The following article, originally published at 11:25 a.m. on Monday, Nov. 14, 2016, has been updated with comments from the Boston Federal Reserve Bank president's speech in Maine.
As long as there are no unforeseen economic or global calamities in the next 30 days, Donald Trump's surprise victory in the presidential campaign is unlikely to sway the Federal Reserve from a December rate hike.
Interest-rate futures indicate a 92% chance of at least a 25 basis-point increase next month as global markets come to grips with the unknowns of the real estate mogul's incoming administration. The S&P 500 and Dow Jones have surged, despite a brief tumble in futures the night of the election, and are now trading at record highs.
While economists agree that a December rate hike is likely, they lack the certainty of traders. "Trump winning the election caught investors off guard," Ryan Sweet, Moody's Analytics director of real-time economics, said in a phone interview.
"The knee-jerk reaction is that the heightened uncertainty would keep the Fed on hold," he said, but with markets hanging on to post-election gains and without any sudden tightening, it's likely "the Fed's going to follow through."
Interest rates have remained below 1% for the past eight years as the economy recovered from the 2008 financial crisis, and a December 2016 hike of 25 basis-points was the first in that period, bringing the target range to 0.25% to 0.5%. Another increase would be good news for banks from JPMorgan Chase (JPM) to Bank of America (BAC) and Wells Fargo (WFC) , which typically benefit from passing higher rates on to borrowers more quickly than depositors.
While Trump's win lowered the likelihood of a rate hike a month from now, on Dec. 14, the chances are still above 50%, Credit Suisse analysts wrote in a note to clients. Nonetheless, a "risk-appetite panic or clear signs of a negative growth shock could stop the Fed in its tracks," they noted.
During the November meeting of the central bank's monetary policy committee, members pointed to economic improvements including a stronger labor market, increases in household spending and movement toward a 2% inflation target.
"The case for an increase" in the benchmark federal funds rate "has continued to strengthen," they said in a statement afterward. Boston Fed President Eric Rosengren, a voting member of the committee, reiterated that assessment in remarks prepared for a speech in Portland, Maine, this morning.
"Absent significant negative economic news over the next month, the market's assessment of the likelihood of tightening in December seems plausible," said Rosengren, who voted in favor of a rate hike at the panel's September meeting. He said he went along with the majority of members opting against action at the next meeting, in November, because changes to the committee's statement "were well aligned with the notion -- and the market perception -- of a high likelihood of tightening in December."
Short-term U.S. interest rates are still "likely to increase more slowly, and by a lower cumulative amount, than in past episodes of U.S. monetary tightening," Federal Reserve Vice Chairman Stanley Fischer, also a voting member of the committee, said Friday.
Bank of America analysts lowered their expectations for a December interest rate increase to 33% after Trump's win, citing a "high level of uncertainty about the exact policy changes" under a new administration.