It was a busy week in DC with the Fed moving rates up 25 bps and the White House meeting between Biden and McCarthy.
The Fed’s move to increase rates by 25 bps was widely expected. It once again demonstrates that under Chair Powell the Fed is going to telegraph policy and not surprise markets. Both the official Fed statement and the Chair’s press conference combined hawkish sentiments on pushing towards the 2% inflation goal with comments about the need to be data-driven in future policy decisions.
As Tom Lee pointed out in his post-meeting note, Chair Powell used the word “disinflation” 13 times in his post-meeting presser. The next FOMC meeting isn’t until March 20-21, and this will allow the Fed to look at the key reports for both January and February. There will be a great deal of “Fed speak” between now and the next meeting, and I expect the Chair and his team to maintain their policy of alerting markets as their thinking evolves and new data comes in.
President Biden and Speaker McCarthy had their first face-to-face meeting this past week since Republicans captured control of the House. Few Presidents have the legislative experience that President Biden brings to the job, and I think this was reflected in the well-orchestrated meeting between these two key actors in the debt ceiling debate. Both sides left the door open for more talks, McCarthy has taken cuts in Social Security and Medicate off the table, and the President recognizes there may be some areas where cuts can be found.
Added to the mix of next steps is the President’s State of the Union (SOTU) address to Congress next Tuesday. It will be a tough audience with Republicans filling the House chamber and McCarthy sitting behind the President. It offers President Biden a chance to put an olive branch forward for House Republicans and it will be interesting to see if the House Republican leadership can keep their most conservative members under some control during the nationally televised policy address.