The US Federal Reserve and many rich-world peers are widely expected to lower interest rates again in the coming week, right after a US presidential election that might not be decided yet.
Central banks responsible for more than a third of the global economy would set borrowing costs in the wake of the vote, clinging to whatever certainties they can discern on the likely path of US policy for the next four years.
With US Vice President and Democratic presidential candidate Kamala Harris and former US president and Republican presidential candidate Donald Trump neck-and-neck before election day tomorrow, monetary officials from Washington to London might find themselves still in suspense.
Photo: AFP
Election aside, US policymakers have already communicated a desire to proceed with a more gradual pace of rate cuts after September’s half-point reduction.
Economists widely expect a quarter-point move on Thursday, followed by another next month — and their conviction grew after data on Friday showed the weakest hiring since 2020.
Fed officials try to steer clear of politics, yet they initiated a rate-cutting cycle heading into the final stretch of an election whose outcome might hinge on how voters feel about the economy.
While Fed Chairman Jerome Powell would likely stress that the current conditions warrant less restrictive policy when he speaks after the decision, he and his colleagues still risk political backlash.
Central banking counterparts elsewhere are confronting a panoply of risks ranging from slowing economic growth to lingering inflation, even before they contemplate what sort of hit to global trade Trump’s threat of tariffs would effectively entail.
While the Reserve Bank of Australia would probably keep borrowing costs on hold again in a decision tomorrow, hours before US polls open, other peers are poised to act.
Those in the UK, Sweden, the Czech Republic and elsewhere are anticipated to cut rates in decisions after election day, while Brazilian officials might hike by as much as a half point.
With such a close-run presidential race, policymakers at the 20 or so central banks setting borrowing costs in the coming week might need to prepare for an extended wait until there is a settled result.
In modern US elections, the losing candidate generally concedes within a day or two, but the 2020 outcome was not called until four days later.
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