With the upcoming presidential elections in the United States fast approaching, there is much uncertainty about the results and the economic policies of the potential winner—Donald Trump from the Republican Party, or Kamala Harris from the Democratic Party.
However, regardless of who wins the election, according to experts from BBVA Research, Enestor Dos Santos and Miguel Jiménez González-Anleo, inflationary pressures could remain strong, pushing the Federal Reserve to keep interest rates at relatively high levels.
“And although the content of the electoral programs may differ from actual initiatives, we should not expect the economy to behave the same under Trump as it would under Harris,” they highlight in their article titled "The U.S. Elections and Inflation," published this Monday.
They explain that immigration controls, protectionist measures, and fiscal stimuli would likely carry more weight and exert greater pressure on inflation under Trump than under Harris.
Similarly, when it comes to fiscal policy, not only the magnitude but also the composition of the stimulus could make a difference. Another variable that could have a significant impact on prices and be affected differently is the price of oil. A firmer stance toward Iran and Venezuela, for example, could drive up crude prices.”
Another crucial issue will be progress in resolving geopolitical conflicts, or measures to stimulate the U.S. production sector, which could have a downward effect on inflation.
“Nevertheless, it’s hard to imagine that a potential drop in energy prices would offset the upward inflationary pressures already mentioned,” they added.
Thus, in an environment of heightened price pressures, interest rates are likely to remain elevated, which would initially facilitate an appreciation of the dollar—contrary to what Trump seeks, the experts concluded.