Friday could be a big day for Fed Watchers as Chair Jay Powell will address the annual gathering of Fed officials and economists at Jackson Hole, Wyoming. The confab is organized each year by the Kansas City Fed. Chair Powell is scheduled to speak Friday at 10:00 EDT.
Chair Powell has done a good job of telegraphing policy putting a great deal of focus on his remarks. As is often the case there is no FOMC meeting in August; this may be the last time Powell speaks before the next FOMC meeting September 20/21. At his post-decision press conference in July he put great emphasis on incoming data and he may review the numbers that have come in for July, including the CPI and his views on whether or not inflation has peaked.
In the past few weeks several Fed officials have been speaking out and there seems to be a signal that more interest rate increases are coming, but there does appear to be increasing speculation that the September meeting may see a step back and a 50bps move rather than a third 75bps increase. Powell’s comments will obviously be scrutinized for any clues as to his thinking on the next move.
Looking forward in DC
With President Biden signing the Inflation Reduction Act DC has gone on August break, but many are already looking at the agenda ahead for September.
Congress returns on September 13 where nearly all the attention will be on the midterm elections; but there is one critical piece of business they need to accomplish prior to their departure to campaign during October.
October 1 is the deadline to pass some sort of budget legislation in order to prevent a government shutdown. Since everyone understands that a full government budget can’t be approved weeks prior to the election the required action is a stopgap measure, Continuing Resolution (CR) that prevents a government shutdown. The one bump in the road for the Senate is the possibility that some Republican Senators threaten to filibuster the CR. However, Senator McConnell has made clear that will not be his strategy.
In the coming weeks there will be a lot of effort to get pet programs into the CR. It is a broad bill funding the entire US government, creating a lot of room for political mischief.
Last week Republican Senate Leader Mitch McConnell expressed his concern that one issue facing Republicans in this year’s Senate races is “candidate quality.” Two examples that come quickly to mind are Dr. Oz in PA and Hershel Walker in GA. Both have made statements that their opponents have used against them. Both are first time candidates who often make rookie mistakes. Polling in both states show close races, but in PA the independent Cook Political Report has moved the race from toss-up to leans D.
Another state where Republicans could have a candidate quality issue is Wisconsin where incumbent Senator Ron Johnson has raised doubts about social security and Medicare, never a place Senator McConnell likes to see his Members. Indeed the most recent Fox Poll in Wisconsin showed the Democratic candidate Lt. Governor Mandela Barnes leading Senator Johnson 50 to 46.
Another state where Republicans may have a candidate quality issue is Arizona where McConnell and others thought they had a good shot at defeating first term Senator Mark Kelly. Venture capitalist, author and Trump backed candidate Blake Masters has demonstrated some of the slips that are not uncommon for first time candidates. The most recent Fox Poll has Kelly up by 8 points 50 to 42.
Observers view 10 Senate seats as most competitive – D held seats in NH, GA, NV, NM and CO and R seats in PA, OH, WS, NC and FL. With a 50/50 Senate it would not take a wave to flip the Senate from Democratic to Republican. Senate McConnell who has great political insight said that whoever wins control will likely do so by a seat or two. I will be following these competitive seats in the weeks ahead.