OVERNIGHT MONEY: Central bank outlook

At a recent hearing on Capitol Hill, Bernanke said he didn’t think the Fed could completely bolster the economy through the effects of the $80 billion sequester. 

With interest rates near zero, “monetary policy does not have the capacity to fully offset an economic headwind of this magnitude,” he said last month.

{mosads}The central bank chief also has expressed concern that prematurely pulling back the bond-buying program could inflict damage on the slow-going expansion. 

And that could be the focus of his message on Wednesday — keep an eye on the horizon and we’ll all have a pretty good idea as to when the economy is ready to sail the ship solo into the sunset. 

He also has made clear that interest rates will remain near zero until the economy starts firing on all cylinders. 

A Tuesday report showed that housing starts rose 6.8 percent to 914,000 units in May due mostly to increased production on the multifamily side.

The pace of new home building is picking up in an effort to meet demand from low inventory of previously owned homes. 

Meanwhile, consumer prices rose only slightly, calming any fears that the Fed’s stimulus is stoking inflation and giving the central bank the ability to continue its efforts. 

WHAT ELSE WE’RE WATCHING

Rally for an audit: A group of House and Senate Republicans, including House Ways and Means Chairman Dave Camp (R-Mich.), is expected to join Tea Party members on Wednesday for a rally calling for an audit of the IRS over targeting of conservative groups seeking tax-exempt status. Sens. Ted Cruz (Texas), Mike Lee (Utah)and Rand Paul (Ky.) are expected to attend the gathering on the Capitol lawn along with Michele Bachmann (Minn.), Tim Huelskamp (Kan.) and Jim Jordan (Ohio).

Farm bill time: The House will start work on Wednesday with amendments on the five-year $939 billion farm bill with the expectation of passing a measure by Thursday. There should be plenty to fight about on the floor before the legislation can reach a clearing.

Debate got started on Tuesday with arguments raised over the cut of more than $20 billion in the Supplemental Nutrition Assistance Program (SNAP). The Senate bill cuts far less, just under $4 billion — a main disagreement between the two chambers. 

Republicans highlighted that the cuts are needed to reduce fraud and abuse of the program, a reason SNAP costs have increased so dramatically over the past few years. 

Day in Berlin: President Obama arrived in Berlin on Tuesday and will spend Wednesday meeting with German leaders including Chancellor Angela Merkel. He will make a speech at the Brandenburg Gate where he is expected to reiterate the strong economic relationship between the United States and Germany only weeks ahead of the start of negotiations between the U.S. and the European Union to forge a huge trade deal. The visit comes nearly 50 years after former President John F. Kennedy made his powerful “Ich bin ein Berliner” remarks. 

HUD-Transportation spending: A House Appropriations subcommittee will mark up on Thursday the $44 billion 2014 spending bill for the departments of Transportation and Housing and Urban Development. The measure is $7.7 billion less than last year’s levels. 

Budget overhaul: The House Budget Committee will mark up on Thursday a couple of measures designed to overhaul the budget process. One measure would revise the formula for calculating the annual baseline for discretionary spending and another bill would require the Congressional Budget Office to prepare for each major bill or resolution reported by any congressional committee a macroeconomic analysis.

Examining Dodd-Frank: House Financial Services Committee will mark up several bills on Thursday that will make specific changes to a variety of requirements for businesses under the Dodd-Frank financial law. 

ECONOMIC INDICATORS 

MBA Mortgage Index: The Mortgage Bankers Association releases its weekly report on mortgage application volume. 

WHAT YOU MIGHT HAVE MISSED

— Democrats defy Issa, release full transcript from IRS investigation

— Poll: 47 percent think White House involved in IRS targeting

— CTIA official leaves to head up venture capital group

— CBO: Senate immigration bill cuts deficit by $197B

— Waters wants financial sector regulations out of EU trade talks

— House releases $44B DOT, HUD budget

— Business groups press for action on India’s trade practices

— Dems blast GOP for slashing renewable energy spending

— GOP opponents of online sales tax: It’s generational

— Senate GOPers vote ‘no’ on veterans bill over lack of budget cuts

— Senate Ag appropriators move bill, reject Obama food aid reforms

— Lew willing to accept more financial regulation

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