The Hill’s Morning Report — Fed wields rate weapon aimed at rising prices

by Alexis Simendinger and Al Weaver - 06/16/22 6:29 AM ET

The Federal Reserve on Wednesday used a sledgehammer to try to throttle rising prices not experienced by Americans in four decades, and suggested it could repeat its newly aggressive stance, however uncommon, even if more Americans lose their jobs and a U.S. downturn can’t be ruled out.

Chairman Jerome Powell, speaking to reporters, said the central bank decided to raise its interest rate by a muscular three-quarters of a point this month instead of half a point because inflation projections “have moved up notably.”

“Inflation can’t go down until it flattens out,” Powell said while repeatedly pointing to various economic crosswinds the Fed cannot control, including the war in Ukraine, COVID-19 lockdowns recently lifted in China, commodity prices and supply chain disruptions.

Powell, who has been accused along with some of his Federal Open Market Committee colleagues of clinging to a rosy narrative about the future of the economy, said consumer demand is still stubbornly gung-ho, despite inflated prices for goods, services and commodities. “We are not seeing a broad slowdown,” he said, adding, “It will take some time to get inflation back down, but we will do that.” Powell was referring to years.

Asked about odds of a “softish” landing for inflation without a recession, the chairman responded, “it’s possible.”

“We’re not trying to induce a recession” — Federal Reserve Chairman Jerome Powell.

▪ The Wall Street Journal: The risk of recession depends on which banker you ask.

▪ The Washington Post: Seven ways you can financially prepare for a recession. “For many people right now, this inflation problem is akin to an emergency,” said Mark Hamrick, Bankrate.com senior economic analyst, who favors stockpiling some savings.

The Fed’s rate decision was anticipated in financial markets, which have been in a deep swoon for days, illustrating investors’ worries that spiraling prices and steep losses in investment wealth would erode confidence and skew decision making. The S&P 500 and Nasdaq Composite are in bear market territory, down roughly 21 percent and 32 percent, respectively, from their all-time highs in January and November. The Dow Jones, in the meantime, is 17 percent below its Jan. 5 all-time intraday high.

CNBC: Stock futures inch higher after the Fed raises rates by the most since 1994.

The Fed’s detailed projections underpinning its June meeting are HERE.

The New York Times: What the Fed’s interest rate means for credit cards, car loans and student loans.

Rising prices are weighing on President Biden’s approval ratings and undermine his cheerleading about strong employment and wages at a time when many Americans look at their costs and argue they are falling behind. Republicans are hammering Democrats on inflation, crime and what they describe as an immigration “crisis” ahead of the November midterm contests (The Washington Post).

Related Articles

▪ Sebastian Mallaby, contributing columnist, The Washington Post: With Powell’s rate hike, the inflation fight begins in earnest. “To get inflation under control, the Fed will almost certainly have to cause a recession.”

▪ The Associated Press: In a letter on Wednesday, Biden told U.S. oil refiners to produce more gasoline and diesel to help lower gasoline prices for consumers. The industry told the president that refinery capacity declined as U.S. policy shifted away from fossil fuels.

▪ The Hill: The president, his economic advisers and Cabinet secretaries are weighing ideas to try to lower soaring gasoline prices, even modestly.

LEADING THE DAY

➤ CONGRESS

Bumps in the road have emerged for the process to pass the gun violence framework as Sen. John Cornyn (R-Texas) cautioned on Thursday that the proposal may have to be slimmed down in order to get it across the finish line.

Cornyn told reporters that some issues still need to be ironed out “before we can reach an agreement” and that he’s “starting to get a little concerned” about the holdup. Namely, provisions incentivizing states to institute red flag laws and dealing with the “boyfriend loophole,” are creating problems, according to the Texas Republican (ABC News).

“At some point, if we can’t get to 60 then we’re going to have to pare some of this,” he told reporters on Wednesday morning. “We’ve got to settle these issues or else we’re talking about jeopardizing the whole deal,” he added, referring to the remaining work as “a lift” (The Hill).

Senate negotiators met on Wednesday evening in an attempt to resolve the remaining troubles, but were unable to break the deadlock. According to Cornyn, progress was made, but “we’re not there yet.” Lawmakers are set to convene again this afternoon for another round of talks (NBC News).

The news comes as lawmakers look to complete legislative text on the proposal and potentially put a vote on the floor by the end of next week.

▪ Politico: Senate Minority Leader Mitch McConnell’s (R-Ky.) gun safety gamble.

▪ The New York Times: Toiling to complete a gun bill, two parties part ways on its reach.

The House select committee investigating the Jan. 6 attack on the Capitol will resume its hearings this morning and focus on the pressure former President Trump and his allies heaped on former Vice President Mike Pence.

Two former Pence advisers are expected to testify today — Greg Jacob, Pence’s former counsel, and retired appeals court Judge J. Michael Luttig, an informal adviser to the former VP. The panel showed video last week of a noose brought to the Capitol that day. According to reports, when Trump was informed about chants to “hang Mike Pence,” he responded, “maybe our supporters have the right idea.”

“Even as advice was swirling around the White House saying that this scheme was illegal, it was totally baseless, the president nevertheless continued publicly to apply pressure on Mike Pence,” an aide to the committee added, something that “directly contributed to the attack on the Capitol. And it put the vice president’s life in danger” (The Hill).

As The Hill’s Niall Stanage notes, beyond the actions during the day in question, the hearing will also shine the spotlight on the relationship between the two GOP heavyweights.

▪ CBS News: Luttig has a stark message for the Jan. 6 committee.

▪ ABC News: Photo shows Pence, family in hiding on Jan. 6.

The committee also made news on Wednesday as it released footage tied to a tour Rep. Barry Loudermilk (R-Ga.) gave the day before the attack, featuring a man taking photos of hallways in the Capitol complex before ultimately attending the rally itself. Loudermilk has acknowledged showing a small group of constituents around House office buildings on Jan. 5, but claimed those participants did not attend the rally upon seeing “chaos.”

However, video shared by the panel claims one of the men was indeed there, showing clips of the unnamed man marching toward the Capitol the morning of Jan. 6 (The Hill).

▪ The Hill: GOP lawmaker: “I was excited” to meet Saudi crown prince.

▪ The Hill: Four Senate Democrats push Sen. Amy Klobuchar (D-Minn.) to revise antitrust bill over hate speech concerns.

➤ POLITICS

Republicans scored a major win on Tuesday night as Mayra Flores pulled off a historic win in Texas’s 34th District, handing the party a major talking point as it motors toward November when it expects to make major gains, especially in the House.

Flores became the first GOP candidate to flip a majority-Hispanic Democratic seat in the Rio Grande Valley in more than 100 years by defeating Democrat Dan Sanchez in the contest to replace former Rep. Filemon Vela (D-Texas), who retired in March.

Flores will serve through the remainder of this year under the old congressional lines. Democrats did not spend as they normally would in a contested special election, as the new congressional map is far more favorable heading into November, with Flores set to face Rep. Vicente Gonzalez (D-Texas).

In addition, as The Hill’s Emily Brooks points out, the special election was low-turnout, meaning it may not turn out to be the marker some Republicans are making it out to be.

NYT Analysis: GOP far-right, peddling falsehoods and plots, has gained significant sway to impact future US elections in major battleground states

The news for Democrats is better in Pennsylvania, though, as a new poll shows Lt. Gov. John Fetterman (D) leading Republican Mehmet Oz in the state’s Senate race.

According to a new USA Today-Suffolk University poll, Fetterman leads with 46 percent support among likely voters. Oz pulls in 37 percent, with 13 percent remaining undecided. The winner would replace the retiring Sen. Pat Toomey (R-Pa.).

The poll also shows that Republicans have started to coalesce around Oz as their nominee in the days since David McCormick, his rival in the race, conceded the GOP nod. Seventy-six percent of GOP voters say they support Oz (The Hill).

Reid Wilson, The Hill: Democrats face congressional rout amid historically terrible headwinds.

IN FOCUS/SHARP TAKES

➤ ADMINISTRATION & INTERNATIONAL

*** THIS JUST IN *** French President Emmanuel Macron, German Chancellor Olaf Scholz and Italian Premier Mario Draghi traveled by night train from Poland to Kyiv on Thursday and are meeting today with Ukrainian President Volodymyr Zelensky and visiting nearby Irpin, a site of Russian attacks (The New York Times). It’s an unusual, high-level show of Europe’s support for Ukraine, complete with photos aboard the train, plus interviews and international news coverage of Europe’s leaders walking through a sun-splashed war zone dressed in business suits.

“It’s a message of European unity for the Ukrainian people, support now and in the future, because the weeks to come will be very difficult,” Macron said. … Scholz said the leaders want to show solidarity but also their commitment to keeping up their financial and humanitarian help for Ukraine, and their supply of weapons, adding it will continue “for as long as is necessary for Ukraine’s fight for independence,” according to reporting by the German news agency dpa.

President Klaus Iohannis of Romania — which borders Ukraine and has been a destination for many Ukrainian refugees — arrived in Kyiv on a separate train, tweeting on arrival: “This illegal Russian aggression must stop!” (The Associated Press).

At a time when the West is asking tough questions about Ukraine’s capabilities and strategies to expel or defeat the Kremlin as Russian forces seize more of the Donbas region in the east, Biden on Wednesday answered a plea from Zelensky and announced $1 billion more in weapons and humanitarian aid for Ukraine, including anti-ship rocket systems, artillery rockets, howitzers and ammunition (Reuters).

Gen. Mark Milley, chairman of the Joint Chiefs of Staff, said on Thursday that the “numbers clearly favor the Russians” in the war with Ukraine, but he defended U.S.-supplied weapons and humanitarian aid for Ukraine during an interview with reporters while he was in Brussels (The Washington Post). “Right now, the Severodonetsk, the city is probably three-quarters taken by Russian forces, but the Ukrainians are fighting them street by street, house by house, and it’s not a done deal,” he said, adding that “there are no inevitabilities in war.”

… Meanwhile, Chinese President Xi Jinping told Russian President Vladimir Putin in a phone call that Kyiv and Moscow “should push for a proper settlement” in the ongoing war, according to a Chinese readout of the call (CNBC).

A shake-up related to rules at the government’s bipartisan Chemical Safety and Hazard Investigation Board stirred turbulence that ended with Chair Katherine Lemos resigning last week amid tensions with her colleagues. The independent board investigates industrial chemical accidents, seen by some experts as on the rise on a warming planet (Bloomberg News and The Hill).

The president used an executive order to instruct federal agencies and departments on Wednesday to tap their legal authority to consider ways to counter so-called conversion therapy and other state and local actions he believes are mistakenly applied to individuals, including minors, in the LGBTQ community. “Unrelenting political and legislative attacks at the State level — on LGBTQI+ children and families in particular — threaten the civil rights gains of the last half century and put LGBTQI+ people at risk,” Biden wrote (The Associated Press).

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OPINION

■ On inflation, economics has some explaining to do, by Greg Ip, chief economics commentator, The Wall Street Journal. https://on.wsj.com/3xTsfYt

■ Can America “do big things” again? Ask the regulators and lawyers, by George F. Will, columnist, The Washington Post. https://wapo.st/3mW7W68

WHERE AND WHEN

The House meets at 9 a.m. to consider legislation to address high food and fuel prices. Speaker Nancy Pelosi (D-Calif.) will hold her weekly press conference at 10:45 a.m.

The Senate convenes at 10 a.m. and expects to vote on final passage of legislation to expand access to Veterans Affairs health care and disability benefits for toxic-exposed veterans.

The president will receive the President’s Daily Brief at 10:30 p.m. Biden at 3:10 p.m. will sign the Ocean Shipping Reform Act of 2022 in the State Dining Room.

Vice President Harris at 10 a.m. will speak to reporters about the administration’s efforts to expand postpartum health coverage for mental health. Harris will speak at 1:40 p.m. while announcing the launch of a White House Task Force aimed at helping to curb online harassment and abuse.

Secretary of State Antony Blinken hosts a reception for the diplomatic corps at the Department of State at 6:30 p.m. and will address the guests.

Treasury Secretary Janet Yellen today will meet with CEO members of the Bank Policy Institute to discuss the global economic outlook.

Economic indicator: The Labor Department will report at 8:30 a.m. on filings for unemployment benefits in the week ending June 11.

First lady Jill Biden will speak at 8 p.m. at the Smithsonian’s Molina Family Latino Gallery exhibition “¡Presente! A Latino History of the United States,” marking the first gallery and physical presence of the National Museum of the American Latino.

The White House daily press briefing is scheduled at 12:15 p.m.

🖥 Hill.TV’s “Rising” program features news and interviews at http://digital-staging.thehill.com/hilltv, on YouTube and on Facebook at 10:30 a.m. ET. Also, check out the “Rising” podcast here.

ELSEWHERE

➤ SUPREME COURT

Justices on Wednesday dismissed an effort by GOP attorneys general to reinstate the Trump-era “public charge rule” penalizing lawful immigrants for using welfare benefits, indicating that it shouldn’t have heard the case originally. The Biden administration eventually discarded the rule and declined to defend it in court. The move leaves in place an appeals court ruling that rebuffed Arizona Attorney General Mark Brnovich’s (R) bid to step into the shoes of the Trump administration in hopes of reviving the public charge rule via a legal victory (The Hill).

➤ POX & PANDEMIC

The Food and Drug Administration’s expert advisers on Wednesday recommended federal authorization for Moderna’s and Pfizer’s versions of COVID-19 vaccines for children 5 and younger (The Hill and The New York Times).

🦠Anthony Fauci, 81, director of the National Institute of Allergy and Infectious Diseases, tested positive for COVID-19 with mild symptoms after being fully vaccinated and boosted twice. His office said in a Wednesday statement that he is isolating and working from home and had not been in close contact with Biden or senior officials (CNN and The Hill).

Total U.S. coronavirus deaths reported as of this morning, according to Johns Hopkins University (trackers all vary slightly): 1,012,607. Current average U.S. COVID-19 daily deaths are 276, according to the Centers for Disease Control and Prevention.

After five weeks of declines, the World Health Organization reports this morning that global deaths from COVID-19 rose in the week ending June 12 by 4 percent compared with the previous week.

➤ PARKS AND WRECK

Yellowstone National Park evacuated 10,000 visitors and National Park Service staff members because of an emergency this week, which was prompted by biblical flooding in Montana that did significant damage (The Associated Press). Floodwaters hit 16 feet as they moved through Billings, Mont., on Wednesday, overtaking farms and ranches and forcing the shutdown of the city’s water treatment plant. Bridges succumbed and water poured into nearby homes. Flooding pushed a popular fishing river off course — possibly permanently — and may force roadways nearly torn away by torrents of water to be rebuilt (The Associated Press).

THE CLOSER

And finally … It’s Thursday, which means it’s time for this week’s Morning Report Quiz! Inspired by Friday’s 50th anniversary of the Watergate break-in, we’re eager for some smart guesses about one of the biggest scandals in American history.

Email your responses to asimendinger@digital-staging.thehill.com and/or aweaver@digital-staging.thehill.com, and please add “Quiz” to subject lines. Winners who submit correct answers will enjoy some richly deserved newsletter fame on Friday.

Days after the break-in, what did Nixon’s White House press secretary dismiss the incident as?

1. “Who cares?”

2. “A non-event”

3. “A third-rate burglary attempt”

4. “Bullshit”

Which of the following is not an article of impeachment the House Judiciary Committee approved against Nixon?

1. Obstruction of justice

2. Abuse of power

3. Corruption

4. Contempt of Congress

Which Nixon administration or campaign official involved in Watergate did not spend any time in prison?

1. Commerce Secretary Maurice Stans

2. John Dean, White House counsel

3. H.R. Haldeman, White House chief of staff

4. Attorney General Richard Kleindienst

In the movie “All The President’s Men,” what actor did Robert Redford originally choose to play Carl Bernstein before ultimately deciding on Dustin Hoffman?

1. Robert De Niro

2. Michael Douglas

3. Jeff Bridges

4. Al Pacino

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