U.S. President Donald Trump tabled a new proposal today, aimed at ending that country’s longest ever government shutdown. That he did so on television as opposed to in a White House meeting room doesn’t bode well for public-sector workers smarting from a lack of pay.
In return for Congressional approval of border-wall funding, Trump is promising to protect those who fall under the Deferred Action for Childhood Arrivals (you’ve heard it referred to as DACA) and Temporary Protected Status programs. The deal is meant to reopen the federal government and at the same time limit the political damage all of this is causing the Republicans and Democrats.
A deal along these lines has been previously suggested, more than once. It all speaks to the less-than-ideal state of U.S. politics and in particular of this presidency.
Washington’s latest unforced error comes as U.S. growth is slowing. That has mostly to do with economics, but not entirely.
As yesterday’s Focus report from BMO Capital Markets Economics notes, U.S. political risk is alive and well. “Prepared for the January 29-30 [Federal Open Market Committee] FOMC meeting, the Fed’s regional report should reflect some moderation in economic activity, while underscoring concerns about trade protectionism and labour shortages.”
Elsewhere in the same report, BMO senior economist Sal Guatieri writes: “In light of more dovish talk from policymakers and the minutes of the December FOMC meeting, we have both delayed and reduced the amount of expected rate hikes by the Federal Reserve. We now see increases in June and December – one to three months later than previously thought – and no longer expect a final move next year.”
That could have a direct effect on mortgage rates, which are driven more by U.S. rather than Canadian interest rates. This week, Royal Bank of Canada cut its five-year mortgage rate from 3.89% to 3.74%. Watch for other banks to make a similar move.
Political risk is a fact of life for investors. But while it is seldom associated with the U.S., it cannot be ignored as long as Trump is in the Oval Office.