NEW YORK �� The Federal Reserve appears ready to increase interest rates next month, but some strategists say all bets are off should Donald Trump win the presidential election.
In its Nov. 2 statement, the Federal Open Market Committee said the case for higher borrowing costs had strengthened as inflation rose. Traders assign a 76 percent probability of a rate increase by year-end, according to futures data compiled by Bloomberg.
Yet some strategists say a victory by Trump, the Republican nominee, in Tuesday's vote could lead the Fed to change course. Democrat Hillary Clinton is seen as more likely to maintain existing economic policies, while Trump has campaigned on an anti-trade platform and accused the Fed under Chair Janet Yellen of playing politics.
Policymakers entered 2016 forecasting four rate increases from the near-zero rate in December 2015. Instead, they've stood pat and repeatedly cut projections because of uneven domestic economic data and signs of stalling global growth.
Fed Bank of Atlanta President Dennis Lockhart signaled Friday that the central bank was on track to raise rates next month, but hinted that some event could prevent that.
"There's a relatively high bar, at least in pure economic terms, a relatively high bar to not moving in December," said Lockhart, who is not a member of the policy committee this year. "There are other things that go on in the world that could give pause and I don't completely rule them out," he said, without providing specifics.
Treasuryss rose Friday as traders shifted their focus to the election, overshadowing government reports showing steady job gains in October and that wages rose from 2015 by the most since 2009.
Domestic economic data suggest the Fed should raise rates in December absent an economic shock stemming from next week's election, according to Mohamed El-Erian, chief economic adviser at Allianz SE.
"If Donald Trump wins the election, the first if, and if in his acceptance speech he reiterates his anti-trade rhetoric �� so you have two ifs there �� then risk markets will sell off significantly," El-Erian said Friday. "If the two ifs materialize, I would expect a 5 to 10 percent decline in the S&P 500 index of stocks, with the balance of risks toward even a greater decline."
A Trump presidency "would be a more uncertain environment," said Justin Lederer, an interest-rate strategist in New York at Cantor Fitzgerald LP, a primary dealer. "The Fed would rather wait and see how everything plays out before they make a rate hike, whereas Clinton would be more of status quo."
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(Jeanna Smialek and Christopher Condon contributed to this report.)
