RSS Federal Reserve monetary policy has entered a new phase - may be quite different

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 RSS Federal Reserve monetary policy has entered a new phase - may be quite different

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Rick Rieder, BlackRock's Chief Investment Officer of Global Fixed Income.

In summary.


  • Federal Reserve Policy:
    • The U.S. is entering a new phase of the rate-cutting cycle, distinct from the prior quarters.
    • The Federal Funds Rate has been reduced to around 4%, which is still moderately restrictive but aligns better with inflation running in the low-to-mid 2% range.
    • Elevated rates disproportionately impact lower-income households through housing, credit card debt, and auto financing. With inflation significantly decelerated, continued high rates may no longer be justifiable.

  • Immigration and Labor Market:
    • President-Elect Trump plans to prioritize addressing illegal immigration, consistent with campaign objectives.
    • Legal immigration has played a critical role in U.S. employment growth, filling gaps in industries such as hospitality, healthcare, education, and aviation.
    • A slowdown or reversal of legal immigration trends could reduce labor supply, impact employment levels, and increase wage pressures.

  • Trade and Inflation Risks:
    • Proposed tariffs, trade policy changes, and potential global economic decoupling could create short-term inflationary pressures.
    • Long-term impacts on economic growth depend on the scope and implementation of these policies.
    • Businesses are already engaging in inventory stockpiling in anticipation of potential disruptions.
This article was written by Eamonn Sheridan at www.forexlive.com.
 
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