Monday, July 30, 2018

The Fed vs Trump's economic policies


The Fed is to face a new challenge to align itself with President Trump’s economic policy which no longer favors raising interest rates so often, as it negatively affects his projects that need low interest rates on borrowing. The US economy has been booming and requires a matching fiscal policy with higher interest rates to control inflation.

This raises the question as to whether the Fed will be pressured by the US administration or will exercise its independent role in accordance with the law and constitution, given that the Fed is under the authority of the congress and enjoys the freedom to design its own financial policies. Similarly, how will President Trump fund his major projects that include the $2 trillion to be spent on infrastructure? Of course, in due course the Fed has to support the US growth process that has surpassed its strong point.

In addition to the above questions, let’s not forget the weak dollar strategy that’s needed to boost exports, support US products and achieve the main objective which is to reduce the trade deficit. And in between the lines, Trump highlighted his policy path when unmasking his current agenda last week. Then, he criticized the US Fed policy of raising rates that would eventually lead to the rise of the USD.

ADSS has been uncovering this agenda in the past, illuminating the America First motto and what comes below, such as job creation, cutting taxes and attracting foreign investment, as well as restrictions on financial laws that were eased to facilitate financing and encourage local producers, plans that obviously disagree with high interest rates.

The US economy has already started benefiting from the trade war with the first evident end result showing recently as Trump and the president of the EU reached an agreement to remove tariffs on industrial products and increase agricultural imports from the US, a practical step serving the interests of the United States.

In a previous report we mentioned that these measures will reduce the trade deficit by 30% and be reflected in the US economy to add around one trillion dollars to the GDP in addition to 600,000 jobs and attract those companies that have migrated outside the US since 1996 which have reached around 6,000 companies.