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Federal Reserve Chair Jerome Powell will have an opportunity this week to clarify what many found a confusing message on the path of interest rates, with the added task of assuring Democrats and Republicans the economy is on track.
The Fed chief will face questions from lawmakers tomorrow and Thursday, his first testimony on Capitol Hill since early March, before banking-sector turmoil prompted sharp criticism of the Fed and forced officials to rethink their policy strategy. Since then, the most acute financial strains have eased, but questions remain about the extent to which tighter credit will weigh on the economy, and what that means for the Fed.
Powell will need to reassure Republicans the Fed is not backing down from its campaign to contain price pressures, while pointing Democrats to the resilience of the economy as officials prepare to raise rates further this year.
Powell will be fresh off the Fed’s June 13-14 meeting, where he and his colleagues left rates unchanged for the first time in 15 months but signaled they may deliver two more hikes this year. Fed watchers and investors struggled to digest the message from Powell’s post-meeting press conference, and lawmakers last week said they planned to press him for an explanation.
The Fed has raised rates five percentage points since March 2022, one of the fastest tightening campaigns in its history. That gives officials room now to take a breather and monitor incoming data as they consider their next move, Powell said last week.
The Fed’s quick action over the past year — a catch-up strategy after policymakers failed to realize how persistent inflation would be — has drawn criticism from progressive Democrats fearful that higher rates would cause a surge in unemployment. The jobless rate recently inched up from its 50-year low, but employers continue to hire workers at a rapid clip.
Despite continued worries about inflation, which peaked at more than 9% last year, Republicans said they were concerned about how additional hikes could further unsettle the financial sector in the wake of several bank failures this year.
Democrats are likely to push Powell for more stringent rules, including rolling back the asset cap increases of 2018 that many blame in part for Silicon Valley Bank’s troubles. Republicans have argued against increased burdens on banks that Fed Vice Chair Michael Barr has said the Fed is exploring, and question instead the regulator’s own supervisory shortcomings in the lead up to the failures. Read the full story from Catarina Saraiva, Steven T. Dennis, and Laura Litvan.
- The House is back for votes at 6:30 p.m. on VA benefits bills.
- Senators convene for a vote at 5:30 p.m. on a federal appeals court nominee.
- President Joe Biden meets at 1 p.m. in San Francisco with experts on AI as his administration pushes companies to develop new security and privacy safeguards. Read more.
- The president departs San Francisco to attend a 4:15 p.m. campaign reception in Kentfield, California.
- Biden returns to San Francisco to attend a 7 p.m. campaign reception.
Also Happening on the Hill
Sen. Richard Blumenthal (D-Conn.), who is investigating the merger of PGA Tour and Saudi-backed LIV Golf, said he may seek subpoenas to obtain more information on specifics such as the structure and governance of the new entity.
The House Appropriations Committee resumed its work on fiscal 2024 spending bills after pausing during the debt ceiling negotiations.
Politics, Probes and 2024
Top Justice Department antitrust lawyers are weighing a major revamp of how they scrutinize bank mergers, complicating further consolidation for an industry that’s facing some of its biggest challenges since the financial crisis.
Biden called for new taxes on the wealthy and corporations and warned Republicans would roll back policies he argued had saved the economy, setting out core themes as he kicked off his reelection campaign.
If a recession is going to come in the next 12 months — and most economists surveyed by Bloomberg say it probably is — then Biden should hope it begins sooner rather than later.
Republican presidential contender Chris Christie said the RNC’s requirement for candidates to support the eventual 2024 nominee is a “useless idea,” adding to criticism following the indictments of GOP front-runner Donald Trump.
Trump said he did not turn over presidential records to the National Archives because he was busy and had not yet had time to remove personal items from boxes packed at the White House.
What Else We’re Reading
The US and China agreed to boost dialog but tensions lingered after Secretary of State Antony Blinken became the highest-level American official to visit Beijing in five years, as the world’s largest economies seek to put frayed ties on more stable footing.
- Biden hailed what he said was progress in restoring US-China ties after Blinken wrapped up two days of meetings in Beijing, including talks with Chinese President Xi Jinping. Read more.
- Blinken and Chinese officials had extensive discussions on issues related to the Taiwan Strait, according to Daniel Kritenbrink, US Assistant Secretary of State for East Asian and Pacific Affairs. Read more.
The 2021 PAWS Act approved the pilot program at VA sites in California, Alaska, North Carolina, Florida, and Texas. But the agency has not allocated any money to subsidize the startups, leaving the service dog providers and trainers to foot the bill.
Transportation Secretary Pete Buttigieg and Pennsylvania Gov. Josh Shapiro (D) have said that the collapsed Interstate 95 bridge in Philadelphia is expected to reopen “within weeks.”
With the federal government deadlocked over AI regulation, state legislatures have been quicker to advance laws that aim to tackle the immediate harms of generative AI. Nine states have enacted laws that regulate deepfakes, mostly in the context of pornography and elections influence. At least four other states have bills at various stages of the legislative process.
NATO countries are increasingly likely to ask Secretary General Jens Stoltenberg to remain for another year as they struggle to reach a consensus on his successor ahead of next month’s summit.
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