Trump Will Not Be Pleased with the Federal Reserve When He Returns

President Donald Trump does not like to wait, and patience is exactly what the Federal Reserve is serving right now. After the strong December jobs report, the Fed seems comfortable sitting still, keeping interest rates stable instead of cutting them. The unemployment rate has dropped to a desirable level of 4.1% and inflation remains above the Fed's 2% target. Therefore, there will be no interest rate cuts. This is sure to cause disagreement with Trump, who is already frustrated with the Fed. Your economic plans - high tariffs, 'the largest tax cuts ever' and overly strict immigration policies - could push the economy into uncertain territory. Economists at JPMorgan called Trump and his team "alchemists", experimenting with policies that could cause chaos. This is a risky formula and the Fed knows it. The real estate market is under pressure The housing market has felt pressure. Mortgage rates have risen back to 7%, partly due to the increase in treasury bond yields and expectations of Trump's return. The 10-year treasury bond yield - closely tied to mortgage rates - has recently surged 10 basis points, reaching a level not seen since late 2023. This is not a small issue for Americans who want to buy a house. Higher borrowing costs mean higher monthly payments, making homeownership more difficult to afford. But wait, it gets worse. Trump's immigration policy could reduce the workforce of construction workers. Immigrants make up about 25% of the total construction workforce in the United States. If Trump pushes for stricter deportation or immigration laws, the already tight labor supply in the construction industry may become even more depleted. The California housing market is in turmoil due to wildfire damage, requiring significant rebuilding efforts. Combined with fewer workers, the housing crisis could quickly worsen. Inflation, debt and all the headaches Expectations of inflation are increasing, and Trump's policies may only add to it. A recent survey by the University of Michigan showed that long-term inflation expectations rose to 3.3%, the highest level since 2008. Why is this important? Because when people expect higher inflation, it can become a self-fulfilling prophecy. Shoppers and businesses start adjusting prices, and before you know it, inflation has spiraled out of control. Meanwhile, national debt is a thorny issue worth $36 trillion. Both the Democratic and Republican parties have contributed to this financial mess, but Trump's tax cut proposal won't help much. In addition, higher borrowing costs due to rising interest rates, the United States seems to be preparing for a comprehensive debt crisis. Wall Street has taken note. Economists at Bank of America have adjusted their expectations. They no longer predict any interest rate cuts this year and even see the possibility of a rate hike if inflation exceeds 3%, which could happen. Although Citigroup still expects some interest rate cuts, it has pushed back the timing to May. Traders, tariffs, and Trump's experiments Trump has proposed ideas such as a 60% tax on goods imported from China and a general tax on other trading partners. Imported goods will be more expensive, and businesses will pass on those costs to consumers. The Tax Cuts and Jobs Act of 2017 has provisions expiring at the end of this year, and the Republican Party is racing to incorporate as much as possible into a bill. Cutting taxes further may seem politically appealing, but economically, it is playing with fire. If Congress does not address the financial impact of these, the United States could face a severe backlash from the bond market. Rising borrowing costs could stifle economic growth and that's not a gamble anyone wants to take. As for me, the Federal Reserve is watching all of this like a hawk. Chairman Jay Powell and his team are aware of the risks of stepping into uncharted territory. Trump has been dissatisfied with most of the decisions that the Fed has made over the past four years. And he can either calm things down or blow it up immediately. He tends to be quite unpredictable. DYOR! #Write2Earn #Write&Earn $BTC {spot}(BTCUSDT)