This article assesses the actuality that the proposed budget by the Trump administration will result in long-term growth before inflation and higher interest rates unfold. With all that being said, the Federal Reserve stated they are poised to counter inflation if any signs of it taking off become present.
Trump's budget includes $200 billion for infrastructure over the next 10 years, $18 billion for his wall along the Mexican border, $13 billion to fight the opioid crisis, and $716 billion for military programs and maintaining a nuclear arsenal.
Douglas Holtz-Eakin, a former chief economist under George W. Bush, stated that he believes the best chance at long-term growth is cutting taxes for American businesses, but the household tax cuts were not necessary due to a rather strong labor market that continues to hit record-low unemployments.
If higher interest rates were to occur, then all of the stimulus created by the Trump administration will become irrelevant. Knowing the Federal Reserve has such a keen eye on signs of inflation and expected interest rates is assuring to citizens in that, if anything unexpected were to happen, the Federal Reserve will have implemented a policy before the estimated price hikes and interest rate increases were to occur.
https://www.reuters.com/article/us-usa-budget-economy-analysis/as-trump-gambles-with-more-economic-stimulus-the-fed-is-poised-to-counter-inflation-idUSKBN1FW2C8
1 comment:
Interest rates have been relatively low in the past few years, and I feel that using interest rates is a good way for the Fed to monitor it. Expected interest rates can be increased in order to promote growth in the present. Meanwhile, if inflation gets too high because of this growth, the Fed can easily increase interest rates to combat it. However, since interest rates are currently so low, it will be difficult to fight inflation with a small increase in these rates.
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