In an eventful week, the US just jumped over the elections hurdle, and now it confronts the FOMC one. The Fed meets today and by 2 pm EST we’ll know the new level of Fed funds. It is expected with 97% probability, that rates will be lower by 0.25%. What is the context? J Powell has communicated that the economy is strong and inflation is under control. He’s expected to remain chairman of the Fed until 2026. And he has communicated through the dot plot that rates will be 200 bps lower (aprox) by the end of his term. However, the new government might put the Fed’s plan to a test. A continuation of Trump tax cuts, set to expire this year, perhaps even more fiscal stimulus, with even lower taxes can bring back inflation. And te markets are trading to that beat. New all time highs for equity indexes, bitcoin up strongly and firmer dollar. Can the new government lower spending to allow the Fed to continue with its dovish monetary policy?
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