The postelection volatility in the financial markets should not have too much influence on the Federal Reserve's rate-hike decisions in the near term, Fed watchers said Wednesday.
“The U.S. economy is on stable footing, and in that sense we have the luxury of time,” said Tim Hopper, managing director and chief economist at TIAA Global Asset Management, in an e-mail. “Consumer balance sheets are in better shape today than at any point since the recession, savings rates are elevated, wages are rising, labor markets are still improving, and earnings fundamentals still strongly support positive financial market performance.”
Federal Open Market Committee members convene Dec. 13 for their last two-day meeting of 2016. Originally expected to have approved at least two rate hikes so far this year, FOMC members have been reticent to do so.
“The fact that the markets are taking everything in stride is I think a signal that the Fed realizes,” said Edward J. Perkin, chief equity investment officer at Eaton Vance Management, in an interview.
Longer term, though, the election of Donald J. Trump “introduces many uncertainties to the path of economic and monetary policy” and other issues, said Rick Rieder, managing director and global chief investment officer of fixed income at BlackRock, in a statement. When it comes to bond markets, “we are probably going to see a significant shift from monetary policy stimulus to fiscal policy initiatives, particularly in the area of infrastructure investment at the federal level. This may well aid in accelerating the pickup in inflation levels that already appeared underway, and it likely also results in a steepening in the yield curve over time.”
Mr. Trump has been an outspoken critic of Federal Reserve Chairwoman Janet Yellen, whose term ends in 2018. There are two other Federal Reserve vacancies that he will have to fill.
