- According to a report from JP Morgan, Trump’s election policy goals will lead to higher inflation.
- The market is not pricing in a risk premium for the impact on inflation.
Analysts at JPMorgan say a second Donald Trump presidency could pave the way for inflation that many people may not be prepared for.
“The market appears to have yet to price in much of a risk premium for the inflationary impact of the Trump campaign’s key policies,” JPMorgan analysts said in a client note.
JPMorgan listed the following Trump campaign statements that suggest the following policy goals:
Analysts said Trump plans to extend the 2017 tax cuts, severely restrict immigration with plans to deport illegal foreign-born immigrants and impose tariffs on imported goods.
All of this could lead to inflation, they said.
If tariffs were imposed on all U.S. imports, prices in the U.S. would likely rise.
Severe restrictions on immigration could put upward pressure on wages.
Additionally, extending the Tax Cuts and Jobs Act of 2017, which expires at the end of 2025, could further expand the U.S. fiscal and debt trajectory, potentially creating inflationary risks.
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Analysts at the bank noted that President Trump plans to replace Federal Reserve Chairman Jerome Powell when his term ends and that there is “some discussion” of legal changes that would reduce the Fed’s independence.
Federal Reserve
Changes to the Federal Reserve Act that would reduce the Fed’s independence are unlikely to gain sufficient support in Congress even if Republicans control both houses, analysts wrote.
Still, these comments alone could have an impact on markets, possibly triggering a steepening of the Treasury yield curve through rising longer-term inflation expectations.
The memo was written ahead of Thursday’s debate.
“President Trump’s policies overall could pose significant upside risks to inflation, inflation expectations, and Treasury issuance,” they concluded.
Meanwhile, a letter signed by 16 Nobel Prize-winning economists, spearheaded by Joseph Stiglitz, also warned that a return of Trump to power would bring a resurgence in inflation.
Stiglitz said: Business Insider“I think the general consensus, not just from me but from just about anyone who models the current situation, would be that a Trump administration would accelerate inflation.”
Cryptocurrency Market Trends
- Bitcoin is down 1.42% today to $60,644.80.
- Ethereum fell 2.03% today to $3,378.97.
