After weeks of speculation the Federal Reserve’s Federal Open Markets Committee (FOMC) meets this week on Tuesday and Wednesday. The central bank releases its decision in a formal statement that is made public Wednesday at 2:00pm. The decision is then followed by a press conference by Chair Powell at 2:30.
Since the last meeting when the Fed held rates steady, the Chair and other Members of the Federal Reserve have sent out strong signals that they will start the process of reducing rates at this meeting. Among most Fed watchers the question isn’t whether or not rates will be cut, but by how much – 25 or 50bps.
While the Fed Chair has reiterated his position that the Central Bank does not factor in the election season, a 50bps cut may give the appearance of favoring one side over the other. If there is a 25bps cut, and data between now and the next meeting argues for a larger cut, then there may be broader agreement on a 50bps cut. The November meeting is the 6/7th, with the rate announcement the day after the election. Perhaps the calendar argues for a 25bps cut at this week’s meeting.
The Chair’s post-meeting press conference on Wednesday usually gives a good insight into the Committee’s discussion. It was at the last post-meeting press conference that Chair Powell made clear that there were those on the Committee who would support a cut at the July meeting, but nonetheless voted for the maintenance of the current rate.
Under Powell’s leadership the votes of the Committee have been unanimous. This meeting may pose the biggest challenge yet to maintain unanimity in the rate decision vote.
Federal Budget Deadline
Last week Speaker Mike Johnson proposed a six-month Continuing Resolution (CR) to keep the government open past the September 30 midnight deadline. To get the support of the more conservative members of the House Republican Conference the Speaker added the Securing America’s Federal Elections (SAFE) Act to the CR. However, with only a four seat House majority, the Republican Members split on the bill as many of the fiscal conservatives are opposed to any CR at the current record high spending levels. In the end the Speaker realized he couldn’t pass his CR legislation and sent the House home on Thursday. A new week now begins, and the Republicans start with no real game plan to get a CR passed and keep the government open.
The problems for Speaker Johnson were exacerbated when former President Trump issued a statement calling for a government shutdown if the CR doesn’t have the SAFE Bill as part of the package. On the other side of the aisle the White House issued a veto threat if the CR passed with the SAFE Act as part of the package. At this point neither side has an exit strategy that keeps the government open after the midnight September 30 deadline.
Presidential race
This past weekend saw the Presidential campaign rocked by a second assassination attempt on former President Trump, as both the Administration and a House Special Committee investigate the first attempt in Pennsylvania to take the life of President Trump.
Before the news from Florida of the threat to the former President’s life much of the focus had been on the debate which was seen by over 60 million Americans. While most observers of the political scene viewed Vice President Harris as the winner of the debate, polls continue to point to a very close race. Respected pollster Nate Silver said in a release on Sunday that his data showed both candidates tied with at least a 40% chance of winning. However, Silver did write that some traditionally Republican states have shown Harris closing the gap with Trump.
A major issue that emerged from the debate were reports about Haitian immigrants who have moved to Springfield, Ohio. President Trump raised the Springfield immigrant issue at the debate, and other supporters have continued to raise the issue, but in the days following the debate it has been challenged including a strong response from Republican Ohio Governor DeWine.
From my days working on campaigns, I understand that events that move the stories off the key points that favor your candidate are not good days. Polls continue to show that in general President Trump gets higher marks on both immigration and the economy than Vice President Harris. Trump supporters are looking for ways to get the former President back on messages that builds his support, especially in key swing states.
