The general election in the US in November is already gathering attention. This is unwanted attention for the Federal Reserve (Fed), says Vincent Reinhart, Chief Economist and Macro Strategist at BNY Mellon Asset Management.

“Because the election landscape is dotted with landmines that could bring serious harm if the Fed missteps, we believe the Fed will try to keep as low a profile as possible. We think this will influence the timing, but not the general direction, of policy this year,” writes Reinhart in a recently published whitepaper.

In the whitepaper, Reinhart points to the risks the Federal Open Market Committee (FOMC) must balance. “Slow-walking accommodation probably seems manageable to Fed officials, as in our view
it appears that there are few evident threats to economic activity,” says the chief economist.

Reinhart believes that the FOMC meeting scheduled for June 11-12 presents the least unfavourable opportunity to integrate action within the current political landscape. He points out that the difficulty for monetary policymakers will lie in tempering investors’ enthusiasm, who tend to anticipate a series of aggressive cuts as soon as the easing cycle commences.

Download the whitepaper here.