Markets will be focused on DC this week as the Bureau of Labor issues the Consumer Price Index (CPI) Wednesday at 8:30am and at 2:00 the Federal Reserve will announce the Federal Open Markets Committee (FOMC) rate decision followed by Chair Powell’s press conference at 2:30.
The FOMC meeting is two days long, but hanging over the first day of discussions will be the knowledge that the next day the CPI will be released in the morning. Obviously, as the Fed prepares to make its rate decision public it will know that the most current CPI number will be part of the process.
On decision day the announcement has two parts; first the decision and official Fed statement are released, and then the all-important press conference that the Chair has after the release of the decision. Chair Powell will be well prepared to answer questions related to the CPI data and will have cleared his thoughts with the FOMC members. One part of his tenure of Chair that I believe Powell has taken great pride in is that all the tough rate decisions by the FOMC have been unanimous. I would expect unanimity to continue in this week’s decision; and any decision other than that hold rates steady would be a huge, and unexpected, surprise.
At the last post FOMC presser Chair Powell made the strong statement that he would not expect the next rate move to be an increase. The Chair and the Fed staff spend a great deal of time anticipating the questions and his comment tamped down speculation of a rate increase.
Budget process
The US Government operates on a yearly budget process requiring some Congressional action prior to the beginning of the new fiscal year on October 1. The government is divided up into 12 categories and hence there are twelve budgets that requires Congressional action. However, Congress, in recent years, has failed to pass all 12 budgets in a timely manner and has resorted to Continuing Resolutions (CR) that keeps government departments running at the current year’s spending levels.
Last week the House started the appropriations process when it passed one of the less controversial budgets: Military Construction and Veteran Affairs. Usually, this budget bill that provides military construction money for districts across the country and funds the VA has broad bipartisan support – but not this year. The vote on final passage was 209 Yes to 197 No. Only four Democrats joined all but two Republicans to support the bill. Democrats opposed the policy riders that ranged from abortion restrictions to outlawing the pride flag.
Failure to pass a budget can lead to a government shutdown if there is neither an appropriations bill approved or a CR. Adding to the tension in the House was a pronouncement from hardline conservative Marjorie Taylor Green that perhaps a government shutdown would be a policy alternative rather than give any ground to Democrats.
As summer leads to fall, and the October deadline starts to loom, candidate Trump is likely to play a significant role as House Republicans make their spending decisions.
Polling
This past weekend a lot of attention was focused on a CBS poll of seven swing states that showed Biden with 50% and Trump with 49%.
First, in my political days we were always cautioned not to take any pre-Labor Day polls too seriously. Many voters are focused on their summer vacations and really haven’t given great thought to their election preferences. Second, the pollsters report they interviewed 2068 adults, but only 1615 were registered voters.
Again, from my days in partisan politics a poll is only as good as the model created to represent anticipated Election Day voters.
Bottom line: it is way too early to give any significant credence to polls, though it is fair to say that at this point it appears to be a very close election.
