By Dominique Dwor-Frecaut 17-09-2020

Biden And Trump Macroeconomic Convergence Points At Move To High Inflation Regime

(3 min read)
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The macroeconomic plans of the Biden and Trump campaigns are surprisingly similar and support a move to a high inflation regime. The move would be faster under a Biden administration due to its plans to strengthen workers’ bargaining power.

Fed to Maintain Extreme Dovishness No Matter Who Wins
The Fed has now moved to a policy stance close to that for which Republican incumbent Donald Trump has been calling. The move to average inflation targeting (AIT), especially the decision to no longer hike in the absence of inflation even if unemployment falls below a threshold, addresses Trump’s concerns that the 2018-19 hikes were unjustified. In addition, the Fed decision to massively expand its securities purchases and lend to the nonfinancial sectors has drawn praise from Trump. The bottom line is that it could be difficult for any new chair to ‘outdove’ the Powell Fed.

Fiscal Policies to Widen Deficit Under Trump or Biden Presidencies
A recent study of Democratic nominee Joe Biden’s policy proposals suggests they could add about one ppt of GDP to the deficit. The main difference with Trump’s recent policies is that Biden would raise both revenues and expenditures.

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