What The Republican Sweep Means For The Economy | Global News Avenue

A Republican sweep in the 2024 election would put the economy on track for faster economic growth, higher inflation and higher interest rates in the coming years, according to multiple economic forecasts.

Republicans gained control of both chambers of the Legislature on Wednesday. Associated Press Arizona House Rep. Juan Ciscomani was re-elected, giving the party the 218 seats needed to maintain a House majority. With former President Donald Trump regaining the presidency and Republicans taking control of the Senate, things are looking more like Trump’s economic campaign promises will be achieved.

Economists say some of the proposals could boost economic growth but could also lead to higher prices, prompting the Fed to raise borrowing costs to prevent runaway inflation.

“We believe that looser fiscal policy could provide a near-term boost to the U.S. economy, but the headwinds from rising tariffs, potential trade retaliation, and potential higher inflation and interest rates could largely offset near-term gains.” BMO Capital Markets Chief Economist Douglas Porter and other economists at the bank wrote in a commentary. “The Fed itself may have to respond to the easing of fiscal policy by keeping interest rates higher than previously planned, or even raising the federal funds rate again, to cool an economy that may be overheating again.”

What would be the impact of a Republican government?

Economists generally predict that Trump’s economic agenda could boost economic growth. However, this also poses risks, especially if he imposes high tariffs as he promised on the campaign trail.

The merchant may pass these costs on to consumerspushing up the prices of many products. Likewise, Trump’s proposed mass eviction campaign could remove workers from residential construction, raise prices further.

Democrats still retain at least one lever of power: Republicans’ 53-47 majority in the Senate, allowing the minority party to join Republicans in blocking legislation. filibuster rules. That means major legislation must win the cooperation of some Democrats or go through a process called budget reconciliation, which is only allowed once a year.

Still, the Republican victory in the House of Representatives gives Trump’s party greater room for maneuver in shaping U.S. economic policy. Forecasters have adjusted expectations accordingly, with Pantheon economists calling on the Fed to cut interest rates at a slower speed More than they had previously expected.

Forecasters at Goldman Sachs believe a second Trump term will bring higher growth with “higher China and auto tariffs, significantly reduced immigration, some new tax cuts and deregulation.” However, Goldman Sachs analysts said the biggest risk was a sharp rise in tariffs, which would “severely hit economic growth.”