Trump's budgets will suffer a double whammy
Fed is lifting rates and plans to start shrinking US$4.5t balance sheet - the policies will hit US federal budget
Washington
US PRESIDENT Donald Trump won't inherit the same windfall that the Federal Reserve handed the Obama administration each year, and his budget shows he knows it.
The Fed is lifting interest rates and plans to start shrinking its US$4.5 trillion balance sheet later this year, two policies that will be a drag on the US federal budget. Higher rates mean that America has to pay more to borrow, and the combination of more elevated rates and a smaller balance sheet will leave the Fed with lower excess earnings, which it pays back to the Treasury.
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