Analysts spent early November warning a Trump victory in the U.S. presidential election would make the Federal Reserve less likely to raise interest rates. But as Bloomberg reports, what happened instead is that it has made a December increase a near certainty.
Traders are now assigning a roughly 94% probability—the highest level this year—to a Fed boost at its final meeting for the year in December, futures contracts indicate. The odds of a Fed move by December have risen from 68% at the start of November as inflation expectations surged.
St. Louis Fed President James Bullard says there’s a chance the U.S. economy could get a medium-term boost if Trump increases infrastructure spending and tax reforms, though it’s too soon to say how the economy may be affected by the election.
A “single policy-rate increase, possibly in December, may be sufficient to move monetary policy to a neutral setting,” says Bullard, according to slides released by his office for a speech in London made Wednesday.
