As the US presidential election approaches this week, around 20 central banks globally, including the Federal Reserve, will announce interest rate decisions. At such a sensitive moment, the timing of the US presidential election results and the Federal Reserve interest rate decision overlap, potentially causing significant market volatility.
Global investors are eagerly awaiting the outcome of the US presidential election on the 5th, and according to Bloomberg statistics, more than 20 central banks representing over one-third of the global economy’s GDP will announce interest rate decisions this week following the election. Although the election results are not yet known, it is widely expected that the Federal Reserve and other central banks will cut rates again in the coming week.
The Federal Open Market Committee (FOMC) meeting is scheduled to announce its interest rate decision at 2:00 am Taiwan time on the 8th. Economists generally expect the Fed to cut rates by 1 basis point, followed by another cut in December. Recent data showed a modest increase of 12,000 non-farm jobs in the US in October, the lowest level in 2020, strengthening the belief in a rate cut by the Federal Reserve.
While Federal Reserve officials have tried to steer away from politics, they have initiated a rate-cut cycle in the final stages of the election. The election outcome may hinge on voters’ perceptions of the economy. Despite Chairman Powell’s potential emphasis on the need to reduce restrictive policies at this week’s rate decision press conference, he and his colleagues still face political risks.
Bloomberg Economics analysts suggest that the election deadlock could allow the winner to reshape trade policies, particularly President Trump, who might leverage this power if re-elected. Central banks in other countries, facing uncertainties from economic slowdown to persistent inflation, are considering rate cuts or hikes based on the election outcome.
As the closely contested presidential election unfolds, the 20-plus central banks announcing rate decisions in the coming week may need to prepare for a prolonged election outcome. The market could face significant volatility with the US election results coinciding with the Federal Reserve’s rate decision.
In such a sensitive moment, the timing overlap of the US presidential election results and the Federal Reserve interest rate decision could trigger massive market fluctuations. If Trump, who has recently expressed support for cryptocurrencies, loses in the election, the crypto market may experience a slight decline. Conversely, a Trump victory could lead to a temporary crypto market rally followed by a drop due to policy uncertainties.
Overall, with the dual pressures of high inflation and economic weakness, the Federal Reserve’s decision-making becomes more challenging. In the face of these pressures, any negative developments could lead to more intense market volatility, requiring investors to remain vigilant against dual risks from policy changes and election outcomes.
