The Federal Reserve could clash with President-elect Donald Trump on its core responsibility to keep prices stable.
To control inflation — the gauge of prices changes — the Fed regulates borrowing costs. Cheaper borrowing costs makes it easier to spend, raising demand and prices.
The Fed has kept borrowing costs near zero since the economy started to falter nine years ago, but is now normalizing interest rates, as inflation gradually rises and the labor market improves.
Trump’s massive infrastructure-spending plan could trigger a much faster jump in inflation. It’s not guaranteed, and there are questions about how much of the promised economic growth it would actually spur. But since the election, interest-rates traders have priced in a much steeper trajectory for inflation.
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