Fed’s Economic Downgrade Helps Donald Trump, Hurts Hillary Clinton
The FOMC did not (could not) raise interest rates, but it signaled a new turn for the US economy, South.
Wednesday, the US Fed downgraded its economic outlook for the rest of this year, which will impact the Presidential election if the forecast is right.
In the recent past a steadily improving economy looked to benefit Hillary Clinton, since it would validate President Barack Hussein Obama’s highly lauded (by him) legacy, and give voters a reason to stick with the Democrats.
A weakening economy, however does the opposite, as it sours voters on Mr. Obama and the Democrats, and make them more likely to vote for a Republican.
That Republican is Donald Trump and seems clear that his message of a declining America and his plans to hike tariffs on imports appeals to struggling middle class Americans.
Donald Trump’s talk about American jobs lost to free trade and trade partners that are “eating our lunch” is legitimate, as he gains more followers, if the economy deteriorates as 4 November approaches.
Few economists predict a recession in here, but there are signs of the anemic US economy slowing further.
Job creation during Q-4 of Y 2015 averaged 240,000 new jobs per month. In Q-2 of Y 2016 the average dove to 116,000 per month.
“New worries about the labor market were the major change to the language of the Fed’s statement,” as I noted in my report yesterday.
In March, the Fed predicted GDP growth at 2.3% this year. It now foresees growth of 2%, and that could drop further, given that the Fed is always overoptimistic in its forecasts.
Also, Fed officials think interest rate hikes will be less frequent than they thought 3 months ago.
Markets typically like low interest rates, since it makes corporate and consumer borrowing cheaper, but investors now interpret the Fed’s reluctance to raise rates as a sign of flagging confidence in the econ
If job numbers and other data continue to disappoint, it is very possible the Fed will not raise rates at all this year. That would make last December’s 1/4 pt hike look like a serious mistake.
There is a lot of attention on Donald Trump’s border wall proposal and Hillary Clinton’s e-Mail scandal, but let us not forget what voters care most about, they are: a stagnant economy and a shortage of good jobs.
The voters will remind the office seekers of that come November, and either reward or punish the incumbent Democrats based on if they feel better off, or worse off.
I am beginning to see the trend I have been watching for.
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