Fed Day hits different this time

IN THIS EDITION

The Federal Reserve’s anxious new era

Dems dig in with CR counteroffer

Tech: Kelly wants to jumpstart AI jobs ideas

Indiana inches toward new maps

THE TOP

The Federal Reserve’s anxious new era

Happy Wednesday morning.

It’s a new era for the Federal Reserve. And not everyone is jazzed about it.

The world’s most important central bank is set to cut interest rates today — probably by 25 basis points. That’s the boring part, though much of Washington and Wall Street will be thrilled.

It’s everything else swirling around the Federal Reserve in this politically charged moment that’s the problem. This may be the most important Fed Day in years.

President Donald Trump has been waging an unprecedented and broad-ranging campaign for control of the Fed all year long. This particular meeting of the Federal Open Market Committee comes at a critical crossroads in that conflict.

Dual mandate. Stephen Miran now holds two of the most important jobs in federal economics. Miran leads the White House’s Council of Economic Advisers as chair, and, as of roughly 10 a.m. Tuesday, he’s also a governor on the Federal Reserve Board.

Miran said he’d take a leave of absence from the White House gig rather than resign, meaning he’s still an employee of the Trump administration. His dual role at the Fed is unheard of in modern U.S. history, and it comes with the blessing of the Republican Senate.

Fed watchers on and off Capitol Hill are increasingly worried about the Fed’s ability to stay independent of Trump’s control.

Sen. Elizabeth Warren (D-Mass.) told us that the Fed’s independence from the White House “is dissolving by the moment.”

“Donald Trump has attacked the independence of the Fed repeatedly, and he’s now making inroads,” Warren said.

Of course, the Trump administration’s closest allies on Capitol Hill are more than happy with the White House’s moves.

“I think we’re taking the politics out of the Fed,” asserted Sen. Bernie Moreno (R-Ohio) “Jerome Powell has infected the Fed with all kinds of incompetence and with an amazing amount of political thinking.” Conservatives have long griped about the Fed’s focus on climate risk during the Biden years, for instance.

At the same time, Federal Reserve Gov. Lisa Cook has so far survived the White House’s attempts to fire her. On Monday, a U.S. appeals court blocked the Trump administration’s attempt to oust Cook over increasingly dubious-looking charges of mortgage fraud. The White House has pledged to bring the case before the conservative-dominated Supreme Court.

In the meantime, Cook has shared a seat at the FOMC table with Miran – a member of an administration that tried to get her fired.

It’s the economy. A rate cut is practically a given coming out of today’s meeting. It’ll be the first we’ve seen since Trump’s return to office, despite his months of lobbying for it.

But Washington policymakers have broader fears about the state of the economy. The U.S. labor market – a high point of the Biden administration – looks increasingly shaky. Inflation has ticked back upwards in recent months, and tariff-exposed sectors are leading that charge.

Will rate cuts fix all that? Not in the near term. Changes in monetary policy always take time to filter through the broader American economy, whether that’s mortgages or credit card balances.

However, it’s the combination of higher inflation and weaker jobs numbers that freak out economists more than anything. The phenomenon has a name: stagflation.

Of course, the inflation consumers are experiencing now could be temporary. That’s the nature of tariffs and a shorter-term trade war.

Yet the Fed only has one blunt tool when it comes to countering inflation. More restrictive monetary policy is supposed to clamp down on demand and ease price pressures. When the Fed cuts rates, the supply of credit eases, and it becomes easier for businesses to grow and create jobs.

So U.S. central bankers find themselves in the unenviable position of choosing whether it’s more important to preserve the labor market or price stability. Today’s likely cut signals that the Fed is more worried about jobs in the near-term.

“If we do have new inflation, clearly, the labor market is the cure,” Sen. John Kennedy (R-La.) said. “Once it starts getting soft, you’ve got to jump on it.”

As always, the most important part of today’s proceedings will be Fed Chair Jay Powell’s news conference at 2:30 p.m. Investors always pore over Powell’s remarks for signs of how the Fed is thinking about the next interest rate meeting.

But we expect some of the Fed press corps’ questions to focus on Miran, Trump and other things that make Powell’s job harder. Plenty of Republicans told us this week they believe the Fed’s independence remains intact. But Democrats are far from convinced.

“What I worry about, with all the threats and tweets from President Trump, is that people’s independent judgment will be interfered with,” said Sen. Chris Van Hollen (D-Md.). “We’re already experiencing the Trump slump. The last thing we need is for a political decision to do even greater harm to the economy.”

— Brendan Pedersen and John Bresnahan

Don’t miss: The third Tech Quarterly special edition of 2025 comes out today. We’ll walk you through how America’s chipmakers are navigating D.C. as lawmakers hone in on chips and AI. Plus, where things stand in Congress on the long-running push for kids’ online safety and privacy protections. Check your inboxes and our website later this morning for more.

Happening Tomorrow: House Energy and Commerce Committee Chair Brett Guthrie (R-Ky.) will join us at 8:30 a.m. ET to discuss news of the day, small business and artificial intelligence. RSVP here!

GOVERNMENT FUNDING

Dems dig in with CR counteroffer

Democratic leaders on Capitol Hill are set to unveil their counteroffer to Republicans’ seven-week government funding bill later today. It’ll be the first time Senate Minority Leader Chuck Schumer and House Minority Leader Hakeem Jeffries are putting their demands on paper in an attempt to kickstart negotiations that Republicans have thus far shunned.

Yet there’s no indication that the proposal — a short-term CR filled with partisan policy riders — will make a bit of a difference in the push to prevent a shutdown.

The House is charging ahead with a GOP-drafted CR. And Senate Republicans are going to dare Democrats to reject it.

The counteroffer. While the text isn’t final, the centerpiece of the Democratic plan will be a permanent extension of the Obamacare enhanced premium tax credits, according to multiple sources briefed on it. There’s GOP interest in addressing the soon-to-expire subsidies, but Republican leaders have ruled out doing so on a short-term CR.

The Democratic proposal could also include rollbacks of the Medicaid cuts in the One Big Beautiful Bill Act, plus language to restrict further rescissions.

“That’s our view — that [Medicaid] never should have been cut,” Sen. Elizabeth Warren (D-Mass.) said in justifying Democrats’ demands.

Of course, there’s no chance Republicans would agree to tinker with their signature legislative achievement.

Schumer and Jeffries believe they need to take a hard line against Republicans’ CR. But they must keep their caucuses together to hold that line if they have any hope of forcing Republicans to negotiate.

Yet GOP leaders are digging in further and laughing off Democrats’ posture.

“I’m happy to sit down with [Schumer]. But I’d like to have a reason to do that. At the moment, I don’t think I do,” Senate Majority Leader John Thune told us.

Thune has been reprising Schumer’s oft-stated support for “clean” CRs. And a senior GOP aide quipped of Democrats’ proposal: “For anyone wondering what a partisan CR actually looks like, look no further.”

Full steam ahead. House Republicans are charging ahead with their Nov. 21 CR. The measure is relatively clean, meaning it doesn’t have partisan policy riders. Democrats seem to agree, because they’re attacking what’s not in the bill — health care provisions — rather than what is.

Speaker Mike Johnson is staying relatively calm during this episode, cautiously optimistic that he can get this bill across the finish line by Friday.

To be fair, this is a relatively simple CR. Many of the complaints from the rank-and-file are that they don’t know what the next play call is come Nov. 21. Will they get an omnibus? Will they get a package of pre-negotiated individual spending bills? These are fair questions that Johnson is going to want to answer before Friday.

House GOP opposition to the CR doesn’t seem terribly serious so far. But that could change on a dime.

Don’t be surprised if the CR comes up in the House today or Thursday. Johnson said he’d move “as there’s a consensus to move it.” And for Thune, the sooner the better. The Senate is bumping up against a recess and potential weekend scheduling conflicts for senators, including Charlie Kirk’s funeral in Arizona on Sunday.

Quick note on member security. The top Republican and Democrat on the Senate Rules Committee are at odds over a proposal to harden member security.

The panel’s chair, Sen. Mitch McConnell (R-Ky.), told GOP senators during their lunch meeting Tuesday that the Senate should pass a resolution authorizing the use of senators’ office budgets for security expenses. There isn’t a timetable for this effort.

Across the hall at the Democratic lunch, the committee’s ranking member, Sen. Alex Padilla (D-Calif.), was making the case against it. We’re told Padilla said that “simply repurposing existing funds” is insufficient, and that the Senate needs a “dedicated program” for member security with built-in oversight mechanisms.

— Andrew Desiderio, Jake Sherman and Brendan Pedersen

REDISTRICTING WARS

Indiana inches toward new maps

Indiana had the makings to become a holdout in the redistricting wars. Now the resistance to new maps is fading.

The Hoosier State movement underscores just how hard it is for Republicans to deny the redistricting push the White House so badly wants.

GOP Gov. Mike Braun suggested on a local Indiana radio show Tuesday that he expects state legislators to come around to the effort. Braun warned there’d likely be “consequences of not working with the Trump administration as tightly as we should” if Indiana Republicans don’t get on board.

This is the most supportive posture Braun has publicly taken about redistricting. State legislative leaders in the Indiana House and Senate have remained largely quiet on the prospect even amid heavy pressure from President Donald Trump and the White House. Braun’s comments could provide a helpful nudge.

Rep. Marlin Stutzman (R-Ind.) told us he’s talked with legislators back home about the need to redistrict, citing other states’ efforts and the ability to help keep Republicans’ House majority.

“Some of the members that have said ‘absolutely not’ at the beginning are now saying ‘yes we have to do this,’” Stutzman said. “Now that they’ve learned the circumstances a little bit. I think the momentum is really building.”

Delegation dynamics. Republicans could try to pick up one or two more seats in Indiana — two seems most likely. The state currently has seven Republicans and two Democrats in the House.

The next step would be for Braun to call a special session, possibly for November.

Stutzman said the delegation has discussed the issue “here and there” but not together as a group.

Rep. Victoria Spartz (R-Ind.) cheered the effort.

“Sometimes it’s good to, well, make districts all competitive,” Spartz said. “There’s nothing wrong with that.”

— Laura Weiss and Ally Mutnick

… AND THERE’S MORE

Downtown Download. Apple has hired Sightline Advocacy to lobby. Sightline also signed on Business Roundtable and will lobby for the BRT on “artificial intelligence and cybersecurity.”

Milwaukee County, Wisc., has hired Michael Best Strategies to lobby on “issues related to funding for transportation and the General Mitchell Airport.”

– Jake Sherman

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