Tomorrow, the final vote of the US presidential election will begin, and the election results are expected to be basically finalized by noon on the 6th Beijing time.

On Monday, JPMorgan analyst David Kelly stated in an interview with the financial media Business Insider that if Trump wins the US election this week, the Fed may suspend its easing cycle as early as December.

Kelly believes that Trump's expansionary fiscal policy plan will push up inflation and prevent interest rates from falling:

"If Trump wins the election, he will adopt a more expansionary fiscal policy, which may trigger a trade war, expand the deficit, and raise interest rates."

Kelly also mentioned that the Fed is almost certain to cut rates by 25 basis points in Friday's rate decision, even if the election takes place before then.

If Trump wins, it will prompt the Fed to pause rate cuts.

Trump's proposed tariff measures and his immigration crackdown plan are widely believed to cause inflation. Because these plans will involve a large amount of federal spending, exacerbating the federal budget deficit.

Kelly believes that the impact of these policies will prompt the Fed to pause rate cuts. She stated:

"I believe the Trump administration will explore possible directions in fiscal policy. If the fiscal policy appears to increase the deficit, increase fiscal stimulus, and increase inflation, they may feel that if the fiscal policy is expansionary, we must oppose this expansion and slow down the loose policy."

On the other hand, Kelly said that if Harris wins, the economy may continue to head towards a soft landing.

"If there is internal division within the government, such as Harris winning, then I think the economy will continue to slowly and steadily land, overall appearing relatively flat and unremarkable."

Kelly believes that in this scenario, the Fed may stick to its expected loose policy path.

Interest rate cut by 25 basis points on Friday, a done deal?

Kelly said that unless inflation sweeps again, the Fed will continue to adhere to its September's dot plot. The chart at that time indicated an expected additional 50 basis points cut by the Fed before the year-end, further easing in 2025.

Although the Fed operates independently, Kelly pointed out that it still cannot completely escape the influence of political factors, as the development of political events may determine the direction of the economy.

"Once the Fed understands what measures fiscal policy will take, I believe this will have a certain impact on their decisions. They will not try to tell the federal government what to do, but they will react to what the federal government is doing or may do."

Therefore, he stated that the Federal Reserve is almost certain to cut interest rates by 25 basis points in Friday's rate decision, even if the election takes place before then.

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