On Monday republican presidential candidate Donald Trump fired political shots at the Federal Reserve saying, “she is keeping them artificially low to get Obama retired,” while referring to the interest rate policy the Fed has taken under the leadership of Janet Yellen.
The Federal Reserve is set to release their September rate decision this upcoming Wednesday. If Yellen is indeed political, and the businessman’s statements perturbed her, she may use the meeting as an opportunity to prove him wrong.
Unexpectedly lift rates by 25 basis points and press the markets to new highs.
Investors are currently pricing in a 15% chance of a rate hike.
“I think she’s very political, and to a certain extent she should be ashamed of herself.” – D.Trump
A strong stock market bodes well for President Obama and also Hillary Clinton, who is set to debate Trump Monday September 26th, five days after the FOMC rate decision.
There’s an old saying among investors and traders about not fighting The Fed. Trump picked a fight with the central bank in public forum, and Yellen and her team of bankers have two meetings left to react before elections.
The S&P 500 is down -1.5% since Monday’s close. The selling could be associated with Trumps remarks, Clinton’s rash of health incidents, or just old fashioned OPEX shenanigans.
If the Fed does take action next week, many will speculate whether their timing was political. Americans’ trust in many of the long-standing pillars of society is sinking to new lows. According to a recent Gallup Poll, only 32% said they trust mass media “to report the news fully, accurately, and fairly”. No poll numbers currently exist based off a similar question of trust in the Federal Reserve.
Donald Trump continues to be a constant presence in the media by saying stunning things. His latest comments toward the Fed may lead investors to start pricing in rate hikes, and soon.
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Interesting take, but I think she will not revert to Hawkishness as no doubt she is one of those who adore Nate Silver’s data points showing Clinton’s “invincibility”.