fearing the moves will push inflation through the roof on the back of a rising US dollar.

Some key pillars of Trumps policies are cutting income taxes, corporate taxes, as well as spending 1 trillion dollars on infustructure for projects like roads, bridges and the like.

The corporate tax cuts alone are likely to see a flood of money repatriated to the USA which is going to cause a huge demand for the greenback and in turn send it higher against other currencies.

Another fear of a Trump administration is the potential to interfere with the independence of the US Federal Reserve which is the key decision maker on interest rates.

All through his election campaign Trump blasted Fed President Janet Yellen for keeping interest rates too low for too long, and some predict that he will pressure the central bank to lift rates higher than they would like.

Fed Vice Chair Stanley Fischer weighed into the argument on Monday by noting that a rise in spending on infustructure would actually take some of the pressure of the Fed in regards to monetary policy and would greatly benefit the US economy

“Certain fiscal policies, particularly those that increase productivity, can increase the potential of the economy and help confront some of our longer-term economic challenges,” Mr Fischer said.

“Some combination of improved public infrastructure, better education, more encouragement for private investment, and more effective regulation all likely have a role to play in promoting faster growth of productivity and living standards,” he added.

Mr. Fischer also noted that the independence of the Fed needs to remain intact and that nothing in recent times warrants any interference,

“If inflation were at 15 percent like it was in the 1980s, there would perhaps be a reason to say that something isn’t right and it has to be changed. But that is not the case today,” he said

This article is brought to you by FIBO Group.

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Andrew Masters

Andrew Masters is an analyst from FIBO Group forex brokers who has more than 15 years’ experience trading forex and different financial markets. He specializes in Fundamental analysis which is targeted towards commodities such as gold and oil while also focusing on commodity currencies such as the Australian and Canadian dollars.