President-elect Donald Trump will undoubtedly have a profound and lasting impact on economic policy throughout his presidency. Costly business regulations are likely to be reduced or rolled back; rate-reducing, base-broadening, comprehensive tax reform will be under active consideration; and the leadership of the Federal Reserve will change in 2018.
The nation's low unemployment is placing pressure on the Federal Reserve to raise short-term interest rates, and those rates will influence many future policy decisions. The incoming Administration, in cooperation with a Republican-controlled Congress, will likely pursue policy that will boost GDP growth in the short run. However, if policy changes result in a growing deficit or overheating labor markets, interest rates will rise (faster) in response. Moreover, any policy changes that restrict trade will act as a drag on economic growth.
Interest rates are sure to grow in the years ahead. Smart policy is needed to identify economic efficiencies that will help limit how quickly those rate increases accelerate, thereby supporting housing affordability and improving business lending conditions in the longer term.
–NAHB Chief Economist Robert Dietz