US voters are going to the polls on Tuesday for a fiercely contested presidential election between Republican Donald Trump and Democrat Kamala Harris, with outcome expected to influence financial markets, global trade with China and Europe, and central banks’ monetary policy in more ways than one. The US Federal Reserve has interest rate decisions on the agenda for the next three months, as do the Bank of England, the Reserve Bank of Australia and the Central Bank of Brazil – an indication of the global economic stakes of the election.
Market forces of anticipation and uncertainty are at work too; both Treasury yields and the US dollar have risen since August, which might signal some investors are betting on a Trump victory. Yet polls show it’s close and, if Harris does prevail, expect the big tech companies to receive a major boost. And that’s in the scenario of a reasonably clear outcome. What if the result is contested and legal decisions linger? In that case, the volatility will only increase. The Fed will commence its quarterly meeting on interest rates a day after the election; its statements should provide more information regarding whether economic resilience allows for further tightening, or if the central bank will cut rates if presented with fresh economic data.
Globally, Trump’s proposed tariffs on China could cripple its export-based economy, while central banks worldwide could adjust their policies accordingly, depending on which candidate wins the US election. The Bank of England and others could cut rates as the British, too, are in a delicate time of global economic policies and US politics. Meanwhile, trade and inflation numbers due out of China later this month could be the first barometers to show what US policies are doing to the world economy.
Source: Economic Times
