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Rabobank analysts note that in the US, the Democrats in the House of Representatives have decided to start impeachment proceedings against President Trump.

Key Quotes

“While impeachment is possible as the Democrats have a majority in the House of Representatives, conviction is unlikely as long as the Republicans in the Senate continue to support their President. In this case the removal of President Trump from office is unlikely, neither by conviction nor by the 25th Amendment.”

“What’s more, history suggests that it will be a challenge for the Democrats to complete the process of impeachment & conviction before Election Day 2020. And then there is – at least as things stand now – virtually no chance of conviction. Consequently, it is unlikely to affect who is on the Republican ticket for the presidential elections in 2020.”

“However, it will set the tone for the election campaign. In fact, it could even backfire on the Democrats as it may energize Trump voters to go to the polls. Meanwhile, the impeachment theme may overshadow any political message that the Democrats might want to sell to the electorate.”

“What’s more, Democratic candidate Joe Biden may not come out of this process unscathed. This would strengthen the position of the remaining leading candidates in the Democratic primaries, which are far more left-wing than Biden. While this strengthens the position of the left wing in the Democratic Party, it may scare away centrist voters on Election Day.”

“Impeachment proceedings and the related further deterioration of the US domestic political climate add to the range of factors that are creating the uncertainty for the economic outlook that the Fed is monitoring closely. What’s more, they reduce the chance of meaningful fiscal policy legislation. Therefore, a third insurance cut before the end of the year – which is already in our baseline forecast – has become more likely.”

“It also makes our forecast of a recession in 2020 and the Fed cutting all the way back to zero before the end of next year more likely.”