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Delivered daily by 8 a.m., Morning Money examines the latest news in finance politics and policy. | | | | |  | | By Kate Davidson 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 s 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.
| | | Policymakers thought the economy was approaching an inflation peak. The summit may be higher and the descent much slower than anyone expected. Consumer prices continued rising at the fastest pace in four decades last month, the Labor Department said Thursday, climbing 7.9 percent since February 2021. Gas prices jumped 6.6 percent from just a month earlier, accounting for nearly a third of the 0.8 percent increase since January, and prices for groceries posted their biggest monthly increase since April 2020. And that was mostly before Russia’s invasion of Ukraine, which has sent energy and commodity prices soaring. Also rising last month: costs for housing, recreation, furniture, car insurance, personal care and airline tickets. One bright spot: Used vehicle prices declined in February. Looking ahead, economists at the White House and Federal Reserve have said they continue to expect inflation readings to improve this spring, as the high price increases from early last year fall out of the Labor Department’s 12-month inflation figure. They’ve also expressed hope that supply chain bottlenecks, which have fueled price pressures since last year, would finally begin to subside, helping them curb inflation. That bet suddenly seems in doubt Fromour Victoria Guida and Steven Overly : “Russia’s invasion of Ukraine threatens to further disrupt global supply chains just as shipping delays were poised to improve, scrambling the economic outlook and the Federal Reserve’s strategy for fighting inflation along with it. … “Russia’s attack in late February sent oil prices surging some 25 percent over the following two weeks. Energy costs are expected to remain high, making the transportation of goods much more expensive. Shipping routes around the war-torn region must now be recalibrated, and more than 300,000 companies in the U.S. and Europe alone could see disruptions, one supply chain software CEO estimated.” Consider this stat from the International Chamber of Shipping: Russians and Ukrainians make up 14.5 percent of the global shipping workforce, nearly 275,0000 workers, and they are struggling to leave the war-torn region and join ships. That could exacerbate global supply chain issues, the group warned. The trade disruptions add another layer of complexity for the Fed: Officials must keep an eye on risks that inflation could speed up further, while also bracing for the possibility that soaring oil prices could weigh on economic growth.
| | | | SUBSCRIBE TO NATIONAL SECURITY DAILY : Keep up with the latest critical developments from Ukraine and across Europe in our daily newsletter, National Security Daily. The Russian invasion of Ukraine could disrupt the established world order and result in a refugee crisis, increased cyberattacks, rising energy costs and additional disruption to global supply chains. Go inside the top national security and foreign-policymaking shops for insight on the global threats faced by the U.S. and its allies and what actions world leaders are taking to address them. Subscribe today. | | | | | David Wilcox, a former senior Fed official, says: “There is no clear answer to how the Fed should respond because these forces are pulling in opposite directions. The most important thing for them to do now is to communicate that the situation is incredibly uncertain.” How much could higher energy prices affect the U.S. economy? It may not be much, BlackRock Chief Investment Officer Rick Rieder said in a note Thursday. “The fact is that gasoline consumption as a proportion of disposable income, while set to grow sharply, is still starting from such a relatively low base that its influence should be modest at the aggregate level,” he said. But, but — “That said, the share of after-tax income spent on both food and fuel is much greater for lower- to middle-income cohorts, so if inflation in these areas continues to rise in a persistent manner this year, it will cause considerable stress for these households.” That’s bad news for a White House that has been hoping for months that lower prices are just around the corner. IT’S FRIDAY — Congrats everyone, we made it. Again. Find some time for yourself this weekend. Binge a new Netflix period drama. Take a hike in the woods. Sleep in. You deserve it. But don’t forget to send us your hot takes on next week’s big Fed meeting: kdavidson@politico.com, aweaver@politico.com, or on Twitter @katedavidson or @aubreeeweaver.
| | | | A message from ExxonMobil: ExxonMobil is committed to playing a leading role in the energy transition. We’re advancing climate solutions, including carbon capture and storage, hydrogen and advanced biofuels. And, by 2050, we aim to achieve net-zero emissions (Scope 1 and 2) from our operated assets. We’re working with partners to achieve similar results from non-operated assets, and advocating for supportive policies to accelerate the deployment of lower-emission technologies needed to support a net-zero future. Learn more at ExxonMobil.com/Solutions | | | | | | University of Michigan consumer sentiment data released at 10 a.m. FIRST IN MM: TREASURY’S ADAMS MOVING UP — Lily Adams has been named the Treasury Department’s new assistant secretary for public affairs. She'll be taking over for Calvin Mitchell, who is transitioning to a role as counselor to Treasury Secretary Janet Yellen on strategic communications. Adams has been serving for the past year as Mitchell’s principal deputy, playing a key role in the agency’s communications around the American Rescue Plan and sanctions programs. She’s an alum of Vice President Kamala Harris’ presidential campaign, and was an aide to Harris in the Senate. She also worked previously for Hillary Clinton, Tim Kaine and Richard Blumenthal. (Adams comes from a line of Democratic women activists: She’s the daughter of Cecile Richards, former Planned Parenthood president and American Bridge super PAC co-chair, and the granddaughter of former Texas Gov. Ann Richards.) WHAT’S AT STAKE IN THE RASKIN FIGHT? — Better Markets President Dennis Kelleher emails MM about our story on Sherrod Brown and Pat Toomey’s Fed showdown: “First, people should call this what it is: Toomey refusing to allow a vote for four nominees unless one other is withdrawn is nothing less than a political hostage-taking that should be beyond the bounds of Senate conduct. It also violates the intent and spirit of the rules governing a 50-50 Senate. “Second, this isn’t that different than Republicans depriving Obama of a Supreme Court nominee, except here it’s Republicans depriving Biden of a Fed Vice Chair for Supervision. That’s what is really at stake here. If Raskin isn’t confirmed, it is almost certain that Biden will not be allowed to appoint a VCS.” CLIMATE DISCLOSURE RULE ON THE HORIZON — E&E News’ Avery Ellfeldt: “The Securities and Exchange Commission is set to vote on a groundbreaking rule later this month that for the first time would require public companies to disclose the risks they face from climate change. The agency posted notice Thursday morning alerting the public that its five-member commission will meet on March 21 to consider proposed amendments that would ‘enhance and standardize’ companies' climate-related disclosures for investors.” TAXPAYER ADVOCATE: IRS SHOULD AUDIT MORE BUSINESS PARTNERSHIPS — National Taxpayer Advocate Erin Collins, discussing differences between IRS audits of poorer taxpayers compared to the wealthy, said the IRS should audit more partnerships like pass-through entities to root our tax-dodging, our Aaron Lorenzo reports. Critics have charged tax cheats with using such private business structures as a shield for getting around their tax obligations. “I think it’s an area that people could be aggressive and I don’t think the IRS has spent enough time focusing on that,” she said on a webcast hosted by the Tax Policy Center. —HELP WANTED: Also from Aaron: “IRS Commissioner Chuck Rettig on Thursday detailed new agency plans to hire thousands of workers , along with more job reassignments for current employees, to help cut the historically huge backlog of unprocessed tax returns and taxpayer mail that’s holding up refunds and credits from last year.” For the calendar: Rettig is headed to Capitol Hill on March 17 for his annual testimony on tax filing season.
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| POWER PLAYERS OF 2021 — POLITICO’s The Recast has named the 40 power players of 2021. From strategists to politicians, activists to influencers, they undeniably impacted the intersection of race, politics and policy. Among the players: Senate Banking Committee member Tim Scott (R-S.C.) Explore the full list here. #TheRecast40 BIDEN’S DIGITAL DOLLAR COULD RILE BANKS, CRYPTO — WSJ’s Telis Demos: “The Biden administration’s plan to study whether to launch a digital dollar may bring together some strange bedfellows : banks and crypto companies. … A CBDC could work in a number of different ways. But both traditional deposit-taking lenders and some upstart digital currency companies have had worries about what would happen if U.S. dollars become digitized in ways that might enable them to move or be stored independently or on a government-owned network.”
| | | | A message from ExxonMobil:   | | | | | | ECONOMIC BLACKLIST OF RUSSIA MARKS NEW BLOW FOR GLOBALIZATION — WSJ’s Josh Zumbrun: “The U.S.-led effort to expel Russia from international commerce marks another fracture in the free-trade vision that guided American policy for nearly 30 years, signaling a future where nations and companies shift away from trading with adversaries and focus more on like-minded partners. The actions taken by the U.S. and Western European allies since Russia invaded Ukraine have been swift and punishing—including banning or scaling back purchases of Russian oil, gas and coal to pressure Russian President Vladimir Putin to call off his troops.” IMF: WAR IN UKRAINE LIKELY TO SLOW GLOBAL GROWTH — NYT’s Alan Rappeport: “The war in Ukraine and the associated sanctions that countries around the world have imposed on Russia are likely to cause a downgrade of the International Monetary Fund’s global economic growth forecast, Kristalina Georgieva, the I.M.F.’s managing director, said on Thursday. JPMORGAN, GOLDMAN LEAD WALL STREET’S RETREAT FROM RUSSIA — Bloomberg’s Hannah Levitt and Sridhar Natarajan: “JPMorgan Chase & Co. joined Goldman Sachs Group Inc. in pulling back from Russia in response to the country’s invasion of Ukraine last month. JPMorgan, the biggest U.S. bank, is currently engaging in limited activities in the country, the New York-based company said in a statement Thursday. Goldman Sachs said it plans to close its operations there.”
| | | | 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. | | | | | | | | VOLATILITY TRADERS BECOMING LESS IMPRESSED BY BIG MARKET SWOONS — Bloomberg’s Lu Wang: “What’s remarkable one day becomes commonplace when repeated often enough. It’s a sentiment settling into volatility markets with each lurch between euphoria and panic in the S&P 500. Case in point is the Cboe Volatility Index, a thermometer for anxiety on Wall Street that normally jumps when the market tumbles. That pattern was absent Thursday, when despite the S&P 500 being down as much as 1.6 percent, the VIX spent most of the day either unmoved or in free fall.” INVESTORS EXPECT EARNINGS HIT — Reuters’ Caroline Valetkevitch: “Investors are bracing for a hit to U.S. earnings as oil and other commodity costs skyrocket and major U.S. companies including McDonald's begin to halt sales in Russia following Moscow's invasion of Ukraine. Estimates of the earnings growth for S&P 500 companies have barely budged since the invasion began two weeks ago, but strategists expect that to change as more companies give guidance on earnings for this year.”
| | | Catherine Cotsakos has been promoted to vice president for financial communications and capital markets at Edelman. Before joining the firm in 2019, she worked on the Hill for Reps. Blaine Luetkemeyer (R-Mo.) and Rick Allen (R-Ga.), and the House Financial Services Committee.
| | | Private equity firms like Blackstone, Apollo Global Management, KKR and Carlyle have refashioned themselves into the supermarkets of the financial industry. They span areas of traditional finance long dominated by banks and investment categories typically dominated by hedge funds and venture capital. —NYT’s Maureen Farrell Bank of New York Mellon Corp. Chief Executive Todd Gibbons plans to retire , following a nearly three-year tenure in which he steered the custody bank through the upheaval of the coronavirus pandemic. —WSJ’s Justin Baer The European Central Bank said Thursday that it will make an early exit from its economic stimulus efforts as it combats record inflation that threatens to go ever higher as energy prices soar during Russia’s war in Ukraine. —AP
| | | | A message from ExxonMobil: ExxonMobil is committed to playing a leading role in the energy transition and advancing climate solutions while continuing to power economies around the world. We’re investing $15 billion in lower-emission technologies, including carbon capture and storage, hydrogen and advanced biofuels, through 2027. By 2050, we aim to achieve net-zero emissions (Scope 1 and 2) from our operated assets, backed by a comprehensive approach with detailed emission-reduction roadmaps. And where we are not the operator, we’re also working with partners to achieve similar results and help them reach their emission reduction goals. We’re advocating for supportive policies, such as a price on carbon, which can help reduce costs and drive new markets to accelerate deployment of key lower-emission technologies needed to support a net-zero future. Learn more about our plans and how our strategy is resilient under the International Energy Agency’s Net Zero Emissions by 2050 scenario at ExxonMobil.com/Solutions | | | | | | | Follow us on Twitter | | | | Follow us | | | | |  |
