With the debt ceiling raised, is Federal Reserve QE also around the corner?
The U.S. House of Representatives passed a budget resolution allowing Trump to implement tax cuts and increase federal government debt. Policies are expected to be introduced that could lead to tax cuts of up to $5.3 trillion and an increase in the debt ceiling of $5 trillion. This move will enable the U.S. Treasury to significantly issue U.S. bonds, potentially leading the Federal Reserve to implement quantitative easing (QE)
Overnight, the U.S. House of Representatives passed a unified budget resolution, meaning that the Republican Party can now advance Trump's tax cut agenda with just party votes, without needing to negotiate with the Democrats.
The approval of the budget resolution puts Trump's initiatives for trillions of dollars in tax cuts and increased federal government debt on track. Subsequent policy proposals from Trump's plan are expected to include tax cuts of up to $5.3 trillion over the next decade and an increase in the debt ceiling by $500 billion.
The significant increase in the debt ceiling means that the U.S. Treasury will be able to issue a large amount of U.S. debt, but who will foot the bill? Federal Reserve QE may be hard to avoid.
