jimnyc
12-04-2017, 05:57 PM
2018 Could Be the Year of 'Trumponomics'
All eyes should turn toward the U.S. economy in 2018, since it will be a make or break year. From the Fed leadership transition to the tax reform package, there are numerous reasons that 2018 will be adventurous. It will be the year that Trumponomics gets its first true test-drive.
Obviously, there will also be challenges that the U.S. economy will need to overcome in 2018, but these are generally overstated. Risks are always present, but sometimes they outweighed by the potential positives. And 2018 is one of those years. It is a toss-up whether tax reform or the Federal Reserve will be the more important part of the 2018 economic landscape. But both are potentially positive for economic growth.
The appointment of Jerome Powell, the Trump administration’s nominee for Chair of the Federal Reserve, is an important part of the economic growth in 2018. The Fed is always a threat to end an economic expansion prematurely by tightening policy too much, too quickly. With Powell, there are few reasons to worry about over-tightening, at least in the next year or so. The Fed Chair is not a dictator of monetary policy, but the position does hold a tremendous amount of sway in its determination.
Powell has stated that interest rates should rise "somewhat," and that is something the Fed has already stated and is not particularly interesting or exciting. His comments around the Fed’s reduction of its quantitative easing bloated balance sheet were intriguing. Instead of stating that the balance sheet would shrink dramatically, back to levels more consistent with precrisis levels, Powell commented in his confirmation hearing that the balance sheet would be lowered to $2.5-3 trillion. That should only take about four years to complete, and leaves more assets on the balance sheet than many expected.
With only somewhat higher rates ahead and carrying a large balance sheet, the Fed may actually be able to hold out the expansion long enough to get some upward wage pressures. And, alongside wage pressures, the potential for stable inflation pressures.
The result of firmer inflation would be a Fed more confident in their ability to raise rates in late 2018. One possibility is that the Fed could stick to their current two-to-three hike projection that would mark the first time in recent history the Fed hit its projections with any consistency.
Rest - http://nationalinterest.org/feature/2018-could-be-the-year-trumponomics-23444
All eyes should turn toward the U.S. economy in 2018, since it will be a make or break year. From the Fed leadership transition to the tax reform package, there are numerous reasons that 2018 will be adventurous. It will be the year that Trumponomics gets its first true test-drive.
Obviously, there will also be challenges that the U.S. economy will need to overcome in 2018, but these are generally overstated. Risks are always present, but sometimes they outweighed by the potential positives. And 2018 is one of those years. It is a toss-up whether tax reform or the Federal Reserve will be the more important part of the 2018 economic landscape. But both are potentially positive for economic growth.
The appointment of Jerome Powell, the Trump administration’s nominee for Chair of the Federal Reserve, is an important part of the economic growth in 2018. The Fed is always a threat to end an economic expansion prematurely by tightening policy too much, too quickly. With Powell, there are few reasons to worry about over-tightening, at least in the next year or so. The Fed Chair is not a dictator of monetary policy, but the position does hold a tremendous amount of sway in its determination.
Powell has stated that interest rates should rise "somewhat," and that is something the Fed has already stated and is not particularly interesting or exciting. His comments around the Fed’s reduction of its quantitative easing bloated balance sheet were intriguing. Instead of stating that the balance sheet would shrink dramatically, back to levels more consistent with precrisis levels, Powell commented in his confirmation hearing that the balance sheet would be lowered to $2.5-3 trillion. That should only take about four years to complete, and leaves more assets on the balance sheet than many expected.
With only somewhat higher rates ahead and carrying a large balance sheet, the Fed may actually be able to hold out the expansion long enough to get some upward wage pressures. And, alongside wage pressures, the potential for stable inflation pressures.
The result of firmer inflation would be a Fed more confident in their ability to raise rates in late 2018. One possibility is that the Fed could stick to their current two-to-three hike projection that would mark the first time in recent history the Fed hit its projections with any consistency.
Rest - http://nationalinterest.org/feature/2018-could-be-the-year-trumponomics-23444