| | | | |  | | By Kate Davidson and Aubree Eliza Weaver | Presented by United We Succeed | Editor's Note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our subscribers each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day's biggest stories. Act on the news with POLITICO Pro.
| | | Federal Reserve officials are set to lift interest rates today for the first time since 2018 in a bid to stamp out searing inflation. But huge questions remain about what comes next, including whether and when officials may deploy super-sized rate increases as they try to play catch-up on inflation, how they see the war in Ukraine potentially shifting their policy path and whether they're still confident they can avoid tipping the economy into a recession. We asked readers, and some other smart Fed-watchers, what they would want to know from Chair Jay Powell at his post-meeting press conference today. David Beckworth, senior research fellow at the Mercatus Center at George Mason University: "What indicators are you looking at to determine if inflation expectations remain anchored? And how much would they have to change for you to be alarmed? "It is an important question," he adds, "because in order to see through the inflation caused by the supply shocks, inflation expectations need to remain anchored." Julia Coronado, president of MacroPolicy Perspectives: "In your testimony before Congress you said the labor market is 'overheating,' but in recent months we have seen the long awaited improvement in labor force participation, particularly among prime age workers, alongside moderating wage growth. Do you think we are seeing some of the supply constraints in the labor market ease? If the moderation in wage growth were to persist, what signal would you take from that for inflation?" David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy: "When do you expect inflation as measured by the PCE price index to fall to 2%?" Julia Pollak, chief economist at ZipRecruiter: "The risk of a Chinese real estate market crash appears to be growing. Do you think a recession in China would be inflationary or deflationary, and how would the Fed respond?" And a bonus: "Importing businesses say their labor costs are going up 6% but their shipping costs and times have gone up 6-fold. Those protracted supply chain disruptions are still the main drivers of price increases, they say. Are there more targeted actions the government could be taking to reduce inflation—such as convening a task force to update the rules that currently penalize businesses for delays that are completely beyond their control?" Kate Bahn, chief economist at the Washington Center for Equitable Growth: "How is the FOMC balancing concerns about reducing inflation alongside maintaining labor demand so that wage pressure is maintained for workers?" Skanda Amarnath, executive director of Employ America: "With the introduction of the Standing Repo Facility, would the Fed now be more open to a sooner, faster, or larger runoff of its balance sheet? Could a stronger January or February inflation reading make the Fed more confident about pursuing passive balance sheet reduction sooner?"
| | | | SUBSCRIBE TO NATIONAL SECURITY DAILY : Keep up with the latest critical developments from Ukraine and across Europe in our daily newsletter, National Security Daily. The Russian invasion of Ukraine could disrupt the established world order and result in a refugee crisis, increased cyberattacks, rising energy costs and additional disruption to global supply chains. Go inside the top national security and foreign-policymaking shops for insight on the global threats faced by the U.S. and its allies and what actions world leaders are taking to address them. Subscribe today. | | | | | RASKIN WITHDRAWS — As expected, Sarah Bloom Raskin informed the White House Tuesday that she was bowing out as President Joe Biden's pick to be the next Fed vice chair for supervision. We told you what that means in yesterday's MM. (TL;DR — Democrats need to move quickly if they want to ensure a nominee is confirmed before Republicans possibly take back the Senate next year. That likely means accepting a less progressive candidate for the job.) We mentioned Atlanta Fed President Raphael Bostic as one name in the mix previously who could possibly garner Republican support. ("I think Bostic could be in by Memorial Day, July 4 at the latest," one financial services industry lobbyist told MM about his potential prospects in the Senate.) But a person familiar with the process reminds MM that Bostic has already raised some red flags among Banking Committee Republicans over what they call the "woke Fed." Toomey sent Bostic a letter last year about the regional Fed banks' "Racism and the Economy" series, which Bostic spearheaded. The person also pointed to Bostic's comments in July that high incarceration rates, especially among people of color, were constraining the labor market, and his remarks endorsing the idea of reparations. "I think a lot of [GOP] members see him as a political actor," the person said. "I think someone like Nellie Liang" — the Treasury under secretary for domestic finance — "may be more well-received among Republicans." IT'S WEDNESDAY — Another sign that nature is healing: Meal-kit delivery subscriptions, which flourished early in the pandemic, are struggling . Are we just all back to eating out? Or cutting costs amid higher inflation? Can you really replicate that amazing burger with the onion jam yourself? Please send us your best tips, cooking, econ policy or otherwise: kdavidson@politico.com, aweaver@politico.com, or on Twitter @katedavidson or @aubreeeweaver.
| | | | A message from United We Succeed: Proposed new regulations on credit cards would cause millions of low-income and minority Americans to lose access to credit. Research shows that similar regulations on debit cards cost low-income consumers about $160 per year. Furthermore, all credit card users, including individuals and small businesses, would see their points and perks slashed if these regulations pass. Congress should leave credit cards alone! Learn more. | | | | | | February retail sales data 8:30 a.m. … Senate Finance hearing on prescription drug inflation at 10 a.m. … House Small Business hearing on the Paycheck Protection Program at 10 a.m. … FOMC statement at 2 p.m. … Fed Chair Powell press conference at 2:30 p.m. GAS PRICE SPIKE PRESSURES GOVERNORS TO LOWER TAXES — Our Marie French and Colby Bermel: "[B]lue and red states alike are embracing a solution that makes for great headlines: cutting gas taxes. As federal action languishes on the issue, some states are quickly moving to suspend their own fuel taxes to counter price shocks at the pump. Governors and state lawmakers, in the midst of an election year, say it's necessary relief for drivers." WHITE HOUSE AGAIN DELAYS PLAN FOR NEW CHINA TARIFFS — Our Gavin Bade: "The Biden administration is still considering new tariffs on China's most prized industries, but has delayed action due to Russia's invasion of Ukraine and disagreements between economic officials, two industry officials with knowledge of the talks told POLITICO. … USTR, the sources said, wants to ease tariffs on a smaller group of Chinese goods than the Treasury and Commerce Departments, which are advocating broader tariff relief as a way to ease inflation." FREEZING ASSETS V. SEIZING ASSETS — The latter is a lot harder. From our Janaki Chadha in New York: "In 2008, federal prosecutors brought a case against the owners of a 36-story midtown Manhattan office building they alleged was linked to the Iranian government, in violation of economic sanctions on the country. It wasn't until nearly a decade later, in 2017, that a jury concluded the U.S. government could seize the building. … "The case illustrates the complex and lengthy process involved in actually confiscating property amid growing calls to seize luxury U.S. homes owned by members of Vladimir Putin's inner circle in response to the war in Ukraine." DEMOCRATIC SEC COMMISSIONER TO STEP DOWN — Our Katy O'Donnell: SEC Commissioner Allison Herren Lee, a Democratic appointee, will leave the agency after her term expires in June , she said in a statement released by the commission on Tuesday. "I have notified President Biden that I intend to step down from the Commission once my successor has been confirmed," Lee said. "Over the coming weeks and months, I will remain actively engaged in the Commission's critically important work, and I look forward to continued progress in advancing the Commission's regulatory agenda." BIG FOUR ACCOUNTING FIRMS UNDER SEC SCRUTINY — WSJ's Dave Michaels: "Regulators are carrying out a sweeping investigation of conflicts of interest at the nation's largest accounting firms, asking whether consulting and other nonaudit services they sell undermine their ability to conduct independent reviews of public companies' financials, according to people familiar with the matter. "The Securities and Exchange Commission probe highlights the agency's new focus on financial-market gatekeepers such as accountants, bankers and lawyers. These firms help companies raise capital and communicate with shareholders, but also have duties under federal investor-protection laws. Auditors are a shareholder's first line of defense against sloppy or dodgy accounting."
| | | | STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president's ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today. | | | | | | | | TRANSITIONS — Our Sam Sutton: "Michele Korver is leaving her job as the Financial Crimes Enforcement Network's top crypto expert to head up regulatory affairs for Andreessen Horowitz, a venture capital firm that has raised billions to invest in digital assets and Web3 startups. "Korver, who was tapped as FinCEN's first-ever digital currency adviser last year, is the latest in a series of high-profile hires made by the firm — popularly known as a16z — amid its push to shape policy around crypto and digital asset markets in Washington." 401(CRYPTO) — Sam Sutton again: The country's largest provider of defined contribution plans is pushing back on recent Department of Labor guidance that cautioned 401(k) plan fiduciaries to " exercise extreme care" before adding crypto options to a plan's investment menu. "We agree that plan fiduciaries should adhere to their duties of prudence and loyalty when designating investment alternatives for their plans as articulated in the DOL guidance. However, we believe retirement investors increasingly view digital assets, and bitcoin in particular, as a legitimate asset class for long-term investing," Fidelity Investments spokesman Eric Sandwen said in a statement to POLITICO on Monday, adding that the firm also thought DOL's latest statements might not be consistent with prior guidance. Fidelity launched a new business dedicated to digital asset trading and custody in 2018. The firm is "committed to working with the DOL on this issue," Sandwen said. BITCOIN STUCK IN TIGHTEST TRADING RANGE SINCE 2020 — Bloomberg's Vildana Hajric and Lu Wang: "Global stock markets have whipsawed investors in recent weeks amid the war in Ukraine and spiraling commodities prices. Yet Bitcoin, which typically is no stranger to wild moves, has been locked in its narrowest trading range in more than a year. The world's largest cryptocurrency has been trading within 10 percent of a key trendline — its average price over the past 50 days — for 40 straight sessions."
| | | | A message from United We Succeed:   | | | | | | FED WRESTLES WITH CHALLENGE OF HOW QUICKLY TO RAISE INTEREST RATES — WSJ's Nick Timiraos: "Federal Reserve Chairman Jerome Powell took much of the suspense out of this week's policy meeting when he said recently he would propose raising interest rates by a quarter percentage point from near zero, which would be the first increase since 2018. The harder part of Fed officials' deliberations might be agreeing on how to signal the likely path of rate increases in the months to follow." GLOBAL ECONOMY SINKS DEEPER INTO TURMOIL — NYT's Ana Swanson and Jeanna Smialek: "When Federal Reserve officials raise interest rates on Wednesday, they will do so amid an unfortunate economic reality: Many of the inflationary pressures they had long assumed would dissipate have instead lingered, and some are getting worse."
| | | Matt Jacques, the former chief accountant for the SEC's enforcement division, is returning to AlixPartners as managing director and co-lead of Americas investigations, disputes and risk in the firm's Boston office. Jacques served as a managing director at the firm before joining the SEC in 2018. He was previously a senior forensic accountant in the SEC's Boston regional office. Kate Bahn has been named chief economist for the Washington Center for Equitable Growth. Bahn, who is also the center's director of labor market policy, had been serving as interim chief economist for the past nine months. She was previously an economist at the Center for American Progress. Matthew Beck has joined Prosek Partners as senior vice president in its new Washington, D.C., office. Beck was previously senior director of media relations at the Investment Company Institute and vice president for strategic communications at the Glover Park Group. He is also a House Ways and Means alum.
| | | The Senate on Tuesday confirmed Shalanda Young to be White House budget director, filling Biden's last vacant Cabinet position more than a year after he withdrew Neera Tanden's nomination. —Our Jennifer Scholtes Rising fuel prices may present an obstacle, but the airline recovery in the U.S. appears to be on track for now. —NYT's Niraj Chokshi EU growth will be "severely impacted" by the disruption stemming from Russia's invasion of Ukraine , the European Commission warned, as investor confidence dropped sharply in Germany, the union's biggest economy. —FT's Sam Fleming and Martin Arnold
| | | | A message from United We Succeed: Big retailers are pressuring Congress to regulate credit cards in a way that would unfairly punish consumers and put their private financial information at risk. These proposed changes would be especially tough on Americans in low income and minority communities. When Congress voted to impose similar regulations on debit cards, consumers were promised lower prices. It didn't happen. Instead of any consumer benefits, many low income and minority Americans lost access to the banking system. If these regulations were expanded, millions could lose access to credit. Community banks and credit unions rely on revenue from card programs to serve low income and rural communities. These proposed regulations put those programs at risk. They would also threaten the security of credit cards by introducing alternative networks to process transactions - all without the consumers' knowledge. Congress must not make the same mistakes with credit cards! Learn more. | | | | | | | Follow us on Twitter | | | | Follow us | | | | |
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