On Friday at 10:00am ET Fed Chair Powell will give the annual keynote address at the Fed’s Jackson Hole economic conference. Last year in a crisp 10 minute speech he warned of the pain the Fed was ready to accept with in its fight against inflation. This year his speech will be closely watched for signs of future policy as the central bank will be a month away from its next interest rate setting meeting on September 19/20.
Last week the minutes from the July FOMC meeting were released and it was a mixed bag as a divergence is emerging from the Committee members. While the minutes included comments about the concern Members of the FOMC have about inflation and the need to take whatever action is needed to achieve the 2% inflation goals, the minutes also included the following:
“A number of participants judged that, with the stance of monetary policy in restrictive territory, risks to the achievement of the Committee’s goals had become more two sided, and it was important that the Committee’s decisions balance the risk of an inadvertent overtightening of policy against the cost of an insufficient tightening.”
As Powell addresses the Jackson Hole conference he will be aware of the growing split among the FOMC members which will add to the drama that surrounds these annual summer remarks by the Fed Chair.
Debate
Earlier in the week on Wednesday the Republicans have their first debate of the 2024 Presidential cycle. As I wrote last week from my role as an adviser to Senate candidates for debates I would have advised former President Trump not to attend the debate, and that appears to be the case. However, if I was advising the other candidates’ developing a strategy would be much more complicated. While the failure of President Trump to attend is likely to hold down the audience it will still be the most important moment of the early days of the campaign and give each of the participants an opportunity to have a breakthrough moment.
The Republican Party is somewhat at a crossroads, with Trump the clear leader of the populist wing, but his potential rivals will need to decide whether or not to become Donald Trump 2.0, or do they try to emerge as the leader of the more traditional Republican Party focused on smaller government and a robust foreign policy. It will be interesting to see which lane the various challengers to Trump decide to take.
Budget
While Congress remains out of session, with the House not returning to DC until September 11, the House Republicans did have a conference call last week led by Speaker McCarthy. On the call the Speaker raised the issue of the need to act on the 12 budget spending bills and the likelihood that there will probably be a need for a Continuing Resolution (CR) in order to buy time for the House and Senate to approve and send 12 budget bills to the White House.
The issue for the Speaker and House Republicans will be finding a CR strategy that can pass with the razor thin 5 seat majority that the House Republicans hold. On a party-line vote the Republicans can only lose four Members. When the House approved the debt ceiling deal negotiated by the Speaker and President Biden, 117 conservative Republicans voted NO. On the other side of the political equation Speaker McCarthy has 18 Members of his caucus who sit in seats President Biden carried in 2020. McCarthy has come under some criticism for passing the debt ceiling bill with a majority of Democratic votes. Will he again turn to Democrats to pass a CR–a tough call for the Speaker.
On the Senate side Leader Chuck Schumer told the press that he indeed has had preliminary talks with the Speaker about a CR; but Senator Schumer knows that it will easier for him to find common ground with Republicans than for the Speaker to get his Republican conference to approve spending levels that Democrats will accept. A lot of phone calls and rumors as the August break continues.
US/Japan/South Korea summit
President Biden invited the leaders of Japan and South Korea to join him at Camp David for a trilateral summit to discuss Pacific regional issues.
This was a test of President Biden’s international negotiating skills as Japan and South Korea have a long history of disputes between them. However, today they face mutual potential advisories. The Chinese navy has had drills near the territorial waters of both South Korea and Japan; and of course both nations have concerns with the growing military power of North Korea. North Korea has sent missiles over the air space of both Japan and South Korea.
Here is the official White House fact sheet issued at the end of the summit.
