Trump’s attempt to get rid of the Obamacare health scheme has turned into a complete fiasco, and a similar fate might await his plans to revamp public expenditure. Trump’s own party mates share his will to reduce corporation tax, but have expressed deep concern about huge deficits. So much of the presidential agenda might end up in the dustbin.
Larry Summers has written a perceptive analysis about the Fed’s confusion (and that of all the central banks, by the way) over what they are doing. Last Wednesday he made a brief reference to the FOMC’s decision not to raise rates, with the Fed once again being forced to withdraw from its previous plan of action. The total failure of ‘forward guidance,’ which has only served to make the Fed’s prose even more tedious to hide their misgivings.
In a few days the Fed will meet and, inevitably, will raise interest rates. It is inevitable because it would contradict its discourse if this doesn’t happen. In the short-term it is unlikely to present any problems, because the move is already discounted. But there is something worse: there is the risk that the Fed makes a mistake which it later has to rectify, as has happened in other countries. Sweden is the main example.