The assassination of former Japanese Prime Minister Shinzo Abe shows that unfortunately the US doesn’t have a monopoly on gun violence. It is premature to speculate on whether or not there will be any implications for global relations but it is a reminder of the risk that is constantly facing policy makers.
Wednesday the much anticipated minutes from the June FOMC meeting were released and there were no surprises. The Fed remains hawkish on rates with the minutes making clear that as of June the FOMC members believed that another increase of 50bps or 75bps will likely to needed when the Committee meets at the end of July. However, the Committee did leave the door open to a 50bps which would be significantly lower than the June 75bps increase.
As always when the Committee meets at the end of July there will be close attention paid to the comments of Chair Powell at the meeting’s conclusion. Powell has been pretty clear that he doesn’t want to surprise markets, and while the Michigan Consumer number gave the Fed enhanced concern and is credited with the rate going from 50bps to 75bps, the Fed moved quickly to telegraph a late change in rate. Similarly, I would expect word getting out if the Fed staff comes to believe that a return to 25bps is warranted. In my view it is more likely that a signal of a more dovish stance would be part of the Chair’s comments at the post-meeting press conference. However, just as the Fed changed quickly in June from 50bps to 75bps; I don’t believe any decision on rates is off the table three weeks before the meeting.
Budget Reconciliation
While the Senate was not in session this week talks continued between Senators Schumer and Manchin to see if a Budget Reconciliation Bill can be agreed to and hopefully passed by the end of the month. Leader Schumer would like to have a big accomplishment for his Senators to talk to constituents about when they are home for the August break.
The bill is the $2T Build Back Better legislation that Senator Manchin stopped as too large and too much government spending at a time of rising inflation. The new bill would be less than $1T and include programs such as relief for prescription drugs, Obamacare subsidies, and raising money by cutting back some of the Trump tax breaks passed in 2017. During the July 4 break Senator Schumer started the process of consulting with the Senate Parliamentarian to make sure that the provisions comply with the tight restrictions the Reconciliation process places on legislation. This sent a clear signal to Washington that Democrats would like a bill on the Senate floor during July.