Inflation storm returns? JPMorgan Chase warns: If Trump wins the election, the Fed may suspend interest rate cuts in December

The US presidential election will take place on the 5th, with the Democratic Party represented by current Vice President Kamala Harris, and Minnesota Governor Tim Walz as her running mate, while former US President Donald Trump is running for the Republican Party, with Ohio Senator J.D. Vance as his running mate. JPMorgan's Chief Global Strategist David Kelly said in an interview with Business Insider that if Trump wins and the Republicans sweep the election, the US will have a more expansionary fiscal policy, which could lead to trade wars, larger deficits, and higher interest rates. Trump has previously proposed across-the-board tariff hikes, including a 60% tariff on Chinese imports, and has proposed policies to crack down on immigration, which are seen as potentially fueling inflation, and his plans will involve significant federal spending, which could deepen the federal budget deficit. David Kelly pointed out that the impact of these policies will prompt the Federal Reserve to pause rate cuts: "I think the Fed will consider the potential direction of fiscal policy. If fiscal policy looks like it's going to increase deficits, increase fiscal stimulus, increase inflation, they may feel that if fiscal policy is going to be expansionary, they can't really lean into it and slow the easing." On the other hand, David Kelly said that if Harris wins, the economy may continue to slow and move towards a soft landing, in which case the Federal Reserve may continue its accommodative policy path. He emphasized that while the Federal Reserve operates independently, it will still respond to political developments that affect the economic outlook. The Federal Reserve is almost certain to cut rates by 1 percentage point at its meeting this week, following the election, according to the CME Group's Fed Watch tool. It is worth noting that this week, around 20 central banks, including the Federal Reserve, will announce their interest rate decisions, and the timing of the US presidential election results and the Federal Reserve's interest rate decision will highly overlap, which could lead to severe market volatility. In modern US elections, the losing candidate usually concedes within a day or two, but the 2020 election results were not revealed until four days later.