Janet Yellen confirmed the increase in interest rates: “it Is an act of confidence in the american economy”. But the chairman of the Federal Reserve (Fed) sees the unknown: the economic policy of Donald Trump. The Fomc, the Federal Open Market Committee, the body of the Fed to control monetary policy, has raised 0.25 points the interest rate, announcing three other increases of the same amount in 2107. Now we pass from the range of 0.25-0.50% and the upper step: 0,50%-0,75%. Then, in the course of the next year, the central bank is expected to intervene again, until you get to 1.4% within twelve months. The rates curve should continue to rise in 2018, up to 2.1% in 2019, up to the threshold of 2.9%.
Distance from the Eu
For the moment, we are facing a mini-close largely expected and discounted by the markets now for weeks. It widens the distance by the european Union, as noted by Peter Praet, capoeconomista of the Ecb: “The Eurozone is not yet ready for an increase in interest rates”. Yellen, on the contrary, considers the move of the Fed “it’s a decision that will have a modest impact on business”. The economic context is ready. First of all the growth, “that was established”. The year began with a weak thrust. In the third quarter, however, the gross domestic product increased by 3.2%, and now the curve of the gdp travels on an average of 1.8%. If this trend will continue also in the fourth quarter is expected to exceed the 2% level than expected by the Imf (1.6%) and by the Fed itself (or 1.8%).
Employment and inflation in line
the other two key variables, employment and inflation, are in line with the objectives prefigured by the Federal Reserve. The unemployment rate is back to levels prior to the Great crisis of 2008: 4,6%, even if it is accompanied by a share of participation in the labour market is still low of 62.7%. The inflation will be around 1.5% in 2016, to rise to 1.9% in 2017 and reach the target of 2% in 2018.
Yellen gradient
But all these numbers may be scompaginati by the measures of the new president. “Yes, we discussed it among ourselves and we concluded that there is a lot of uncertainty on the line of the next administration.” Janet Yellen looks for the words as neutral as possible. However, the point is very clear. In the election campaign, Trump has promised a great plan of public works, to be financed with tax credits, and then, at least in a first phase, with a budget deficit. Is the right way? Yellen replied: “We have an unemployment rate of 4.6%, close to our target of 4%, which we consider to be full employment. A large fiscal stimulus could have the effect of slightly loosen the unemployment rate, but it could have effects on inflation”. The unintended consequences, then, may be in excess of the benefits. There is an alternative? The Fed chairman repeated, with a tone more muted, as he had already said, on the 16th of November last, in a t estimony to Congress: “The Country needs to increase productivity, with measures that foster the training, the organisation of the work”. The distance is clear: the Trump prepares to manoeuvre to support the application; Yellen insists that you intervene on the structure of the economy. Trump, finally, wants to sweep away controls on the finance provided for by the law Dodd-Frank. Yellen returns to the replicate: “We experienced a very severe crisis. I think that those rules should stay.”
December 14, 2016 (change on December 14, 2016 | 22:27)
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