| | | | |  | | By Kate Davidson , Sam Sutton and Aubree Eliza Weaver | | | 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 5:15 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 . Just getting started — Federal Reserve officials are expected to approve another supersized rate increase at the end of their two-day policy meeting today. And while they're raising rates faster and higher than anyone expected at the beginning of the year, they still have a ways to go. But those moves, and the expectations for further interest-rate increases, are already having the desired effect now , our Victoria Guida writes. Three areas where we're already seeing the fallout from tighter policy, per Victoria: Broke businesses: "Rock-bottom interest rates during the pandemic helped many companies lock in cheaper debt, meaning the prospect of bankruptcies is not as dire as it might have been. "Still, about 600 larger companies that employ more than a million workers could be at risk of default if the Fed carries out its plans for raising borrowing costs, based on figures from the Swiss bank UBS."
| | | | STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president's ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today . | | | | | | 
A run-up in interest rates is already being felt in the housing sector, as builders pull back from new construction. | Matt Rourke/AP | Housing: "Builders have begun pulling back from new construction; housing starts fell 8.1 percent in June after dropping 9 percent in May, which is leading to job losses and could exacerbate affordability problems in a market that's already lacking supply." Credit cards: "The average annual rate for a new credit card is up 1.3 percentage points from last year, an unusually large increase that is the biggest since 2011, according to Bankrate. Unlike mortgages, which are often long-term and fixed-rate, card rates tend to move up alongside the Fed's moves." SELLING A HEALTHY ECONOMY — Meanwhile, the White House is scrambling to get ahead of tomorrow's GDP data release, which could show the economy contracted for the second straight quarter — an oft-cited, though by no means the only, definition of a recession. From our Ben White : "Senior administration officials are hitting the airwaves and arm-twisting reporters in private, imploring anyone who will listen that the economy — despised by majorities of both Republicans and Democrats fed up with inflation — is still healthy. "But White House officials admit that changing people's minds is a daunting task as the highest inflation in four decades severely cuts into wages even as the economy continues to churn out jobs and Americans keep spending. "'I don't think any of us are trying to convince anyone that their feelings about the economy are wrong,' Jared Bernstein, a member of the Council of Economic Advisers and one of Biden's longest-serving aides, said in an interview. 'What we are trying to do is explain things in a much more nuanced way than most people are getting from the daily news flow.'" IT'S WEDNESDAY — Happy Fed Day to all who celebrate! Remember to eat a good breakfast. And send your questions, plus any tips or stories ideas, to kdavidson@politico.com , ssutton@politico.com or aweaver@politico.com .
| | A message from Altria: Moving beyond smoking. Altria's companies are leading the way in moving adult smokers away from cigarettes – by taking action to transition millions toward less harmful choices. We are investing in a diverse mix of businesses to broaden options beyond traditional, combustible cigarettes. See how we're moving. | | | | | | June durable goods orders released at 8:30 a.m. and pending home sales data released at 10 a.m. … Commodity Futures Trading Commission virtual meeting at 9:30 a.m. … House Financial Services committee marks up legislation at 10 a.m. … Fed policy decision at 2 p.m. and Chair Jerome Powell's press conference at 2:30 p.m. ASK JAY — What should reporters ask the Fed chief at this post-meeting press conference today? Three good suggestions: Hamilton Project's Wendy Edelberg: "I would ask Powell what he thinks he is learning about potential output from the continued supply shocks. For example, is he worried that the prolonged energy price hikes suggest it takes more resources to make the same amount of stuff than we thought it would?" Wrightson ICAP's Lou Crandall: Would the Fed consider relaxing the blackout rules for the September meeting? "Powell said in his June press conference that it was very unusual for a surprise to change the policy outlook as drastically during the blackout period as the CPI did last month. However, the September blackout period will include the CPI, retail sales and the preliminary Michigan inflation expectations data. Do they need some flexibility in communicating about those releases?" Yale Program on Financial Stability's Steven Kelly: "Has he adjusted his view of the Fed's ability to impact commodity prices? He has suggested there's little they can do, but commodities have fallen approximately 15% since [the] last meeting largely on tighter financial conditions, including [US dollar] strength." SITUATIONAL AWARENESS — One important add to the calendar: Treasury Secretary Janet Yellen will hold a press conference on the state of the economy at 1:30 p.m. tomorrow, after the GDP report is released, Treasury announced Tuesday. You'll be able to watch live here .
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CFPB Director Rohit Chopra speaks at a White House event on medical debt in April. | Jacquelyn Martin/AP | Q&A WITH CFPB'S ROHIT CHOPRA — Our Katy O'Donnell and your MM co-host sat down earlier this week with Consumer Financial Protection Bureau Director Rohit Chopra to talk about big tech, his relationships with the industry and regulation by enforcement. "For me, the highest-stakes issue for us to deal with is what are we going to do about big tech entering financial services?" he said. "Increasingly, big tech companies have even richer data than even the credit reporting companies have." Pro readers can read a condensed transcript of the conversation here . GAS PRICE RELIEF — How much credit should the Biden White House get for falling gas prices? A new analysis from Treasury economists estimates the release of oil from the U.S. Strategic Petroleum Reserve, combined with similar moves by other countries, lowered the price of gas by between 17 and 42 cents per gallon, with one alternate approach suggesting it was 38 cents per gallon.
| | | | INTRODUCING POWER SWITCH: The energy landscape is profoundly transforming. Power Switch is a daily newsletter that unlocks the most important stories driving the energy sector and the political forces shaping critical decisions about your energy future, from production to storage, distribution to consumption. Don't miss out on Power Switch, your guide to the politics of energy transformation in America and around the world. SUBSCRIBE TODAY . | | | | | | | | INVESTORS LOOK FOR SEPTEMBER CLUES — WSJ's Nick Timiraos: "After the Federal Reserve lifts its benchmark interest rate on Wednesday, attention will turn to what Chairman Jerome Powell says about a rate increase at the central bank's meeting in September . But Bloomberg's Edward Harrison says the forward guidance game is over — "When central banks' target rates were zero, their guidance about future policy was everything. Now that we've moved on from record-low rates, policy makers need to rethink forward guidance — or risk losing even more of their credibility."
| | | | A message from Altria:   | | | | | | INFLATION'S FUNKY BYPRODUCTS — WSJ's Harriet Torry: "Searching for new sources of revenue and greener ways to deal with waste, business owners have started coming up with some funky new products . Vodka distilled from dairy-making waste. Compost made from crabs. Reactions from consumers range from enthusiastic to aghast." ECONOMY SENDING MIXED SIGNALS — AP's Paul Wiseman: "The U.S. economy is caught in an awkward, painful place . A confusing one, too. Growth appears to be sputtering, home sales are tumbling and economists warn of a potential recession ahead. But consumers are still spending, businesses keep posting profits and the economy keeps adding hundreds of thousands of jobs each month."
| | | TOOMEY LETTER — With the Senate Banking Committee poised to hear testimony about crypto scams on Thursday, Ranking Republican Sen. Pat Toomey of Pennsylvania is admonishing the SEC for failing to offer regulatory clarity on the digital asset lending platforms that sparked the latest market downturn. "Companies could have adjusted offerings accordingly, preventing investor losses today, and the SEC would have been free to focus enforcement efforts on the worst actors," he wrote in a letter to SEC Chair Gary Gensler. The SEC did not immediately respond to a request for comment. MAJOR INVESTIGATION — ICYMI Bloomberg's Allyson Versprille and Lydia Beyoud: "Coinbase Global Inc. is facing a US probe into whether it improperly let Americans trade digital assets that should have been registered as securities, according to three people familiar with the matter." Policymakers and crypto lobbyists will be keeping close tabs on the progress of the SEC's investigation, which will likely have significant bearing on how digital assets are listed on popular centralized exchanges. For months, Gensler has said that most cryptocurrencies are securities – with the exception of Bitcoin – and has been pushing to bring exchanges under its direct oversight. – Sam Sutton NEW FTX PAC — From Sam: "After spending tens of millions of dollars on outside super PACs, the executives at crypto exchange FTX are finally launching their own corporate political action committee ." SANCTIONS EVASION — From NYT's Ryan Mac and David Yaffe-Bellany: "Kraken, one of the world's largest cryptocurrency exchanges, is under federal investigation, suspected of violating U.S. sanctions by allowing users in Iran and elsewhere to buy and sell digital tokens , according to five people affiliated with the company or with knowledge of the inquiry."
| | | Matthew Mohlenkamp is joining ICI Global as managing director for Asia and global analytics. He previously spent nearly 15 years at the Treasury Department, most recently as director of the Office of South and Southeast Asia.
| | | The International Monetary Fund lowered its outlook for global economic growth again for 2022 and 2023, as soaring inflation and the spillover from the war in Ukraine cut into household purchasing power around the world and prolonged pandemic lockdowns slowed China's growth engine. — WSJ's Yuka Hayashi EU energy ministers agreed on a bloc-wide winter alert system to trigger mandatory cuts in natural gas consumption at the extraordinary energy council in Brussels. —POLITICO's America Hernandez An SEC whistleblower program designed to prevent another Bernie Madoff-type scandal often ignores its own rules , shields much of its work from the public, and has been a financial boon for law firms that hired former agency officials. — Bloomberg's John Holland
| | A message from Altria: Moving beyond smoking. Altria's companies are leading the way in moving adult smokers away from cigarettes. Today, we are taking action to transition millions toward less harmful choices.
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