| | | | |  | | By Ben White | PEAK PROBLEMS — Remember all that talk about inflation having "peaked " earlier this month? Well, you can toss it in the garbage along with its predecessor in wishful thinking: that the lightning fast run up in consumer prices thatbegan in late 2020 would prove "transitory" and mostly ease on its own. Both of those predictions turned out to be terribly, embarrassingly wrong. Economic forecasts from blue chip prognosticators and the Federal Reserve itself often miss the bullseye. But predictions on inflation over the last two years missed the entire target, flew over the broad side of the barn and plunked down in the mud. Thelatest report out today on consumer prices showed inflation soaring at an astonishing 9.1 percent rate in June from the same time last year, the fastest annual pace since November of 1981. That run of super high price increases — driven by oil embargos — ended only when then-Fed Chair Paul Volcker jammed through huge interest rate hikes, sparking a couple of recessions along the way. That does not necessarily have to be the story this time. But it could be.
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| Let's just start with the basics: Not only has inflation not peaked, nobody really has any idea how or when it will. It is true, asPresident Joe Biden said , that the Consumer Price Index number released today is "backward looking" and does not reflect some recent easing in gas prices. It is also true that energy costs made up around half of total "headline" inflation, as us wonks call it. But even so-called core inflation, which strips out volatile food and energy prices, dipped just a touch on an annual basis to 5.9 percent (still super high) from 6.0 percent in May. Wall Street expected a bigger dip to 5.7 percent to confirm the idea that the worst was over. It does not appear to be. And the monthly rate of core inflation actually rose to 0.7 percent in June from 0.6 in May. Not good. All this means the Fed is absolutely on track to jack interest rates up another three quarters of a point later this month. And it may feel compelled to keep up that pace — or even increase it — in subsequent months. The Fed has two jobs: keep inflation around 2 percent over the long term and promote full employment. But it will absolutely err in favor of the first goal even if it means triggering recession and driving up the unemployment rate,as often happens in rate hiking cycles. Fed Chair Jerome Powell has been pretty clear that nothing works in the economy at inflation rates like this. He's also been clear that he's not certain the Fed can produce the dreamy "soft landing" in which a series of mostly gentle hikes tamp down consumer demand for goods and services and keep a lid on wage gains without driving up the historically low 3.6 percent unemployment rate. In a pinch, the Fed will always choose recession over losing control of prices. And Powell has also said, quite rightly, that the Fed has no power on the supply side of the economy. It can't control the Ukraine war that supercharged oil and food prices, nor can it fix snarled supply chains. The case for inflation having peaked centered on hopes for some resolution in Ukraine (which seems far away) and further healing of post-Covid supply chain problems and super high demand for workers to make and service stuff (neither of which are going away). The one slight bit of good-ish news,as my colleague Victoria Guida smartly noted, is that wage gains have leveled off in recent months. That sounds bad. Because generally speaking you want workers to make more money, especially as wage gains are trailing price hikes by a large margin, leading around 80 percent of Americans to hate what otherwise looks like a pretty good economy. But the Fed dreads the idea of a wage/price spiral in which more dollars are chasing limited supplies of goods and services. So the slight cooling in wage gains is actually good news because it eases at least some pressure on the central bank to pound the brakes on the economy. All of this is a political nightmare for Biden and Democrats staring down potentially big losses in the midterm elections. The jobs numbers and unemployment rate are great. But people only really care right now about their huge bills at the pump and grocery check out, not to mention airfares, lodging and pretty much everything else. And they don't think Biden and the Democrats have any plan.
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| That's partly because there isn't a ton the White House or Democrats in Congress can do that would help in the short term beyond what they are already doing on strategic oil reserve releases and supply chain assistance. What they really have to do to wake from this bad dream is pray that all the very, terribly wrong predictions about the direction of inflation somehow eventually come true. Welcome to POLITICO Nightly. Reach out with news, tips and ideas at nightly@politico.com. Or contact tonight's author at bwhite@politico.com or on Twitter at @morningmoneyben.
| | | | HAVE QUESTIONS ABOUT ROE BEING OVERTURNED? JOIN WOMEN RULE ON 7/21: Now that the Supreme Court has overturned Roe v. Wade , abortion policy is in the hands of the states and, ultimately, voters. Join POLITICO national political correspondent Elena Schneider for a Women Rule "ask me anything" conversation featuring a panel of reporters from our politics and health care teams who will answer your questions about how the court's decision could play out in different states, its impact on the midterms and what it means for reproductive rights in the U.S. going forward. SUBMIT YOUR QUESTIONS AND REGISTER HERE. | | | | | | | | | 
| — Jan. 6 panel talking with Justice Department about false Trump electors: For the first time, January 6 Committee Chair Bennie Thompson confirmed that the Justice Department has engaged the committee on some of the evidence they've obtained . Thompson said the Justice Department is particularly interested in the transcripts of the interviews the committee has conducted with some of the false electors, suggesting the department is continuing to advance its examination of the false-elector scheme, a key element of former President Donald Trump's effort to subvert the 2020 election. — Trump discussing 2024 plans at secret donor dinners: Trump has quietly convened some of his wealthiest and highest-profile supporters for intimate dinners in recent weeks, where the groups have talked about the former president's 2024 election plans — and debated when he should make his expected comeback bid official. The previously unreported dinners, which were described to POLITICO by four attendees , provide a window into Trump's deliberations and show how he has quietly begun to reassemble the political network that he cultivated in the White House. With other potential Republican candidates circling, holding their own donor meetings and making plans for 2024 runs, the former president is taking subtle but concrete steps to prepare for his next campaign. — Biden admin to pharmacies: Refusing to fill contraception and abortion pill prescriptions could break federal law: The Department of Health and Human Services will be reminding more than 60,000 pharmacies around the country that they risk violating civil rights laws if they refuse to fill orders for contraception or abortion medication or discriminate based on a person's pregnancy status. This comes in response to a wave of reports that pharmacies in states with abortion bans are refusing to not only fill prescriptions for abortion and contraception pills but also other medications that they speculate could be used off-label to terminate a pregnancy. — Biden's top bank cop confirmed with strong bipartisan backing: The Senate today voted 66-28 to approve consumer advocate Michael Barr for the Federal Reserve's top regulatory job, where he's expected to bring a tougher approach to the nation's megabanks but also openness to new financial technology. The Fed's Washington-based board has been without a point person on bank regulation since October, during an especially risky moment for the financial system as lenders deal with soaring inflation, rising interest rates and disruption caused by the war in Ukraine. — Ex-CIA engineer convicted in massive theft of secret info: A former CIA software engineer was convicted today of federal charges accusing him of causing the biggest theft of classified information in CIA history. Joshua Schulte, who chose to defend himself at a New York City retrial, had told jurors in closing arguments that the CIA and FBI made him a scapegoat for an embarrassing public release of a trove of CIA secrets by WikiLeaks in 2017.
| | | | Congressional Vision for Tech Across America – July 21 Event : How can innovation play a role in America's global economic leadership? On July 21, Rep, Gerry Connolly (D-VA), Rep. Tom Emmer (R-MN), Rep. Trey Hollingsworth (R-IN), Rep. Ro Khanna (D-CA), Sen. Jacky Rosen (D-NV), Rep. Mikie Sherrill (D-NJ) are sharing Congress' vision for the future of policy and technology surrounding workforce and education at MeriTalk's MerITocracy 2022: American Innovation Forum. The forum will feature Hill and White House leadership and industry visionaries as they dig into the need for tangible outcomes and practical operational plans. Save your seat here. | | | | | | | | 'GRAVE BREACH' — The United States has called on Russia to immediately stop its systematic "filtration" and forced deportation of millions of Ukrainians in territories under Moscow's control and to allow outside observers access to camps through which they pass, writes Christopher Miller. "The unlawful transfer and deportation of protected persons is a grave breach of the Fourth Geneva Convention on the protection of civilians and is a war crime," Secretary of State Antony Blinken said in a statement today. Blinken said Russian authorities have "interrogated, detained, and forcibly deported between 900,000 and 1.6 million Ukrainian citizens, including 260,000 children, from their homes to Russia — often to isolated regions in the Far East." Ukraine's President Volodymyr Zelenskyy said today that the number of Ukrainians taken to Russia could be as high as 2 million people. HANDS OFF — The White House isn't showing its hand about what Biden plans to do with his, writes Alexander Ward. Just hours before Biden was set to land in Israel for a Middle East swing, officials confirmed reports that the president will seek to limit his handshaking over the next four days. They said the precaution was put in place by Biden's doctor following a rise in cases of Covid-19 variants. The new policy was announced at a convenient time. Biden's team knows the trip's most damaging image would be one of the president pressing palms with Saudi Crown Prince Mohammed bin Salman, who the U.S. intelligence community said orchestrated the murder of Jamal Khashoggi, a journalist and U.S. resident. The doctor's sudden order minimizes the risk that such a picture will flash across TV screens in the coming days.
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Mayor Eric Adams speaks during an event at Damrosch Park, Sunday, July 10, 2022, in New York. | Julia Nikhinson/AP Photo | HIDE & SEEK — Sally Goldenberg reports that New York Mayor Eric Adams and his Deputy Mayor for Public Safety Phil Banks have outfitted offices in a highly secure tower near the foot of the Brooklyn Bridge. The workspace is the latest example of the fledgling mayor fiercely guarding his privacy as he acclimates to one of the most public political jobs in America. Their chosen location, 375 Pearl Street, declares itself "the most secure and resilient building in Manhattan." The setup offers them what City Hall cannot: A covert space away from the prying eyes of City Council members, reporters and employees who work in the building and can spot much of the activity within. Early in his tenure, Adams has made a point of being seen frequenting the city's nightlife, partying at restaurant openings and clubs with celebrities like Cara Delevingne, Mary J. Blige and French Montana. But he alternatively seeks the spotlight and shuns it. And he's bristled at reporting that his use of the highly secure, private building is "secret." "How can a city location be an undisclosed location?" he said today. "That's just not making any sense." Did someone forward this email to you? Sign up here. | | | | Follow us on Twitter | | | | Follow us | | | | |
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