Business & Economy

On The Money: Fed chief hints strongly at rate cut | Powell lays out ‘serious concerns’ over Facebook crypto project | Trump official to investigate French tech tax | Acosta defends Epstein deal

Happy Wednesday and welcome back to On The Money. I’m Sylvan Lane, and here’s your nightly guide to everything affecting your bills, bank account and bottom line.

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THE BIG DEAL– Fed chief strongly hints at July rate cut in House testimony: Federal Reserve Chairman Jerome Powell on Wednesday hinted that the central bank will cut interest rates later this month as it confronts economic red flags and mounting political pressure.

In testimony before the House Financial Services Committee, Powell suggested that the Fed may slash borrowing costs in July to protect the U.S. from the continued economic strain of trade battles and a souring global economy. 

Powell’s remarks are the clearest signal yet that the Fed plans to cut interest rates as insurance against a darkening economic outlook, even as the central bank has little room to respond to a major crisis. I’ll bring you up to speed here.

 

Political pressure: The potential rate cut would be welcome news to President Trump, who has pushed the Fed to slash borrowing costs since January. But Trump’s pressure also poses political challenges for Powell, who will have to justify a potential cut while convincing the Fed’s critics that it did not cave to the president.

 

Bipartisan praise: Lawmakers in both parties were eager to defend Powell from Trump’s attacks, praising his capability and transparency. 

“I believe you know what you’re doing, sir, and I thank you for it,” said Rep. Denny Heck (D-Wash.).

Even some of Trump’s most loyal allies lauded Powell while defending the president’s right to condemn the independent central bank.{mosads}

“Without quibbling about the details, I think that you’re doing an outstanding job,” said Rep. Andy Barr (R-Ky.) to Powell, saying he’s been easily accessible to lawmakers. 

Powell brushed off concerns about Trump’s influence with his usual refrain: The Fed only considers economic currents, not political factors, when shaping monetary policy to foster stable prices and maximum employment.

 

Complicated outlook: A volatile and complicated six months for the global economy gives the Fed plenty to consider.

Powell attributed sinking business spending to growing concerns about global trade battles and rising odds of recessions in Europe and China, where industrial output is sinking.

 

What comes next: Powell will testify before the Senate Banking Committee on Thursday, where he’ll likely face many of the same questions. There might be a heavier emphasis on the Fed’s deregulatory efforts from the GOP-controlled panel. 

 

More from Powell’s testimony today: Powell on Wednesday said that Facebook’s proposed cryptocurrency project poses “serious concerns” and warned the company against a “sprint toward implementation.”

 

LEADING THE DAY–White House, congressional leaders revive budget talks: Administration officials and congressional leaders are trying to revive long-stalled talks aimed at striking a budget deal and avoiding a government shutdown in the fall. 

Speaker Nancy Pelosi (D-Calif.) is expected to hold discussions with Treasury Secretary Steven Mnuchin on Wednesday, marking the second day of talks after the two first spoke on the phone Tuesday about raising statutory spending caps and the debt ceiling.

Pelosi has been guarded about saying whether the renewed talks will lead to a breakthrough after negotiations between Democrats, GOP leadership and the White House stalled last month. 

Asked if progress was made during Tuesday’s phone call with Mnuchin, Pelosi told The Associated Press, “We’ll see.”

“It’s possible. I don’t know. We’ll see what they come back with,” she said when asked about the prospects of a deal coming together this month. The Hill’s Jordain Carney explains here.

What’s at stake: 

 

Trump officials launch investigation into French plan for tax on tech giants: The Trump administration on Wednesday announced an investigation into the French government over its plans to implement a tax on technology companies.

United States Trade Representative (USTR) Robert Lighthizer expressed concerns that the French digital tax could disproportionately affect American companies.

“The President has directed that we investigate the effects of this legislation and determine whether it is discriminatory or unreasonable and burdens or restricts United States commerce,” Lighthizer said in a statement.

The USTR investigation is the first step toward the potential implementation of tariffs or other trade measures against France at a time when President Trump has ignited trade disputes with other allies.

USTR will conduct the assessment under the authority of Section 301, the same provision that Trump has used to cite national security concerns in imposing steep tariffs on Chinese imports.

 

Acosta defends Epstein deal, amid calls for resignation: Embattled Labor Secretary Alex Acosta on Wednesday defended at length his handling of a 2008 plea deal with wealthy financier Jeffrey Epstein and insisted his relationship with President Trump is “outstanding,” despite swirling questions about his job security.

During a nearly hourlong news conference, Acosta said he is “pleased” that federal prosecutors in New York City are bringing sex trafficking charges against Epstein but argued that “facts are being overlooked” in criticism of the deal he previously struck, which some have called too lenient.

Under that deal, Epstein pleaded guilty to soliciting prostitution under Florida law, registered as a sex offender and spent just over a year in jail while having work-release privileges.

“We believe that we proceeded appropriately,” Acosta told reporters at the Labor Department, where he spoke in detail about how his office ultimately decided to offer a plea deal to Epstein while Acosta served as U.S. attorney in Miami.

“We did what we did because we wanted to see Epstein go to jail. He needed to go to jail,” Acosta said.

Addressing critics of the deal, Acosta said, “Times have changed, and coverage of this case has certainly changed.”

Takeaway: Acosta was unemotional and unapologetic in defending the deal, saying it was the best outcome he could get at the time.

Will it be enough: Trump personally urged Acosta to appear before the press to push back against his critics, according to a person familiar with the conversation.

Acosta insisted his relationship with Trump remains strong and pointed to the president’s Tuesday comments, in which he said the Labor secretary has done a “very good” job and that he feels “very badly” for Acosta. Trump has said he would be looking at the Epstein case “very closely.”

“He has very publicly made clear I’ve got his support,” Acosta said of Trump.

Still, Acosta acknowledged the possibility that Trump, who is monitoring news coverage of the Epstein matter closely, could change his mind. The Hill’s Jordan Fabian and Brett Samuels have more on Acosta’s press conference here.

 

GOOD TO KNOW

 

ODDS AND ENDS