Will Trump and Yellen Work Together?

Blog posted On December 20, 2016

As it stands, President-elect Donald Trump is set to take office next month and Federal Reserve Chair Janet Yellen fully intends to serve the remainder of her term that ends in February, 2018.  On the campaign trail, Trump simultaneously disavowed and defended the actions of the Federal Open Market Committee.  Now that Trump and Yellen are set to fulfill their terms in Washington, the question arises “will they work together?” 

In a September phone interview with CNBC, Trump argued that keeping interest rates low creates a false stock market, yet also said “as a real estate person, I love it [when rates are low].”  This composite view leads analysts to speculate that a Trump-Yellen relationship may actually be cooperative and yield favorable outcomes.

Based on Yellen’s record with the Federal Reserve and beyond, analysts predict that she won’t resign from her position and will follow her policy instincts throughout her tenure.  Chief Economist at HSBC Global Research stated, “She’s got a pretty stiff spine.  She’ll stand up to any tweets or commentary.” 

In the press conference following December’s rate hike, Yellen asserted “I’m a strong believer in the independence of the Fed” and went on to explain that her four-year term was not meant to coincide with the presidency. 

The FOMC expects three rate hikes in 2017, two or three in 2018, and three in 2019.  The incremental increases depend on changing economic conditions including job growth. 

Source: CNBC, CNBC, Bloomberg, Bloomberg, MarketWatch