Fed Prepares for December Meeting Amid Economic Challenges and New Leadership
You may be experiencing some déjà vu, but for the Fed, 2024 is very different from 2016.
The president-elect’s economic plans (tax cuts, tariffs, stricter immigration policies) mirror those of eight years ago, yet the economy has changed significantly. Last week’s election results may not have been considered in the recent interest rate decision, but there is one more meeting scheduled before the year ends.
In December 2016, approximately six weeks after Donald Trump was elected, the FOMC raised interest rates for the first time in a year. A surprise was that committee members, including current Fed Chair Jerome Powell, accelerated the pace of rate hikes for the following year.
Minutes from the FOMC’s December 2016 meeting noted: “Many participants indicated that the effects on the economy of such policy changes, if implemented, would likely be partially offset by tighter financial conditions, including higher longer-term interest rates and a strengthening of the dollar.”
Currently, inflation is higher than in 2016, and the Fed is at the beginning of its rate-cutting cycle. The labor market is fragile, potentially impacted by Trump’s mass deportation plans. While prices on goods and services are easing, higher tariffs present a risk.
Upcoming Fed discussions this week could clarify the central bank's strategy. The next policy-setting meeting is set for Dec. 17-18.