CPI
While the data team at Fundstrat looks at many measures of the economy, from a political perspective no measure is as significant as the Consumer Price Index (CPI). The CPI for April will be released on Wednesday morning at 8:30 before markets open.
When I worked on Capitol Hill the only measure of the economy that the press ever asked the House Member or Senator to comment on was the CPI. It is easy for Members, reporters, and voters to understand, and of course is written into many laws and labor contracts with respect to pay increases. While the Fed watches many indexes, they know that the one that gets the most attention from the non-financial press and legislators is the CPI.
At the last post FOMC press conference the Chair made clear that an increase in rates was not on the table, he was noncommittal on when the central bank may start to reduce rates. Chair Powell acknowledged a degree of surprise by the recent higher than expected CPI numbers.
Bottomline is that Wednesday will be a big day as the April CPI comes into focus.
SEC and crypto
Under the leadership of House Financial Services Committee Chair Patrick McHenry, the House voted 228 to 183 to void a rule issued by the SEC – Staff Accounting Bulletin (SAB) or SAB 121. The action was taken under a law that allows the Congress to overrule a government proposed rule. At first it was not clear whether to SEC action fell under the jurisdiction of the law; however, the General Accounting Office (GAO) ruled that the SEC rule fell under the criteria of federal regulations that can be overridden by Congress.
The issue with the SEC rule is that it requires that crypto assets held by banks be counted as custodial assets on their balance sheet which creates corresponding capital implications. This could result in almost no bank holding these assets.
Chair McHenry has been one of the leading supporters of the crypto market in Congress and with his announced retirement this may be one of his last chances to influence the market. Importantly, 21 Democrats voted with the Republican majority. However, most Democrats voted NO and may have been influenced by a veto message issued by the White House prior to the vote.
The bill now goes to the Senate where it faces an uncertain future. The White House veto threat will obviously play a significant role in the Democratic controlled Senate, and the two senior Democrats on the Senate Banking Committee Chair Sherrod Brown and ranking Democrat Elizabeth Warren are both crypto skeptics and it will be a challenge for the crypto lobby to overcome their resistance.
Here’s a link to the SEC proposal.
FAA
Other than a government funding bill in September the last “must do” piece of legislation for Congress to act on is the five-year renewal of the FAA. While the implications of an unfunded FAA are hard to process, air travel runs the risk of being disrupted and flight controllers while deemed essential works may have paychecks delayed.
Good news: Congress seems ready to avoid a FAA shutdown. Before heading home last week the House passed a one-week extension of the FAA to give the Senate time to pass the five-year extension. On Friday, by a vote of 88 to 4, the Senate approved the extension and sent it to the House. The four NO votes came from the Senators representing Virginia and Maryland who opposed the bill’s provision creating more slots for planes landing at Reagan National Airport. Reagan is on the Maryland and Virginia borders and constituents of these Senators are afraid more slots will create more noise as flights start earlier and go later into the night.
The House is expected to pass the Senate bill and send it to the White House and avoid any issues for the flying public.
