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Ron Insana: Fed Seems to Doubt Trump's Economic Strategy

Image: Ron Insana: Fed Seems to Doubt Trump's Economic Strategy

(Getty/Pablo Martinez Monsivais)

By    |   Friday, 03 Feb 2017 03:37 PM

The Federal Reserve apparently is starting to doubt Donald Trump’s economic plans, just two weeks into his presidency, CNBC’s Ron Insana explained.

U.S. central bankers left their benchmark lending rate unchanged on Wednesday and used their statement to acknowledge that sentiment has gained, and that inflation will rise to their 2 percent target even with “gradual” adjustments in interest rates. They weren’t impressed by the fourth-quarter bounce-back in business investment and continued to term it soft.

“Wall Street needs more clarity from the fiscal side of Washington than the monetary side,” he recently explained on CNBC.com. 

“That is something relatively new. And, unlike some observers, I don't believe that means the Fed is any less important than it has been in the post-crisis world. Instead, it suggests the Fed has a new variable to consider when deciding on whether, how much, or how little, to move interest rates in the current environment,” he wrote.

“Instead of focusing on deflation, global growth risks, a profits recession and diminished expectations, Fed policy may be trumped by Trump,” he wrote.

“The Fed should be on a path to raise rates between one and four times this year, again, assuming meaningful fiscal stimulus,” he said.

“Until it becomes clear that the new president is more focused on tax reform, deregulation, infrastructure spending and other stimulus measures, instead of trade wars and anti-immigration acts, it may very well be that the Fed is back on hold … just when you thought it was safe to assume the Fed was ready to act.”

Insana isn't alone in noting that the nation's central bank is far from convinced that the early stages of Trump's economic strategy will be a rousing success further down the financial road.

“The Federal Reserve acknowledged the boost in sentiment on the part of consumers and businesses, but were not certain enough about the outlook to signal a rate hike was a strong possibility in the near future,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York, said in an e-mail, Bloomberg reported.

Newsmax Finance Insider Hans Parisis contends that the Fed actually sidestepped many potential economic landmines in its first statement of the Trump presidency.

Parisis recently noted that the statement from the FOMC did not go into any of the potential controversies that may plague the Fed over the coming months:

  • The balance between quantitative and monetary tightening;
  • The necessity of offsetting any regulatory easing with quantitative and monetary tightening;
  • The necessity of countering any fiscal easing with policy tightening and how to handle the inflation implications of the muted Trump import tax on consumers by tariffs.

(Newsmax wire services, Reuters and Bloomberg news contributed to this report).

© 2017 Newsmax Finance. All rights reserved.

   
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Economy
Ron Insana: Fed Seems to Doubt Trump's Economic Strategy
ron insana, donald trump, fed, economy
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2017-37-03
Friday, 03 Feb 2017 03:37 PM
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