Donald Trump.
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Business deregulation and tax cuts are likely to boost U.S. growth while a crackdown on illegal immigration and tariffs are seen as potentially fanning inflation. The Federal Reserve, meanwhile, is expected to be more cautious in cutting interest rates as it watches the economic impact of the changes.
With considerable uncertainty over what policies exactly Trump will introduce, traders are pricing in much stronger growth as the default option, said Thomas Simons, U.S. economist at Jefferies in New York.
«We can't predict how it's going to go wrong,» he said. «So you're left with this only path forward that is — well, I guess it means we're going to have more growth, it means we're going to have more inflation, it means that the Fed is probably not going to cut as much.»
The U.S. government is also expected to increase debt auction sizes this year if the budget deficit continues to worsen, as is widely expected for the foreseeable future, and as it balances its debt maturity profile to rely less on shorter-dated bills.
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