With a highly anticipated interest rate meeting by the Federal Reserve in the week ahead, it should be an obvious place for investors to focus upon. But not with the Russia scandal swirling around the Oval Office and threatening President Donald Trump’s policies and presidency itself.
Throughout the recovery, the Federal Reserve cast itself as the steady influence on the American economy while relations between Congress and the Obama White House soured, sapping the ability for fiscal policy to play a more significant role. (Remember the fiscal cliff?) Instead, the Fed’s command of monetary policy kept its target interest rate near zero for seven years.
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That ended in December 2015, and the central bank has proceeded carefully. That caution is expected to continue Tuesday and Wednesday when it convenes to talk about interest rates again. The agency is widely expected to raise borrowing costs for the second time this year.
It likely will credit strong employment, steady inflation and a generally improving economic outlook for providing the environment to comfortably raise rates again. Chairman Janet Yellen has been careful to note, as she did in February, the Fed is “not basing our judgments about current interest rates on speculation” about any plans for infrastructure spending or tax reform or any other fiscal policy that may come out of the Trump administration.
Any such fiscal plans are running into the buzz saw of the investigation into connections between Trump’s campaign and Russia and the president’s own behavior toward his now-former FBI director.
The Federal Reserve may have growing confidence in the economy, but do investors still have confidence in Trump?
Financial journalist Tom Hudson hosts “The Sunshine Economy” on WLRN-FM in Miami. Follow him on Twitter @HudsonsView.