Expert Commentary: FED and Trump's protectionist policy the key issues for US

by Dukascopy

Some economists expect the Fed to resume its plan of increasing key interest rates at a gradual pace if the US economy outperforms itself this year. Do you share this point of view?


I do not think the economy really needs to outperform to make the Federal Reserve raise rates. If the economy evolves as expected, the Fed will be hiking interest rates. The Federal Open Market Committee feels that the economy is performing well and that monetary policy needs to be in a normal position. Currently, monetary policy in the US is accommodative, but with the economy close to normal, the FOMC believes that policy should be close to normal too.   


Experts suggest that higher interest rates could affect American exporters and squeeze foreign investors, who borrowed in US dollars. Are you of the same opinion?


I share this opinion, these effects will definitely unfold. The higher interest rates will dampen spending in the United States. It would probably raise the value of the Dollar and it could hurt some foreign entities that have borrowed in dollars. Still, these potential effects have been well transmitted and participants should understand the consequences.


A narrowing of the trade deficits is a key focus of Trump's economic agenda. In your opinion, how may Trump's "America first" policy change sentiments in international trade?


It is not yet clear what the President Trump will do on the trade front. I am hopeful that he will not engage in protectionist measures and will not generate trade disputes around the world. I believe that Donald Trump will not be as aggressive on the trade front as his comments were during the campaign and in the early days of his election.


Analysts suggest that the uncertainty surrounding US trade policies is likely to push up costs of labour, despite Trump's plan to create new jobs in the manufacturing sector. How do you evaluate the outlook of the US job market?


Job market in the United States is quite good right now. Businesses are actively hiring, enthusiastically looking for workers, which I think will continue throughout 2017 and into next year. Consequently, this will most probably put upward pressure on wages in the country.






Michael Moran 

Chief Economist at Daiwa Capital Markets


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