| | | | | |  | | By Ben White and Aubree Eliza Weaver | PROGRAMMING NOTE: Morning Money will not publish on Friday June 18. We'll be back on our normal schedule on Monday June 21. Editor's Note: Morning Money is a free version of POLITICO Pro Financial Services' morning newsletter, which is delivered to our subscribers each morning at 6 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day's biggest stories. Act on the news with POLITICO Pro. | | | Here comes the Fed — FOMC issues its policy statement at 2:00 p.m. with a presser from Chair Jay Powell to follow. No change expected to rates or asset purchases. But markets will hang on any changes to the dot plot as well as any Powell hints at taper timing or nods to the increased rate of inflation. Our ace Fed watcher Victoria Guida emails MM: "Powell hasn't spoken (except on a panel about climate change) since his last press conference, and in that time, the economic data has shifted a lot – we've had some high inflation readings and a couple disappointing jobs reports, as well as anecdotal reports of worker shortages. "Something to watch will be whether Powell gives any more credence to the possibility of persistently higher inflation, though it's likely that he will continue to put the shortfalls in the job market center stage." Mohamed A. El-Erian on Bloomberg Opinion: "Federal Reserve officials, confronting developments and an outlook they seem to have not anticipated, face tricky decisions as they finalize their policy deliberations on Wednesday … "If they were market traders or CEOs … the answer would be clear: Start reducing exposure to a now more risky posture by moving forward with a partial pivot in light of the changed circumstances, thereby keeping their options open and better balancing risk. That is not what is likely to transpire, however" Brad McMillan, Chief Investment Officer for Commonwealth Financial Network: "I fully expect the Fed to stay the course and keep policy stimulative. … On a one-year basis, inflation is indeed high. On a two-year basis, which captures the downturn and the upturn, inflation is still in the normal range over the past decade." GOOD WEDNESDAY MORNING — Email me on bwhite@politico.com and follow me on Twitter @morningmoneyben. Email Aubree Eliza Weaver on aweaver@politico.com and follow her on Twitter @AubreeEWeaver. | | | | DON'T MISS THE MILKEN INSTITUTE FUTURE OF HEALTH SUMMIT: POLITICO will feature a special edition of our Future Pulse newsletter at the 2021 Milken Institute Future of Health Summit. The newsletter takes readers inside one of the most influential gatherings of global health industry leaders and innovators who are turning lessons learned from the past year into a healthier, more resilient and more equitable future. Covid-19 threatened our health and well-being, while simultaneously leading to extraordinary coordination to improve pandemic preparedness, disease prevention, diversity in clinical trials, mental health resources, food access and more. SUBSCRIBE TODAY to receive exclusive coverage from June 22-24. | | | | | | | | FOMC announcement at 2:00 p.m. not expected to include any changes to rates or asset purchases but the "dot plot" could show the timing of the next hike moving up into next year … Powell in his presser is likely to continue to lean into the need for more labor market improvement while dismissing most inflation as transitory … President Biden meets with Russian President Vladimir Putin before heading back to Washington … Senate Finance has a hearing at 10:00 a.m. on Biden's budget with Treasury Secretary Janet Yellen … POWELL NEXT WEEK — On Tuesday, June 22 at 2pm ET, the House Select Subcommittee on Covid-19 will hold a hearing with Chair Powell entitled, "Lessons Learned: The Federal Reserve's Response to the Coronavirus Pandemic." TWEET DU JOUR — Via Richard Bernstein, complete with chart: "Wake up Washington! Lack of #infrastructure #investment is THE prime reason the US has lost #manufacturing market share. 60 years of neglect. 60 years of lost market share." LEFT RIPS INFRASTRUCTURE TALKS — Our Burgess Everett, Sarah Ferris, and Marianne LeVine: "Influential progressive lawmakers are teeing off on the Senate's bipartisan infrastructure negotiations, threatening defections that could derail the prospects for a deal on roads and bridges given Democrats' thin majorities. "Senate Budget Chair Bernie Sanders (I-Vt.) announced his opposition … and other liberals are threatening to join him. Sens. Jeff Merkley (D-Ore.) and Ed Markey (D-Mass.) are vowing to oppose any infrastructure accord that lacks major policies to tackle climate change. Rep. Pramila Jayapal (D-Wash.), who leads the Congressional Progressive Caucus, says her members will oppose a deal unless Democrats also commit to a broader, separate bill." BIG WIN FOR THE LEFT AT THE FTC — Our Leah Nylen: "Biden plans to elevate Amazon critic and anti-monopoly advocate Lina Khan to chair the Federal Trade Commission Tuesday, sources familiar with the White House's plans confirmed hours after the Senate confirmed her by a 69-28 vote. "The surprise move gives progressive Democrats both the reins and a majority at the antitrust agency, spurring hopes among critics of Silicon Valley's giants for a new assertiveness from the FTC, which is already pursuing an antitrust probe of Amazon and waging a lawsuit that seeks to break up Facebook's social networking monopoly." BUSINESS LEADERS OPTIMISTIC; STILL WARY ON CHINA — Our Tatyana Monnay:
"U.S. business leaders are increasingly optimistic about the country's economic recovery from the coronavirus pandemic, even as they remain concerned over intellectual property protections and America's relations with China. "'There's a long agenda list of items that need to be addressed with China,' Business Roundtable President Joshua Bolten said during a conference call with reporters on BRT's Economic Outlook Survey for the second quarter. Bolten said the tone in Brussels on trade has been positive and he sees an opportunity for the U.S. and EU to collectively tackle trade issues, such as intellectual property protections." | | | STOCKS DIP FROM RECORDS AHEAD OF FED DECISION ON RATES — AP's Damian J. Troise and Stan Choe: "U.S. stocks slipped from their record heights Tuesday as investors wait to hear whether the Federal Reserve will give any clue about when it may let up on its massive support for markets. "The S&P 500 dipped 8.56, or 0.2 percent, to 4,246.59, as the Federal Reserve began a two-day meeting on interest-rate policy. A day earlier, the index returned to an all-time high amid optimism that ultralow interest rates pegged by the Fed, COVID-19 vaccinations and financial support from the government are revving up the economy." IPOS HIT ANNUAL RECORD IN LESS THAN SIX MONTHS — Reuters' Anirban Sen and Krystal Hu: "Wall Street's record-breaking run for stock market flotations shows no signs of slowing down. With more than six months until the year ends, U.S. initial public offerings have already totaled $171 billion, eclipsing the 2020 record of $168 billion, according to data from Dealogic. "Driving the IPO rush are sky-high corporate valuations in the stock market, inflated by the Federal Reserve's low-interest rates and monetary stimulus in the wake of the COVID-19 pandemic. This has fueled a wave of speculative frenzy that benefit not just traditional companies going public, but also special purpose acquisition companies (SPACs) formed strictly to raise money through IPOs." | | | | SUBSCRIBE TO WEST WING PLAYBOOK: Add West Wing Playbook to keep up with the power players, latest policy developments and intriguing whispers percolating inside the West Wing and across the highest levels of the Cabinet. For buzzy nuggets and details you won't find anywhere else, subscribe today. | | | | | | | | RISKS RISE TO BOTH THE FED'S INFLATION AND EMPLOYMENT GOALS — WSJ's Greg Ip: "The Federal Reserve is required by law to seek both full employment and stable prices. It heads into a pivotal meeting this week with both sides of that mandate in trouble; inflation has shot up, while unemployment remains uncomfortably high. "For the first time in years, it faces two-sided risks: Tighten monetary policy too soon and tank the economy, or tighten too late and watch inflation ratchet higher. This isn't how things were supposed to turn out." HARRIS ANNOUNCES $1.25B FOR COMMUNITY LENDERS — AP's Alexandra Jaffe: "Vice President Kamala Harris announced Tuesday that the Biden administration is distributing $1.25 billion to hundreds of community lenders in an effort to help boost the economic recovery from the coronavirus for small businesses and disadvantaged business owners. ''President Joe Biden and I knew that more than repair, we must re-imagine our economy,' Harris said during an event at the White House. 'Small businesses, of course, are at the center of this re-imagining.' THE BIG DIFFERENCE BETWEEN A DIGITAL DOLLAR AND A CBDC — Bloomberg's Joe Weisenthal: "Outside of perhaps China, right now the big use case for central bank digital currencies (CBDCs) seems to be just talking about them. "Crypto is cool right now and people are interested in digital money, so government and central bank officials are also spending a lot of time talking about their visions of how fiat currencies could be brought into this new realm. However, there's still a lot of ambiguity about how, say, a digital dollar would be designed, or what exactly it would accomplish. We're still at the talking stage." INVESTORS SUE SEC OVER TRUMP-ERA AGM RESOLUTION RULES — Reuters' Ross Kerber: "A group of investors sued Wall Street's regulator on Tuesday over rule changes that raise the bar for filing resolutions at annual shareholder meetings to call for new priorities or reforms. "The group is concerned that the changes, pushed through in 2020 by appointees of former U.S. President Donald Trump and set to take effect next year, will restrict shareholder democracy just as activist investors are starting to drive significant change in Corporate America." MAJOR U.S. BANKS EXCLUDED FROM LANDMARK EUROPEAN BOND PROGRAM — WSJ's Anna Hirtenstein: "The European Union excluded some of the world's largest banks from working on a huge new debt-issuance program, citing recent cases in which regulators punished them for forming cartels in the bond and currency markets. The banks include Barclays PLC, JPMorgan Chase & Co., Nomura Holdings Inc., UniCredit SpA, Bank of America Corp., Citigroup Inc. and Credit Agricole SA, according to an EU official." CITI LATEST TO WARN OF BIGGER-THAN-EXPECTED TRADING DROP — Bloomberg's Jennifer Surane: "Citigroup Inc. dropped after Chief Financial Officer Mark Mason signaled that revenue from the bank's trading operations will probably fall by around 30 percent from a year ago — as Wall Street braces for a pandemic-driven boom to run out of steam. Revenue from the business could drop by a percentage in the low thirties in the second quarter, Mason said Tuesday at a Morgan Stanley virtual conference. That's a bigger decline than analysts in a Bloomberg survey were anticipating and comes as investment-banking fees could also fall by a percentage in the mid-to-high single digits, he said." | | | | Follow us on Twitter | | | | Follow us | | | | |
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