The current Continuing Resolution (CR) that funds the federal government expires in two weeks on Friday, February 18; without some action, there would be a government shutdown on midnight of the 18th and all sides agree that needs to be avoided.
The major downside of continuing CRs is that it keeps the spending and priorities stuck at the levels from the previous fiscal year and in areas ranging from defense to childcare both sides would like to see new spending priorities and new programs funded. The bipartisan leaders of the House and Senate Appropriations Committees, now referred to DC jargon as the four corners, continue their negotiations, and staff reports indicate that they are making progress on a new government funding package, referred to as an Omnibus Spending Bill. An Omnibus bill would likely have a compromise where defense and domestic programs are increased equally. The rub is that both sides agree that while progress is being made, they are unlikely to reach an agreement by February 18. It now seems likely that Congress will pass a short-term new CR running until March 11 with the understanding that this is the last short-term CR.
The House has had a long-planned week break to start on February 14; hence to ensure a CR is in place by February 18 the House leadership has announced that the new CR, running until March 11, will likely be scheduled for a vote next week.
Dates to watch: February 18 and March 11.
Fed Chair Powell has finished the hearing stage of his nomination process and the next step is for the Senate Banking Committee to act on the nomination. Massachusetts Senator Elizabeth Warren sits on the Banking Committee and she has announced her opposition to the Powell nomination. With opposition from Democratic progressives to Powell in order to get out of Committee, and then to pass the full Senate, Powell will need support from Republicans. The vote in Committee will give Powell and the White House a good headcount on Republican and Democratic support in anticipation of a Senate floor vote.
Date to watch for Banking Committee vote: February 15.
The Fed has clearly telegraphed its intent to increase rates at the next FOMC meeting of the Board. Most observers believe that if there was any doubt, and I believe there is none, the January jobs numbers should remove any doubt. The strong January numbers did add some fuel to those who have speculated that the Fed could go up 50bps instead of 25bps. It continues to be my view that Chair Powell believes in giving markets notice of Fed actions, and most comments have pointed to a 25bps increase. However, the January numbers did surprise on the upside so I will be watching closely for any comments from members of the FOMC or regional Fed Presidents to see if there are any signals that a larger than expected increase could be in the cards.
Date to watch for next FOMC meeting: March 15-16.
