The Federal Reserve is going to raise interest rates next week, but
shy away from the bigger question looming for financial markets: How
does the shock outcome of the presidential election change the economic
The Fed is widely expected to announce an increase in
the target range for its federal funds rate to 0.5%-0.75% when its
two-day meeting wraps next Wednesday, analysts agree. It will be the
first increase of 2016, a year once expected to produce at least a
couple of rate adjustments. The stock and bond markets have a quarter-point move baked in the cake.
the same time, Fed officials are expected to duck questions about how
the upcoming Trump administration’s plans for fiscal, trade and
regulatory policies will impact the economy and the central bank’s
“I would expect them to keep as low a profile as
humanly possible,” said Vincent Reinhart, chief economist for Standish
Mellon in Boston.
“They don’t want to be seen as influencing policy, either as cheerleader or expressing doubts,” he added.
Fed has already shown a desire for staying out of presidential
politics. It included no mention of the election in the minutes of its
September or November meetings, Reinhart noted.
Janet Yellen wants to avoid the recent experience of Bank of England
Governor Mark Carney, who came under fire from Brexit supporters for
comments he made during, and after, the referendum campaign that
ultimately ended with a vote for the U.K. to split with the European
And the Fed doesn’t want to whip up Republicans in the
House and Senate who are eager to clip the central bank’s wings,
Fed officials are not likely to change their
economic forecasts or their projections for interest rates over the next
three years, economists said. At the moment, the central bank is
penciling in two rate hikes in 2017, and three rate hikes each in 2018
and 2019. Markets scan the Fed’s “dot plot” to extract a snapshot of Fed
thinking on economic and policy projections.
beyond mid-2017 will be basically ignored by the market, analysts say.
By then, the Trump administration could have put its initial stamp on
the central bank, filling the existing two vacancies on the seven-member
Fed board of governors.