US | Elections and inflation

Summary

The upcoming presidential elections in the US will be, without doubt, one of the most epic political and economic milestones in recent times.

Key points

• Key points:
• Whoever wins, migration, trade and fiscal measures are likely to dominate proceedings, at least as much, if not more so, than under previous governments.
• Therefore, upward inflation pressures will likely remain strong, prompting the Federal Reserve to keep interest rates at relatively high levels.
• In all likelihood, immigration controls and protectionist measures (two negative supply shocks, which have the effect of restricting activity and pushing up inflation), along with fiscal stimulus (a positive demand shock, which increases both activity and inflation), would be stepped up even more (thus piling the pressure on inflation) under Trump than they would under Harris.
• Similarly, in the realm of fiscal policy, the exact make-up of the stimulus measures, and not just the size, can also make a real difference.
• The price of oil is another variable with a significant effect on prices that could be affected differently, depending on the winner.

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