Fed acts while Congress talks Jan 6 and guns

The long-awaited action by the Fed’s Federal Open Market Committee (FOMC) was announced on Wednesday, and as markets had begun to suspect, the base interest rate was increased by 75bps. Until the release of the hot CPI and the University of Michigan consumer confidence numbers, markets were banking on 50bps, based largely on Chair Powell’s comments after the May FOMC meeting. Powell has now led forecasters to expect another 75bps hike when the Committee meets July 26-27. The July meeting is late as there is no meeting scheduled until September. 

Another date to watch is July 6 when the minutes of this week’s FOMC will be released. It will be interesting to see if the two new Biden Fed Governors spoke during the proceedings.

While the Fed made the week’s big economic news on the political front, the news was dominated by continued negotiations in the Senate over a compromise gun package. In a move that increased optimism on the part of gun control advocates, Republican Leader Mitch McConnell said that he will likely vote for the compromise. As the week came to an end, the Senate talks were hung up on which states would get grants for mental health, and particularly whether a state could get a grant if it failed to pass a so-called “red flag” law.

On the House side of the Capitol the focus was on the dramatic testimony given before the Jan 6 Select Committee. The Thursday hearing made for dramatic television with key testimony provided by a top Republican aide to Vice President Pence and retired Judge Michael Luttig, a highly respected conservative legal scholar.

This week saw more primaries and of particular interest were two Congressional races in South Carolina. Representative Tom Rice had a 90+ pro-Trump voting record, but he voted in favor or impeachment over the Jan 6 riots. This break with the former President led Trump to endorse his opponent. Rice was badly defeated in the race.

In a second SC House race Representative Nancy Mace had incurred the former President’s wrath when she voted to affirm Biden’s victory. Trump endorsed her primary opponent but Representative Mace touted her pro-Trump credentials with a television ad filmed in front of Trump Tower in NYC. Mace ended up defeating her Trump-endorsed opponent 53 to 45 percent.

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