Key Takeaways
- Congress returns with Ukraine, Covid relief and help for semiconductors on the agenda
- Fed continues to telegraph action at May meeting
- North Carolina has important Senate race with popular Republican retiring
Congress returns after two weeks off for the Easter/Passover break. The war in Ukraine continues to be a rare unifying issue in Washington and Congress is likely to approve more aid for Ukraine after visit to Kyiv by Secretaries Blinken and Austin this past weekend.
Before Congress went home for their spring break, Senator Romney was trying to broker a deal on more Covid money to fulfil Biden’s idea to increase testing and therapeutics through pharmacies and other healthcare providers. How to fund the $10B package was the hang-up as Republicans demanded that the program be paid for, and some Democrats objected to the funding mechanism which was to be reallocation of unspent Covid Relief Bill money. The House and Senate Democratic leadership supported the idea, but progressive Democrats are standing in the way of a popular bipartisan proposal.
Talks are likely to continue and the White House should play a key role in getting Democrats on board. With growing forecasts of big Democratic losses in November many leaders know that the President and Congressional Democrats need some victories and this is one that seems ready for action if Democrats can unite.
Similarly, another compromise that seems possible is a package of aid for the semiconductor industry to provide over $50B for fast tracking domestic production of chips. Different versions have passed the House and Senate and prior to the recess both chambers appointed Members to serve on a joint House/Senate Conference Committee. Again, progressive Democrats pose a threat to a final bill as some oppose benefits going to corporate America; for passage the White House will need to find a way to get a positive accomplishment that Democrats can campaign on in November.
More telegraphing from the Fed
As I have written Chair Powell has been straightforward in his approach for the need to increase rates and sent another signal last week. Speaking to a gathering of the IMF the Fed Chair said: “I would say 50bps will be on the table for the May meeting.”
For Chair Powell to say it is on the table is Fed speak to say, we are going to increase rates by 50bps in May. The Fed outlook was impacted by a statement from St. Louis Fed President James Bullard when he speculated that there may be a need for a 75bps increase, not seen since 1994. Bullard clarified he didn’t see it happening in May, and Cleveland Fed President Loretta Mesters said flatly that an increase of that size wasn’t needed.
Bottomline is that the Fed has made clear the May meeting will end on May 4 with a 50bps increase, and watch Chair Powell’s comments at his press conference at the end of the meeting as to future outlook, but several more hikes seem likely.
North Carolina Senate race
I have written of the Senate races in Ohio and Pennsylvania where popular Republican Senators are retiring and both Republicans and Democrats are targeting the seats in the battle for control of the Senate. The third popular Republican from a “purple” state who is retiring is Richard Burr of North Carolina. North Carolina is becoming more of a swing state; Donald Trump won in 2020 but only narrowly with less than 50% of the vote. North Carolina has a Democratic Governor but Republicans control the state legislature.
Democrats have coalesced around state Supreme Court Chief Justice Cheri Beasley. If Beasley is elected she would be only the third Black woman to serve in the US Senate. She has never run for federal office and will be facing a Republican who will emerge from a bruising primary with widespread name recognition. However, a tough primary can be a two edged sword and the victorious candidate needs to heal wounds from the battle.
The May 17 primary features three main Republican candidates: former Governor Pat McCrory, former Congressman Mark Walker who has a strong grassroots base, and US Representative Ted Budd who snatched the endorsement of President Trump. As in other states that are having Republican primaries all the candidates are running as Trump supporters which makes the Trump endorsement an interesting challenge in the race. Polling in the state shows that the Trump endorsement has pushed Rep. Budd into the lead, but he will need to get more than 30% of the vote to avoid a runoff.