Global Takeaways Of The U.S. Election

Economic

Summary:

In this report, we examine some thematic and global takeaways from the U.S. election.

Global Takeaways of the U.S. Election

Deglobalization and fragmentation are likely to gather momentum in a Trump 2.0 administration.

In our view, Trump winning the White House and having a largely unilateral ability to implement tariffs and shift U.S. trade policy in a more protectionist direction is yet another deglobalization force. During his first administration and over the course of his latest campaign, Trump has been unwavering in his commitment to tariffs. Time will tell how tariff policy ultimately evolves, but as our U.S. economists note in a post-election report, Trump’s tariff threats should be taken seriously. Global trade cohesion has suffered since the Global Financial Crisis and deteriorated further as a result of COVID. Erecting new barriers to trade will place additional pressure on the interconnectedness of the global economy, which can have longer-term negative implications for global economic growth, especially if retaliatory tariffs are imposed on the United States.

Fragmentation (i.e. countries choosing to strategically align with either the U.S. or China) is a product of deglobalization, and as U.S. trade and broader economic policy becomes more uncertain, strategic alignments could shift back toward China. We observed a noticeable shift in alignment patterns toward China during Trump’s first term, driven by countries opting for stronger trade relations with China, participating in China’s foreign investment programs and voting in unison with China on geopolitical issues at the United Nations General Assembly. With U.S. trade policy likely to turn more contentious and inward-looking, countries around the world could look to strengthen economic and geopolitical ties with China.

Trump will not be able to manufacture dollar depreciation

In our October International Economic Outlook, we noted how a Trump White House would lead us to become more positive on the U.S. dollar. Now that Trump has indeed won the election, we reinforce our view for a strong dollar over the course of 2025 and into 2026, and will become more positive on the dollar outlook in our next forecast update. As far as the dynamics surrounding a more constructive dollar view, in their post-election report, our U.S. economics colleagues noted the extension and possible expansion of the expiring provision of the Tax Cuts and Jobs Act (TCJA) in addition to the likelihood of higher tariffs.

Over the next few years, tariffs and looser fiscal policy could lead to higher U.S. inflation, and through reduced purchasing power of U.S. consumers and businesses, could also contribute to slower U.S. growth. With the Federal Reserve potentially cautious about the overall inflationary implications of the new administration’s policies, the U.S. central bank may lower interest rates more gradually than we currently expect. While there may also be some influence on foreign central bank monetary policy, we think the impact would be far more limited. Slower U.S. growth and tariffs would likely spillover to foreign economies, placing both growth and interest rate differentials in favor of the U.S. dollar over the longer-term. Sporadic bouts of markets volatility could also provide the dollar with safe haven tail-winds over the next 18 months. Also, despite any rhetoric aimed at weakening the dollar, Trump will be unable to influence the long-term direction of the dollar. In our view, Trump’s preference for a weaker dollar would have to be accommodated by and in coordination with the Federal Reserve, which we view as unlikely. We view the Fed as a monetary authority that is unlikely to pursue a weaker dollar at the direction of the President nor have its independence questioned by global financial markets.

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Warren Takunda

Economic

The US Federal Reserve cut its benchmark interest rate by 0.25 percentage points on Thursday, bringing the federal funds rate to a range of 4.5% to 4.75% — its lowest level since February 2023.

The quarter-point cut follows a more aggressive 0.5% reduction in September, underscoring a measured approach as the Fed assesses economic conditions and inflation trends.

"This further recalibration of our policy stance will help maintain the strength of the economy and the labour market, and will continue to support progress on inflation as we move toward a more neutral stance over time," Fed Chair Jerome Powell stated in his press conference.

"Even with today's cut, the policy is still restrictive," he added.

Solid growth but weak October job data

The Fed’s November statement noted that the US economy is growing at a "solid pace," with GDP rising at an annual rate of 2.8% in the third quarter.

"Growth of consumer spending has remained resilient," Powell said.

Easing inflation, however, remains "somewhat elevated", with core Personal Consumption Expenditure (PCE) inflation – the Fed's favorite price index measure – holding at 2.7% year-on-year, above the Fed's target.

Labour market conditions also remain solid, despite recent disruptions from worker strikes and hurricanes.

Powell noted that October job creation figures would have been better if it weren't for these factors.

In October, nonfarm payrolls rose by only 12,000, well below the expected 115,000 and sharply down from September’s 223,000 growth.

Data-driven policy and December predictions

The Fed reaffirmed its commitment to a data-dependent approach, with no fixed path for future rate adjustments.

The central bank also left its balance sheet reduction plan unchanged, signalling a steady approach to quantitative tightening.

By choosing not to reinvest money from expired bonds, the Fed is slowly reducing the amount of money in circulation.

Looking ahead, market participants assign a 66% probability to another 25-basis-point cut at the Fed's final meeting of the year on 18 December, according to CME FedWatch data.

However, the recent election results, with Donald Trump securing the presidency and Republicans likely gaining control of Congress, are prompting investors to reconsider the likelihood of additional cuts.

Powell on Trump’s policies and treasury yields

Asked about a potential shift in economic strategy under Trump, Powell clarified that the Fed doesn't speculate on the effects of administration policies or congressional actions.

"In the near term, the election will have no effect on policy," Powell stated.

Powell downplayed concerns over recent increases in US Treasury yields, attributing the rise to improved growth prospects rather than heightened inflation expectations.

"We're not at the stage where bond rates need to be taken into policy consideration," Powell said.

He emphasised that the Fed still has six weeks to assess economic data before its next decision in December.

Powell addressed speculation regarding his potential resignation following Trump’s election. When asked, "If he asked you to leave, would you go?", he firmly replied, "No."

Pressed further with, “Do you believe the president has the power to fire you?”, Powell responded that this scenario is "not permitted under the law".

Source: Euronews

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ACY

Forex

Central Bank

Economic

RBA’s Current Stance: Rates Remain Steady

In its latest policy announcement, the RBA opted to maintain its cash rate at 4.35%, marking the eighth straight meeting without a rate adjustment. The central bank emphasized its “sufficiently restrictive” stance, designed to curb inflation until it reliably aligns with the target range. The RBA projects that inflation will not sustainably reach target levels before 2026, justifying a measured, “wait-and-see” approach to avoid reigniting inflationary pressures.

Inflation Forecast and Economic Headwinds

The RBA’s inflation forecast points to a gradual reduction in core inflation to around 2.5% by late 2026, with a temporary dip in headline inflation to target by mid-2025 before rising slightly. Several factors, however, could challenge these projections, including:

Household Consumption: Expected to strengthen as income growth picks up in the latter part of the year.

Lagged Effects of Policy: There remains uncertainty over how the delayed impact of previous rate hikes will affect consumer spending, wage growth, and pricing strategies.

Global Economic Risks: External influences, such as China’s economic performance and global trade conditions, may further impact Australia’s economic trajectory.

Given these dynamics, market analysts largely anticipate that the RBA will hold off on rate cuts until at least February 2024, in line with recent comments from RBA Governor Michele Bullock. She noted that the current policy settings appear appropriate, with no immediate plans to adjust rates in either direction.

AUD’s Performance Supported by RBA’s Caution

The RBA’s steady approach has provided a measure of support for the AUD, which has outperformed other G10 commodity-linked currencies this year. While the RBA is expected to gradually lower rates in 2024, its approach remains notably more conservative than the Reserve Bank of New Zealand (RBNZ). The RBNZ recently cut its policy rate by 50 basis points and is expected to make additional cuts soon, underscoring a more aggressive stance.

This policy divergence could see AUD/NZD rise above 1.1000 in the coming months. However, the outcome of the U.S. election could significantly influence this trend. A Trump victory might weigh on both the AUD and NZD due to possible adverse effects on China’s economy and global trade, potentially pushing AUD/USD down to 0.6300. Conversely, a Harris administration win could trigger relief rallies, potentially lifting AUD/USD toward 0.6900.

Overall, while the RBA’s cautious approach has underpinned the AUD’s relative resilience, external factors such as the global economic outlook and political shifts remain crucial in shaping its future trajectory.

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CEPR

Economic

Trade globalisation impacts labour markets in various ways. When globalisation enables domestic companies to export, it can stimulate activity in the affected sectors, improve earnings, and contribute to job creation. However, it can also lead to the economic and social downgrading of the workers most exposed to competition from imported goods that are already produced locally. When imports consist of goods that are not produced locally but are used by local firms – either for domestic sales or for exports – they can help stimulate local economic activity and improve wage and employment conditions. Thus, the relationship between exports and individuals’ economic opportunities is relatively straightforward, while the economic impact of imports should depend on whether they are intermediate or final goods. As a result, perceptions of globalisation may be ambivalent. Because of its diverse economic effects on the labour market, voting behaviour toward political platforms that support or oppose globalisation may depend on the concentration of employment in sectors most exposed to imports (whether intermediate or final) and exports at the local level.

Focusing on Germany between 1987 and 2009, Gold et al. (2016) show that an increase in exports per worker to low-wage countries decreases the electoral success of the far right, while a rise in import exposure to low-wage countries increases it. Barone and Kreuter (2021) find that an increase in imports from China raises the populist vote in Italy. For the US, Autor et al. (2020) find that counties with an initial white majority are more likely to vote Republican after a rise in exposure to import competition from China. Docquier et al. (2024) estimate the impact of imports and immigration on votes for populist parties across 55 countries over the period 1960–2018, and find that an increase in imports of unskilled labour-intensive goods boosts electoral support for right-wing populism, while an increase in imports of skilled labour-intensive goods reduces it.

In recent research focusing on French voting patterns since 1981 (Bouët et al. 2024), we analyse the relationship between anti-globalisation votes and local exposure to exports and imports, whether of intermediate or final goods, and show that: local labour market exposure to exports decreases anti-globalisation votes, local labour market exposure to imports of final goods increases anti-globalisation votes, and local labour market exposure to imports of intermediate goods decreases anti-globalisation votes.

One of the key contributions of this research is the distinction between final and intermediate goods. Additionally, we refine the measurement of anti-globalisation votes by conducting a textual analysis of candidates’ manifestos from the first round of eight presidential elections between 1981 and 2022.

Geographical concentration of exposure to international trade

Figure 1 shows local differences in the exposure of employment to variations in imports and exports between 1988 and 2021. A department’s exposure to exports or imports of goods is calculated by totalling the changes in trade per worker in each sector, weighted by the sectors’ shares in total employment. While France’s average exposure to imports rose by $56,500 per worker over the period, there are significant local disparities. Employment in some northern and eastern departments is concentrated in sectors that experienced a sharp rise in imports at the national level, but some southern and western departments show a different pattern over the same period. In contrast, regions such as Paris specialise in sectors where both imports and exports have increased significantly.

The Impact of Trade on Anti-globalisation Voting: Evidence from France_1

The rise of anti-globalisation voting

A textual analysis of the content of each candidate manifesto in the first round of presidential elections shows a rise in the opposition to globalisation. The proportion of sentences in the manifestos that oppose globalisation (from which pro-globalisation sentences have been subtracted) has risen from around 1% in 1981 to 4% in 2022.

By combining the textual content of candidates’ manifestos from the first round of presidential elections with their electoral success, we construct a measure of the local share of anti-globalisation votes. At the national level, this share increased from about 1% in 1981 to 6% in 2022. Notably, the anti-globalisation content in these manifestos is not exclusive to far-right parties, which have traditionally opposed openness and trade. Since 2007, for instance, candidates from the Gaullist right incorporated substantial anti-globalisation themes in their platforms. Consequently, the far-right’s share of the total number of anti-globalisation statements in all manifestos decreased from 84.2% in 1988 to 58.3% in 2022.

The proportion of anti-globalisation votes is unevenly distributed across the country (Figure 2). In 1988, these votes were concentrated around the Mediterranean and certain eastern departments, whereas by 2022, they became more prominent throughout the northeastern departments.

The Impact of Trade on Anti-globalisation Voting: Evidence from France_2

Contrasting effects of French imports and exports on anti-globalisation voting patterns

Over the 1988–2022 period, we find that anti-globalisation votes react differently according to the nature of exposure to international trade: increased exposure to imports favours anti-globalisation votes, while an increase in exposure to exports reduces it (Figure 3). An increase of one standard deviation in our index of exposure to imports (approximately $18,000 per worker) within a department leads to a 0.17 percentage point rise in its anti-globalisation vote. This magnitude suggests that raising France’s average exposure to imports by $55,500 per worker between 1988 and 2022 increased the share of anti-globalisation votes by approximately 0.5 percentage points during this period.

In contrast, the increase in France’s average exposure to exports – by $46,200 per worker between 1988 and 2022 – would have contributed to a reduction in the share of anti-globalisation votes by 1.1 percentage points. The variation in the share of anti-globalisation votes resulting from an increase in exposure to exports is two to three times larger than that associated with higher exposure to imports.

The Impact of Trade on Anti-globalisation Voting: Evidence from France_3

Contrasting effects depending on the type of goods imported

If an increase in a department’s overall exposure to imports leads to a rise in anti-globalisation votes, what occurs when we distinguish between imported goods based on their use? We find that only increased exposure to imports of final goods contributes to the rise in anti-globalisation votes. In contrast, greater exposure to imports of intermediate goods reduces the share of anti-globalisation votes. Specifically, our estimates imply that an increase of $55,500 in imports of final goods per worker raises our anti-globalisation voting index by 0.65 percentage points, while a similar increase in imports of intermediate goods per worker results in a decrease of 0.55 percentage points in anti-globalisation voting.

This asymmetric impact arises because imported final goods may compete directly with domestically produced goods, while imports of intermediate goods may contribute to regional dynamism. More generally, it highlights the complexity of analysing the impact of international trade on electoral behaviour, which must encompass all its dimensions for a complete understanding. Indeed, anti-globalisation voting does not merely reflect a geography of discontent linked to increasing external competition from imports in certain sectors. Globalisation also stimulates economic activity and job creation through exports and imports of intermediate goods, which mitigates the intensity of anti-globalisation sentiment.

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ING

Economic

Forex

Political

This 2024 US election always looked like a very binary event for the FX market. Now that the Republicans have secured both the White House and very likely Congress, we can expect a lower profile for EUR/USD. This largely reflects our pre-election assessment of the global and domestic consequences of a Trump clean sweep, as well as some updated views on the path for ECB and Fed rates.

Our new EUR/USD projections

Two key building blocks for the view

While there are many structural factors which go into exchange rate forecasting, two of the most fundamental are interest rate spreads and a risk premium. The former can determine asset preferences for financial institutions or hedging costs for corporate treasurers. The latter risk premium is a gauge of how far exchange rates can deviate from financial fair value driven by uncertainty. This is particularly important for the incoming Trump Presidency.

As discussed frequently in our election scenario previews, the likely Republican clean sweep and the prospect for renewed fiscal stimulus have re-priced the Fed landing rate higher. Short-dated USD OIS swap rates priced two years forward rose 15bp in Asia on election day as the Republican success became clear. Instead of the sub-3% terminal rate for the Fed easing cycle expected by the market in September, our team now sees the Fed cutting rates more slowly in 2025 to end at a terminal rate of 3.75%.

What was a little surprising on election day was how quickly the market moved to price a deeper ECB easing cycle. We agree that the prospects of US protectionism in 2025 make it more likely that the ECB will cut rates by 50bp in December this year. And we see a terminal rate of 1.75% in 2025 – perhaps as early as the second quarter of next year – as European policymakers take rates into slightly accommodative territory.

Creating a two-year swap rate differential profile from those central bank views, we see this influential spread staying wide near the 200bp over the next two years. Looking solely at the relationship between EUR/USD and that rate spread over the last 12 months points to EUR/USD not straying too far from 1.05 over the next two years. But now we have to add the risk premium.

Adding in the risk premium

Over the last 10 years, we have calculated that EUR/USD can deviate some +/-5% from short-term financial fair value – that fair value is largely determined by interest rate spreads. The task now – in creating a EUR/USD forecast profile – is to estimate the timing of when that risk premium hits.

Speaking to our country and trade economists, we factor in a peak risk premium being priced into EUR/USD in 4Q25/1Q26. Why pick those quarters? We chose this period because it should take about a year for President-in-waiting Trump’s trade team to file trade investigations with the WTO or to conduct internal investigations at the US Trade Representative. That was the case with tariffs enacted against China in 2018.

4Q25/1Q26 could prove ‘peak pressure’ for Europe as the Trump team seeks to secure trade or other concessions from Europe, while tight financial conditions (the US ten-year Treasury yield could be as high as 5.50% around this time) could contribute to softening the risk environment and adding pressure to the pro-cyclical EUR/USD. Our European team feels that the timing sits well with a view that a cohesive support package for domestic demand in Europe only emerges later in 2026 rather than in 2025.

Bringing the rate differential and risk premium story together produces a profile where EUR/USD trades lower than it does now for the next two years. We think it will probably be knocking on parity’s door by late 2025.

Upside risks to this profile stem from either Chinese or European policymakers surprising with sufficient fiscal stimulus (a new German government could play a role here) to move the needle on global demand trends. Or a buyers’ strike of US Treasuries triggering financial dislocation and ultimately lower Fed policy rates. Downside risks – probably more in 2026 – stem from a eurozone recession in response to tariffs (a very difficult environment for investment) and the ECB needing to cut rates much more deeply.

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NIESR

Economic

In Labour’s 2024 Autumn Budget, Chancellor Rachel Reeves confirmed changes to the UK fiscal rules. How are these changes beneficial and in what ways could they have gone further?

In a packed House of Commons, the Chancellor confirmed the two changes to the fiscal framework that she had announced a week earlier in the Financial Times and at an IMF meeting in Washington DC, namely a ‘stability’ (or deficit) rule and an ‘investment’ (or debt) rule. The former states that the current budget must move into balance by 2029-30 and from thereon must remain in balance by the third year of the rolling forecast, while the latter states that debt as a share of GDP must fall by 2029-30 of the rolling forecast.

This reform of the fiscal framework rests on a redefinition of public debt, replacing Public Sector Net Debt (excluding the Bank of England) with Public Sector Net Financial Liabilities (PSNFL). This debt measure encompasses all government financial assets and liabilities (liquid and illiquid), including funded pension schemes, student loans, and equity in private companies, but excluding non-financial assets such as buildings and roads.

Adopting a broader measure of debt is a step in the right direction and the more permissive fiscal rules will allow more public investment, helping to improve UK productivity growth. But the debt target remains arbitrary and makes the instrument of policy the objective of policy. Using PSNFL (or “persnuffle”) – will continue to restrict public investment by not leveraging the value of fixed assets on the government’s balance sheet, nor allowing enough time for public investment to generate returns through higher GDP. The government has widened the fiscal straitjacket rather than throwing it off.

Where we would like the government to go further is to provide a clear strategy that raises public investment over time to some 4-5 per cent of GDP to fill the gaps that lead to a structural deficit. Such a commitment is only credible if it is combined with a rigorous evaluation of progress and the establishment of a national development bank of scale with operational independence to appraise, allocate and assess the performance of public investment projects.

Another reform we have advocated for some time is greater transparency and accountability for economic policy making, which means that the Chancellor takes responsibility for progress made in pursuing objectives such as shared prosperity but also for when policies fall short. We need both an independent assessment of where the national economy is at and a State of the Nation’s Economy address in which the Chancellor explains how the Budget helps improve the country’s economic and social performance and what other policies are required to get us there.

Rather than raising the rate of income tax, corporation tax or VAT, the Chancellor has opted for a 1.2 percentage point rise in the rate of employer National Insurance Contributions (NICs). How do you expect this to impact the UK labour market?

Employer National Insurance Contributions – or NICs as they’re often called – are effectively a tax on employment. They represent a wedge between the wage the worker expects to receive from the employer and the actual cost to the employer of paying that worker. So, a rise in employer NICs represents a rise in the cost of employing workers.

As with any rise in costs, the employer has three choices. First, they could absorb the increased costs by allowing their margins to fall. But with profit margins falling over the past year or so, it’s not clear that firms have the room to do that. Second, they could raise prices, pushing up inflation. Third, they could look to cut their labour costs. What this means is a combination of lower wages and lower employment.

Given how hard it is to cut wages, firms would be most likely to look to cut employment over time by cutting back on their hiring. This would make it harder for unemployed workers to find jobs and, so, the rate of unemployment would rise. But over time, firms will also be able to pass on some of the increase to workers in the form of lower pay increases than would otherwise have been the case. So, we would eventually see both higher unemployment and lower real wages than would have been the case without the rise in employer NICs.

NIESR colleagues have used our macoreconometric model, NiGEM, to simulate the effects of the employer NICs increase. Their results are reported in our response to the Budget. They found that, over the next five years, the rise in employer NICs would result in a 0.1 per cent fall in GDP and a 0.1 percentage point rise in the unemployment rate. Although these effects might seem small, it is important to note that the NICs rise will affect some industries more than others. In particular, it will have larger effects where labour represents a higher proportion of total costs. Given that, we might expect the increase to adversely affect the hospitality and services sectors more than other sectors. In addition, the increase in costs resulting from the increased employer NICS will also particularly affect exporters, as UK firms’ costs will rise relative to their foreign competitors.

How will the government’s decision to keep personal income tax thresholds frozen until 2028/29 affect UK households?

Part of the new government’s economic inheritance was lower living standards, especially for the bottom 40 per cent of the United Kingdom’s population. In Nuffield-funded work on living standards we did in the run-up to the General Election, we found that living standards – measured in a way that reflects household composition and housing costs – have dropped by nearly 20 per cent for the poorest 10 per cent. That’s because low-income households spend a larger share of their budgets on essentials such as energy, housing and food than middle- or high-income households and prices for those essentials have gone up by much more than real wages.

Against this backdrop, we regret that the government will keep personal tax thresholds frozen for another three and a half years. This policy means that low-income households will pay more tax than they would have if the personal allowance of £12,570 was uprated in line with inflation. They will keep less of their earned income while simultaneously spending a larger proportion of their household budget on essentials. Using our household-level model LINDA, we have calculated that if the personal allowance had increased in line with inflation since 2020, it would have risen from £12,570 to £15,301.60. This means, for instance, that the new National Living Wage (NLW) of £12.21 would result in an annual full-time wage of £22,107.92, net of the basic tax rate. In reality, NLW earners will receive £21,561.60, that is, £546.32 less per year. Therefore, the higher rate of the NLW does not make up for the ‘fiscal drag’.

In short, the lowest 10 per cent of earners will face an extra burden of about £600 per year. Thus, ‘fiscal drag’ reduces living standards. And because it reduces consumption, ‘fiscal drag’ is likely a drag on growth.

To what extent do you think this budget will unlock the economic growth that this country needs?

The new government has made economic growth its number one priority. This follows years of low growth and near stagnant productivity. But reversing this trend is a lot easier said than done! To a large degree, it is out of the government’s control. To increase productivity growth, we need to see technological advance and, perhaps more importantly, new innovation that makes use of new technology in ways that add to economic output and the quality of all our lives. The best thing the government can do in all of this is to create a strong economic environment for technological progress to occur. In practice, this means investment in infrastructure and research and development – which supports the ability of firms to source the materials they need, produce their goods and services, and distribute these out to wherever the demand is – investment in the health and skills of the labour force, and provision of support for private investment through appropriate rather than excessive regulation as well as tax incentives and subsidies.

In that light, the Budget certainly represented a step in the right direction. A number of public investment projects were announced, for example improvements to the Trans-Pennine railway and the completion of HS2 between Old Oak Common and Euston, as well as £20 billion worth of government R&D. In fact, the government is expecting to invest a total of around £35 billion on economic infrastructure in 2025-26. The Chancellor also announced a much needed £22.6 billion increase in day-to-day spending in the NHS as well as a £240 million ‘Get Britain Working’ package. This spending ought to have some effect in reducing inactivity due to ill health and so increase the UK labour force, which in turn should help growth. But I suspect this effect is likely to be small. In terms of incentivising private investment, the ‘Corporate Tax Roadmap’ should provide a boost by reducing uncertainty, enabling firms to plan their investment without needing to worry about surprise changes in taxes or regulation. In addition, the maintenance of Full Expense Accounting, the higher Annual Investment Allowance of £1 million, and R&D tax reliefs, should all help to create the right conditions for private investment, and so economic growth, to flourish.

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FastBull Featured

Daily News

Economic

[Quick Facts]

Trump says he spoke to Zelensky, still planning Putin call.

The Federal Reserve cuts interest rates by 25 basis points.

S&P Global: Trump is unlikely to impose full tariff plan.

The Bank of England cuts interest rates by 25 basis points to 4.75%.

WSJ's Timiraos: Fed may revise its baseline scenario in December.

[News Details]

Trump says he spoke to Zelensky, still planning Putin call

U.S. President-elect Donald Trump said that he has had approximately 70 phone conversations with world leaders since winning the election. However, Russian President Vladimir Putin was not among them, though he still intends to speak with him. "I think we will talk," Trump said in an interview on Thursday.

During his campaign, Trump promised to call Putin immediately after winning the election and to broker a peace agreement with Ukraine. He has repeatedly hinted that he hopes to reduce or stop U.S. support for Kyiv, suggesting that Ukrainian President Zelensky may need to accept territorial losses to end the war.

The Federal Reserve cuts interest rates by 25 basis points

On November 7, the Federal Reserve announced it would lower the target range for the federal funds rate by 25 basis points to 4.5%-4.75%, marking the second rate cut in this cycle after a 50 basis-point reduction in September. Its monetary policy statement indicated that, despite low unemployment, "labor market conditions have generally eased," and inflation continues to approach the Fed's 2% target. Risks to achieving employment and inflation targets are roughly balanced. When considering further adjustments to the federal funds rate target range, the committee will carefully evaluate incoming data, changing outlooks, and risk balances.

Later, Fed Chair Powell said at a press conference that uncertainty about the outlook limits the Fed's ability to project monetary policy. While the Fed has gained confidence in lowering rates, it is not the right time for extensive forward guidance. As it approaches a neutral rate, slowing the pace of rate cuts may become necessary. The Fed is moving towards a more neutral stance. When discussing the impact of the U.S. election, Powell said the election would not affect policy in the short term.

S&P Global: Trump is unlikely to impose full tariff plan

In a report released on Thursday, S&P Global noted that U.S. President-elect Trump promised to impose a 10% tariff on all imports and a 60% tariff on Chinese goods, which might only be a starting point for negotiations. According to the report, although it is unlikely these tariffs would be implemented at these levels, a 10% universal tariff could raise U.S. inflation by as much as 1.8 percentage points if it were. The report added that this would cause inflation to spike in the first year rather than have a sustained effect, potentially reducing output by up to one percentage point.

S&P noted that raising tariffs on Chinese goods to 60% could push inflation up by as much as 1.2 percentage points and lower output by around 0.5 percentage points. S&P said it might downgrade the U.S.'s current AA+ rating within the next two to three years if political developments strain U.S. institutions or endanger the dollar's status as the primary reserve currency, or if the U.S.'s already high deficit increases further.

The Bank of England cuts interest rates by 25 basis points to 4.75%

On November 7, the Bank of England voted 8-1 at its November policy meeting to lower the benchmark rate from 5% to 4.75% as expected, with only committee member Mann opposing the cut. Mann preferred to keep the rate unchanged. This is the second rate cut this year by the Bank of England, following a reduction in August as inflation eased.

The monetary policy report noted continued progress in controlling inflation, particularly as external shocks fade and domestic inflationary pressures gradually ease. Following the release of the budget, both inflation and growth expectations have risen, so future rate cuts should be gradual.

Governor Andrew Bailey said at a press conference that the bond sell-off was mainly due to forced liquidations of short-term bets by investors. Previously, the market was reluctant to take active positions due to the uncertain outcome of the U.S. presidential election. That may now be over.

WSJ's Timiraos: Fed may revise its baseline scenario in December

Nick Timiraos, a Wall Street Journal reporter, commented on the Fed's November rate decision, noting that Fed officials now face the question of whether the election results could meaningfully alter economic demand or inflation, potentially requiring a different policy path. Officials will not change their policy stance until they understand Trump's proposals on tax, tariffs, and immigration. But if Republicans control both houses of Congress, they may start revising the baseline scenario at the December meeting.