The last time the Fed’s Federal Open Markets Committee (FOMC) met was July 29/30. Like most of Washington, Fed officials often set aside time in August for vacations, so there was no August rate-setting meeting. The Fed now has two months of information to look at, and on Wednesday at 2:00 p.m. the central bank will announce its rate decision. It is widely expected that the FOMC will move to cut rates, and the general view is that the cut will be 25 bps. There have been mixed messages: we have seen weak job numbers, but last week we also saw a higher-than-expected inflation number. However, all indications point to a cut.
Much of the attention is likely to focus on the newest voting member, Stephen Miran, the current Chair of the President’s Council of Economic Advisors. The Senate plans to confirm Miran tonight in order to allow him to be sworn in on Tuesday and become a voting Member of the Committee on Tuesday and Wednesday. It is anticipated that he would likely be a strong advocate for a cut that the President is seeking. In fact, during the confirmation hearing Miran told the Senate Banking Committee that he would be taking an unpaid leave from his White House job to serve as a Federal Reserve Governor, returning to the White House at the end of his term early next year.
The other drama at this week’s meeting will be the voting status of Governor Lisa Cook. The President has fired Governor Cook but she has gone to Court to block the firing. Over the weekend documents became public that seemed to create more confusion as to the allegations that she misled financial institutions when she made her mortgage loan applications.
Governor Cook’s vote is unlikely to change the outcome of the rate decision, but it will be a distraction both for the FOMC and at the Chair’s post decision press conference at 2:30pm on Wednesday. While the actual rate decision will obviously be the main news coming out of the meeting, these side issues will grab headlines in the press.
Congress and budget
The clock is ticking on the Oct. 1 deadline for Congress to act on funding the U.S. budget to avoid a shutdown. House Speaker Mike Johnson has said that he plans to have a Continuing Resolution ready for House action by Wednesday. The House CR is expected to run until Nov. 20 in the hope that Congress can finish work on a full-year budget before the new deadline.
Both sides need to decide on the politics of being blamed on a government shutdown. Earlier this year Senate Democratic Leader Schumer decided that his Party would be blamed for a shutdown and cast a decisive vote for a CR that kept the government open. The Leader took a lot of flak for his vote, and this time seems determined to get some trade-offs as the price for Democratic support for the CR. Since funding bills and CRs are possible to filibuster, the vote margin to pass a CR is 60 Senate votes and with only 53 Republicans, the issue will need some Democratic support.
The President obviously has a major role to play as Republicans prepare to negotiate a plan with Democrats, and to date he has not outlined his position of what steps Congressional Republicans should take with respect to a possible Oct. 1 shutdown.