A blue wave or Democratic sweep in US Presidential Elections due on Nov. 3 could boost US economic growth prospects beyond 2021. However, it could also cause the Federal Reserve (Fed) to raise interest rates earlier than expected, according to Jim Caron, a fixed income portfolio manager at Morgan Stanley Investment Management.
Key quotes (Source: CNBC)
The Fed’s first rate hike could be brought forward from around 2024-2025 to 2023-2024 — depending on how other policies, such as taxation, turn out in the event of a blue wave.
The US economy is already expected to rebound in 2021. An additional stimulus that’s likely to come with a “blue wave” would further boost growth potential.
The Fed cut interest rates to near zero in March and launched bond-buying programs to counter coronavirus-induced recession fears. It has indicated that rates could stay at current levels through 2023.
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