November 01, 2023
What the Senate wants to hear from Powell today
The Federal Reserve will announce its next interest rate move at 2 p.m. today. There’s not too much suspense about the outcome at this point, but Washington has other questions on its mind.
A broad majority of economists expect the Federal Open Market Committee will vote to hold rates steady. The Fed last hiked interest rates by 25 basis points in July, bringing the federal funds rate between 5.25% and 5.5%.
We expect inflation will continue to be a dominant topic of today’s press conference with Fed Chair Jay Powell. Price increases on an annual basis continue to slow, though inflation remains above the Fed’s target of 2%.
“The everyday consumer is still living paycheck-to-paycheck,” Sen. Cynthia Lummis (R-Wyo.) said. “They’re still suffering with high gas prices and high food prices. The things that they consume regularly are the things that are driving their budgets to a place where they just can’t make ends meet.”
But more than any Fed presser in months, global turmoil is looming large over the U.S. central bank. Regional wars, whether in Ukraine or in the Middle East, don’t make the Federal Reserve’s price stability mandate any easier to achieve.
Sen. Elizabeth Warren (D-Mass.) said she hoped Powell would weigh in on the current strength of the U.S. economy and “whether commodity price increases that we may see as a result of the outbreak of hostilities in the Middle East will not trigger the Fed to increase interest rates once again.”
“Higher interest rates will not produce more oil,” Warren said, adding that she was also concerned about the price of grain.
We’ll also probably hear about bond markets today, with sky-high yields that have been delivering heartburn to Washington and Wall Street alike in recent weeks. Those yields are making credit more expensive, particularly in housing.
“It looks to me like the bond markets are doing [Powell’s] work for him,” Sen. John Kennedy (R-La.) said. “The bond market could tank us all, really tank the economy. It’s the market, and the markets do what markets do.”
— Brendan Pedersen
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