FOMC Decision, Powell Comments on Wednesday Key Event This Week

Work on CR | Rail strike update | Food price update | Funeral for Queen Elizabeth II

•

September 18, 2022 03:31 PM

Work on CR | Rail strike update | Food price update | Funeral for Queen Elizabeth II

FOMC rate hike Wednesday
Fed’s decision headlines several central bank action this week. Most expect a 75-basis point hike. Key: what Fed Chair Powell says at presser.

Congress works on CR
A tardy Congress is at it again, as a stopgap spending bill is a priority before start of FY 2023, Oct. 1. A few things will hitch a ride but not ag disaster funding.

Update on potential rail strike
CR rail workers are set to vote Thursday morning on the tentative deal. Vote counting is expected to drag into October amid conjecture of outcome.

Washington Focus

Lawmakers had all year to work out a budget/funding level for fiscal year (FY) 2023, which starts Oct. 1. Of course, they didn’t make it and now, again, there’s a need for a stopgap spending bill, the so-called Continuing Resolution (CR). But also as usual, there are disagreements regarding what policy moves may go along for the ride.

Sen. Edward Markey (D-Mass.) says he opposes attaching environmental streamlining provisions for energy infrastructure projects to a CR. He said in a statement there is an “ongoing conversation” on the topic and legislation that could adversely affect the environment shouldn’t be included in a “must-pass” bill. Sometimes centrist Sen. Joe Manchin (D-W.Va.) said Thursday he needs as many as 20 Senate Republicans to vote for his plan to streamline the federal approval for energy projects to counter Democratic defections — casting doubt on the effort to tie his bill to a must-pass spending bill this month. “If it doesn’t get on the continuing resolution, it’s dead,” Manchin said.

Ag disaster aid for eligible 2022 crop and livestock producers is widely expected to be part of a post-election, lame-duck session of Congress that will be part of an omnibus spending measure for the remainder of fiscal year (FY) 2023. That makes some sense because it will give more time to see how the 2022 ag sector season unfolds (potential hurricanes, blizzards, etc.). The level of potential disaster aid is murky because USDA reportedly has told lawmakers there are still around $3 billion in ag disaster aid funding remaining for 2020 and 2021 disasters. So, at this time it is difficult to say what dollar amount Congress will settle on by year’s end. Also, USDA still has not announced phase two for either the Emergency Program (ERP) or Emergency Livestock Relief Program (ELRP). Recall that the White House/USDA requested $1.5 billion for disaster assistance in the Continuing Resolution, but some sources wonder how serious that request really was, thinking it was more messaging than anything else.

Other possible CR provisions. Lawmakers are also eyeing the CR package as a vehicle for Food and Drug Administration user fees and school meals, among other provisions.

Besides temporarily funding the government, which Majority Leader Steny Hoyer (D-Md.) called “the one thing we must do between now and September 30th,” other issues such as policing and public safety, restricting members from trading stocks, and data privacy are stuck in negotiations — and in some cases stymied by disagreements among Democrats.

The House may vote on an update of the Electoral Count Act spurred by then-President Donald Trump’s effort to overturn the 2020 election result, Hoyer said during the weekly colloquy in the chamber. The bill, from Reps. Zoe Lofgren (D-Calif.) and Liz Cheney (R-Wyo.), is more expansive than similar Senate legislation introduced this summer by Sens. Susan Collins (R-Maine) and Joe Manchin (D-W.Va.). House Speaker Nancy Pelosi (D-Calif.) said the stock trading bill could come to the floor later in the month. Bill text hasn’t been made public

A Senate-passed student loan bill is set for a House vote. The measure (S 1098) would allow a borrower who previously consolidated their loans with a spouse or ex-spouse to separate their loans.

The Senate’s first vote of the week will be to limit debate on the nomination of Florence Pan to serve on the U.S. Court of Appeals for the District of Columbia Circuit, the slot previously held by Supreme Court Justice Ketanji Brown Jackson. The Judiciary Committee approved her 13-9 earlier this year and the Senate last year voted 68-30 to confirm her to the U.S. District Court for the District of Columbia.

Climate change: The Senate is expected to take up the Kigali Amendment to the Montreal Protocol. The chamber could ratify its first climate treaty in decades if it can get 67 senators to agree to make it U.S. law. The agreement pushes participating countries to phase down hydrofluorocarbons (HFCs) from air conditioning and refrigeration appliances by 85% over 15 years.

House members have only seven legislative days on the schedule before they leave until the midterm elections. The Senate is scheduled to come back for two weeks in mid-October, but there’s talk the work period weeks might be canceled to give lawmakers more time on the campaign trail. Sen. Debbie Stabenow (D-Mich.), a member of Democratic leadership, anticipates the Senate will be in session for at least a portion of the two-week stretch, to help work through the backlog of more than 40 judicial nominees.

Ag committee hearings this week:

Tuesday, Sept. 20: Crypto. House Ag Committee hearing on “Assessing Crypto as a Tool for Financial Inclusion.”
Tuesday, Sept. 20: Conservation. House Ag hearing on “A 2022 Review of the Farm Bill: Stakeholder Perspectives on Title II Conservation Programs.”
Thursday, Sept. 22: Nominations. Senate Ag Committee hearing to consider nominations of Dr. Jose Emilio Esteban, Undersecretary for Food Safety nominee, Vincent Garfield Logan, Farm Credit Administration Board nominee, and Alexis Taylor, Undersecretary for Trade and Foreign Agricultural Affairs nominee.

Federal lands and GHG emission goals. Tuesday, a subcommittee of the House Natural Resources Committee holds a hearing on a bill sponsored by full committee Chairman Raul Grijalva (D-Ariz.) that would require the Forest Service (part of USDA) and the Interior Department to manage federal lands and waters in line with the administration’s greenhouse gas emission reduction goals.

Other hearings and events of note include:

Winter Covid outlook. Mon., Sept. 19: Center for Strategic and International Studies virtual discussion with National Institute of Allergy and Infectious Diseases Director. Dr. Anthony Fauci on the winter outlook for Covid-19.
Clinton Foundation meeting. Mon., Sept. 19: 2022 Global Initiative meeting with the theme “The Business of How.” Securities and Exchange Commission Chairman Gary Gensler delivers remarks on “Enhancement and Standardization of Climate-Related Disclosures.” Runs through Tuesday.
EU climate, energy strategies. Mon., Sept. 19: Atlantic Council discussion on “the EU strategy for addressing current geopolitical, energy and climate challenges.”
OECD agricultural outlook. Tues. Sept. 20: Organization for Economic Co-Operation and Development (OECD) virtual briefing on “OECD/FAO Agricultural Outlook 2022-2023,” including the impact of the Russia-Ukraine war on farm commodities.
Russia sanctions. Tues., Sept. 20: Senate Banking, Housing and Urban Affairs Committee hearing on “Tightening the Screws on Russia: Smart Sanctions, Economic Statecraft and Next Steps.”
Customs issues. Tues., Sept. 20: National Customs Brokers and Forwarders Association of America 2022 Government Affairs Conference, with Pete Flores, assistant commissioner of Customs and Border Protection’s Office of Field Operations, delivering remarks.
Food crisis/climate change/Clinton Foundation meeting. Tues., Sept. 20: Final day of the Clinton Foundation 2022 Global Initiative meeting with the theme “The Business of How.” Malawi President Lazarus Chakwera participates in a discussion on “The Food Crisis and the Threat of Global Destabilization: How We Can Take Urgent and Sustainable Action to Address Food Insecurity,” and Energy Secretary Jennifer Granholm; and Gov. Gavin Newsom (D-Calif.) participate in a discussion on “The Climate Crisis We’re Already in: How We Can Accelerate Adaptation to a Changing Climate.”
EU policy ahead. Tues., Sept. 20: CQ RollCall and FiscalNote virtual discussion on “EU Legislative Preview: Key Policy Developments to Watch For the Rest of the Year.”
Clean Water Act. Tues., Sept. 20: House Transportation and Infrastructure Water Resources and Environment Subcommittee hearing on “The Clean Water Act at Fifty: Highlights and Lessons Learned from a Half Century of Transformative Legislation.”
Rural housing. Tues. afternoon, Sept. 20: Senate Banking Committee hearing on USDA’s Rural Housing Service.
Antitrust issues. Tues. afternoon, Sept. 20: Senate Judiciary subcommittee hearing on antitrust issues.
Right to repair. Wed. morning, Sept. 21: House Rules Committee hearing, “Right to Repair: Legislative and Budgetary Solutions to Unfair Restrictions on Repair.”
Weather satellites. Wed., Sept. 21: House Science, Space and Technology Environment Subcommittee and Space and Aeronautics Subcommittee joint hearing on “Looking Back to Predict the Future: The Next Generation of Weather Satellites.”
Infrastructure law. Wed., Sept. 21: Senate Environment and Public Works Committee hearing on “Putting the Bipartisan Infrastructure Law to Work: The State and Local Perspectives.”
Maritime issues. Wed., Sept. 21: Federal Maritime Commission update on Maritime Transportation Data Initiative; and a briefing on Ocean Shipping Reform Act of 2022.
Battery technologies. Thurs., Sept. 22: Senate Energy and Natural Resources Committee hearing on deploying innovative battery and non-battery technologies for energy storage.
China and the U.S. dollar. Thurs., Sept. 22: Wilson Center’s Kissinger Institute on China and the United States discussion on “Beijing’s Dollar Decoupling Plans.”
Fed session on pandemic impacts. Fri., Sept. 23: Federal Reserve Board holds a “Fed Listens” event on “how the pandemic has re-shaped the economy and the workforce and what challenges and opportunities exist during the transition to the ‘new normal.'“ Federal Reserve Board Chairman Jerome Powell delivers opening remarks.
USMCA Environment Committee. Fri., Sept. 23: U.S. Trade Representative virtual meeting of the U.S.-Mexico-Canada Agreement Environment Committee, including a review of the implementation of the Environment Chapter, and discuss how the Parties are meeting their Chapter obligations; and Presentation from the Commission on Environmental Cooperation (CEC) Secretariat on cooperation and public Submissions for Enforcement Matters.

USDA’s Equity Commission will hold its third public meeting, starting Wednesday. The meeting will include members of the commission’s newly constituted Rural Community Economic Development Subcommittee as well as the Agriculture Subcommittee. Deputy Ag Secretary Jewel Bronaugh and former United Farm Workers President Arturo Rodriguez are co-chairing the commission.

Rail workers are set to vote Thursday morning on the tentative deal reached between unions and railroads. If any of the 12 rail unions fail to ratify a new contract, nearly 125,000 rail workers could be headed for a strike. Vote counting is expected to drag into October.

The tentative agreement would mandate two-person crews, cap health care costs and allow workers to take time off for medical appointments or other scheduled events without being penalized. It also provides 24% raises over five years, back pay and cash bonuses. Much of the discord over the past week had to do with a demand for paid medical leave — a demand that even the Biden administration opposed for being “too costly” — which was reportedly left out of the final deal. If adopted, it “would create 15 paid days a year that, while nominally labeled as sick leave days, would be structured to be used on demand as a means of permitting employees to better balance work-life needs and would effectively be personal days.”

President Biden talked about the tentative deal during an interview with CBS’ Sixty Minutes. “The alternative was just not thinkable,” Biden said. “If, in fact, they’d gone on a strike, the supply chains in this country would’ve come to a screeching halt. We would’ve seen a real economic crisis.” Biden said during the interview that the two sides were able to work out a deal that is “fair” to both. A railroad workers strike would have had far-reaching effects across the U.S. economy, with the American Association of Railroads estimating that a work stoppage could cost over $2 billion per day in economic output that is lost.

Senate Democrats on Wednesday blocked a GOP resolution that would have forced unions to accept the PEB terms, arguing that negotiators should be given more time.

House Speaker Nancy Pelosi (D-Calif.) said Thursday that Democrats were ready with a resolution to block a railroad shutdown if negotiations collapsed. She didn’t indicate whether the bill would impose a new contract, appoint arbitrators or simply prevent a walkout. “Thankfully this action may not be necessary,” Pelosi said in a statement.

Bottom line: Congress may still have to get involved this time, but only if union members reject the tentative agreement. If that occurs, it will be in a different political environment, because there will be a mandatory 60-day “cooling off period” before a potential strike. Any congressional action, therefore, will come after the Nov. 8 midterms.

The 77th U.N. General Assembly takes place in New York City, through Sept. 27. President Joe Biden will speak on Wednesday. At the General Debate, starting on Sept. 20, topics will include climate change, the war in Ukraine, and the aftermath of the Covid pandemic.

U.S. Treasury Secretary Janet Yellen on Thursday will be interviewed at The Atlantic Festival’s Ideas Stage session, which begins at 2:30 p.m. ET on Thursday.

Securities and Exchange Commission Chair Gary Gensler, Commerce Secretary Gina Raimondo and BlackRock CEO Larry Fink are among the long list of high-profile speakers at the Clinton Foundation’s Global Initiative meeting Monday and Tuesday.

World Bank Group President David Malpass will take part in a webinar at The Economic Club of New York on Monday at 12 p.m. ET. The club will also host economist and former Texas Sen. Phil Gramm on Thursday at 12 p.m. ET.

Meanwhile, Politico on Thursday morning will have virtual conversation with Global Insider author Ryan Heath, featuring World Bank President David Malpass, to explore what it will take to restore global stability and avoid a prolonged recession. Link for details.

CEOs of some of the largest U.S. consumer banks are slated to testify before the House Financial Services Committee on Wed., Sept. 21 at a hearing titled “Holding Megabanks Accountable.” Megabank CEOs including Jamie Dimon of JP Morgan Chase and Brian Moynihan of Bank of America are scheduled to testify.

The pair is also scheduled to appear at a Senate Banking Committee hearing on Thursday, according to a committee release. Other witnesses on the agenda include Charles W. Scharf of Wells Fargo, Jane Fraser of Citigroup, William H. Rogers Jr. of Truist Financial Corporation, Andy Cecere of U.S. Bancorp, and William S. Demchak of PNC Financial Services Group.

House Ways and Means panel to consider Social Security benefits bill. The panel on Tuesday will consider a popular bill that would scrap provisions under current law that shrink Social Security payouts for some beneficiaries with government pensions. The bill (HR 82) from Rep. Rodney Davis (R-Ill.) would get rid of two provisions that aim to prevent overly generous benefits for former public sector workers or their spouses who qualify for government pensions but may also be entitled to Social Security payments. The “windfall elimination provision” limited Social Security for 2 million people who qualified for benefits and had a separate pension as of December 2021, according to a Congressional Research Service memo. The “government pension offset” reduces benefits for a spouse or widow who has a government pension, aiming to replicate how Social Security paid to a spouse or widow is typically curtailed based on their own benefits under the program. That provision impacted almost 724,000 people as of December, the CRS said. Davis’ bill would get rid of both restrictions for benefits payable after December 2021.

Funeral services for Queen Elizabeth II will be held Monday, with President Joe Biden and First Lady Jill Biden attending. The state funeral begins at 11 a.m. in London (6 a.m. ET). World leaders, public figures and European royals, and more than 500 dignitaries from around the globe, are expected to descend on London to pay their last respects to Britain’s longest reigning monarch. Biden traveled to Westminster Hall in London where the queen is lying in state. He made the sign of the cross Sunday and put his hand to his heart as he stood quietly near the casket. The Bidens were joined by U.S. Ambassador Jane Hartley. Biden was also expected to sign the official condolence book and attend a reception Sunday at Buckingham Palace hosted by King Charles III before attending the state funeral at Westminster Abbey on Monday.

Vice President Wang Qishan is leading the Chinese delegation. President Xi Jinping was invited but declined.

Olena Zelenska, wife of Ukrainian President Volodymyr Zelenskyy, is attending, but her husband is expected not to — but he previously has made surprise appearances.

House Speaker Nancy Pelosi (D-Calif.) announced Saturday that she is leading a congressional delegation to Armenia this past weekend, which her office said made her the highest-ranking U.S. official to visit the country since its independence in 1991. She arrived in Armenia on Saturday amid clashes with Azerbaijan that killed hundreds of people this week, with plans to meet with the country’s leaders and push for peace.

Regarding Russia’s war with Ukraine, President Biden is resisting a request from the Ukrainian government for a missile system with a range that could reach far into Russian territory. Reason: Russian leader Vladimir Putin could escalate the war to compensate for recent losses. The U.K.’s Ministry of Defense said Sunday that Russian strikes had increasingly picked out civilian targets over the past week, even when no immediate military benefit could be perceived. The aim, it said, is to “undermine the morale of the Ukrainian people and government,” which has been buoyed by the success of a recent offensive in the northeast of the country.

Meanwhile, Putin said he’s “not in a hurry” to end military operations in Ukraine and threatened to step up attacks on civilian targets. The leaders of China and India last week both expressed concern about the war to Putin. President Biden warned Putin in a “60 Minutes” interview against using nuclear or chemical weapons in Ukraine. “You think i would tell you?” Biden said when 60 Minutes’ Scott Pelley asked what the U.S. response would be to a Putin nuke. “They’ll become more of a pariah in the world than they ever have been,” he said.

Another Ukrainian wheat cargo sailed for Ethiopia under a U.N. humanitarian program, as Putin renewed his threat to torpedo a safe-transit agreement reached in July for Ukraine’s Black Sea grain exports. Putin’s comments came just hours after he told Narendra Modi of India that Russia would “do everything to end this as soon as possible.” The Indian prime minister chided the Russian leader, saying, “today’s era is not one for war.”

NASA holds a media briefing Thursday for the Double Asteroid Redirection Test, the world’s first mission to test technology for defending Earth against potential asteroid or comet hazards. It is due to impact its target asteroid, which poses no threat to Earth, next Monday.

On the economic front, as noted below, the Federal Open Market Committee begins its two-day meeting Tuesday, with a press conference scheduled for 2:15 p.m. ET Wednesday. A 75-basis-point interest rate hike seems likely. But what Fed Chair Jerome Powell says during his briefer is what’s important.

Economic Reports for the Week

Wednesday, Sept. 21, the Fed is widely expected to again hike interest rates by 75 basis points. Key will be what happens in their moves after that occurs. The Fed, as Chairman Jerome Powell likes to say, is data dependent. And so far, it looks like all the data point to more hikes and that rates will stay higher for longer. “This meeting is going to be very important in light of all the recent data,” said Roger Aliaga-Díaz, chief economist of the Americas and head of portfolio construction for Vanguard. “It’s too early to talk about a pivot.” Powell holds his briefer Wednesday.

Other economic reports of note: On Tuesday, the Census Bureau releases figures on new residential construction, and on Wednesday, the National Association of Realtors updates its data on existing home sales.

Monday, Sept. 19

National Association of Home Builders releases its Housing Market Index for September. Economists forecast a 48.5 reading, about even with the August data. The index has fallen every month this year and in August breached the key break-even measure of 50 for the first time since May of 2020.
Bank for International Settlements publishes its quarterly report on global financial markets.

Tuesday, Sept. 20

Census Bureau reports new residential construction statistics for August. Expectations are for a seasonally adjusted annual rate of 1.45 million privately owned housing starts, matching the July figure.
International reports: Canada, August consumer price index (CPI) figures | China, monthly policy rate decision | Germany, August producer price index (PPI) data.
Japan, August CPI figures | U.K. Department for International Trade’s investment and trade data.

Wednesday, Sept. 21

MBA Mortgage Applications
National Association of Realtors reports existing-home sales for August. Consensus estimate is for a seasonally adjusted annual rate of 4.7 million existing homes sold, about 100,000 fewer than in July.
Federal Open Market Committee (FOMC) announces its monetary-policy decision. Just two weeks ago, Wall Street was debating whether the FOMC would raise the federal-funds rate by 50 or 75 basis points. After another strong jobs report and a hotter-than-expected print for the August consumer price index, a three-quarters of a percentage point interest-rate hike seems all but assured. That would bring the fed-funds rate to 3.0%-3.25%. Traders are even pricing in a 25% chance that the central bank will raise its key short-term rate by a full percentage point, which would be the largest move in nearly four decades.

Thursday, Sept. 22

Jobless Claims
Conference Board releases its Leading Economic Index for August. The consensus call is for a 0.1% month-over-month increase, after a 0.4% decline in July. The index has fallen for five consecutive months, indicating that the risk of a recession is rising in the near term.
Fed Balance Sheet
Money Supply
Bank of Japan announces its monetary-policy decision. The central bank is expected to maintain its ultralow interest-rate policy and keep its target rate unchanged at negative 0.1%, as it has been since early 2016. The dovish BOJ , in contrast to the hawkish U.S. Federal Reserve, has sunk the yen to its lowest level against the U.S. dollar since 1998.
Bank of England’s Monetary Policy Committee announces August rate-setting decision.

Friday, Sept. 23

S&P Global releases both its Manufacturing and Services Purchasing Managers’ indexes for September. Economists forecast a 51 reading for the Manufacturing PMI and a 45.3 for the Services PMI. This compares with 51.5 and 43.7, respectively, in August.
International reports: Canada, monthly retail sales figures | Eurozone, France, Germany, U.K. purchasing managers’ indices.

Key USDA & international Ag & Energy Reports and Events

With USDA’s September Crop Production and WASDE reports out of the way, the focus now is on U.S. crop development and harvest conditions. Ukraine exports, or the lack of them, remain a focus.

On Tuesday, comes the Organization for Economic Co-Operation and Development (OECD) virtual briefing on “OECD/FAO Agricultural Outlook 2022-2023,” including the impact of the Russia-Ukraine war on farm commodities.

Thursday brings the International Grains Council monthly report.

On Friday, we get another USDA food price update. The most CPI report last week showed higher food prices are lingering. Expect USDA’s report to show some prices lower with others higher. The CPI report showed the cost to eat at home soared 13.5% from a year ago, the largest rise since March 1979. Egg prices are up nearly 40% from a year ago while fruit and veggies rose 9.4% and dairy products cost 16.2% more.

Monday, Sept. 19

Ag reports and events:

Export Inspections
Crop Progress
Food Expenditure Series
Milk Production
MARS monthly crop conditions report