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Presented by ExxonMobil: 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. WELL, THAT WAS AN INFLATION REPORT THAT NOBODY COULD LOVE — Our Ben White writes: “The highly watched consumer price number for April resolved basically nothing about the longer-term direction of inflation, the economy, the Federal Reserve or Democrats’ fate in this fall’s elections. “On the very top line, prices dipped to an annualized 8.3 percent gain (still enormous) from March’s 8.5 percent jump. But much of the decline stemmed from a drop in gas prices after the Ukraine war-induced oil spike. “Wall Street wanted a cooler number, 8 percent or below, to ease fears of larger, faster Fed rate hikes. And stocks quickly resumed their recent tantrum after the numbers came out with all the major indexes plunging again. “It’s not like it was a horrible report for Biden and the Democrats. The data, while a bit short of expectations, follows other signals that prices, which began to rise sharply in April of last year, have perhaps hit their high point. But the numbers were always going to look more favorable once year-to-year comparisons were from higher numbers. “Still, the rapid increase in inflation expectations has slowed in the last three months. Americans now expect annual inflation of a still-very-high 6.3 percent over the next year, a 0.3 percent drop from March. “Prices for used automobiles continue to fall. Goldman Sachs analysts this week said that for the first time since early 2021 they are lowering their inflation target a bit for the year. The pace of wage growth also eased in March, making Fed panic about inflationary wage spirals slightly less likely. “Still there was plenty not to like and to allow the GOP to keep hammering away at Democrats on inflation, a strategy that is clearly working, based on polling data. “‘Inflation should absolutely be coming down in part just because the numbers will now be compared to more favorable figures from last year,”’ Matthew Luzzetti, chief U.S. economist at Deutsche Bank Securities, told MM. “But it will still be very high and subject to energy, food and other shocks.” “Who cares if we’ve hit ‘peak’ inflation? Inflation may technically have “peaked” at some point in March. But it’s still extremely elevated and there is no easy way to get prices down faster without crashing the economy, meaning any political gains for Democrats could wait for months. "I don't think that there's a lot that the White House can do; 95 percent plus of economic growth and inflation is happening in the private sector,” Austan Goolsbee, a former top economic adviser to President Barack Obama, said on CNBC. “In other words, nothing is settled. Things just might be pointing in a slightly better direction. “‘We still have a big inflation problem in this country; you just need to look at how broad-based it has become since the beginning of the year. It used to just be supply chain issues, but now it’s goods and services,’ said Blerina Uruci, U.S. economist at T. Rowe Price. ’We are a long way away from the Fed’s 2 percent inflation target, and it’s going to take us a long time to get there.’” SITUATIONAL AWARENESS — The Senate is expected to vote today on Fed Chair Jerome Powell's nomination to a second four-year term around 1:45 p.m.
| | | | 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. | | | | | MM SCOOPLET: BARR HEARING SET FOR MAY 19 — The Senate Banking Committee will meet next Thursday to consider Michael Barr’s nomination to be the Federal Reserve’s vice chair for supervision, a source tells MM. As another person reminded us when the nomination was announced, Barr has testified many times during his stints in previous administrations and as an outside expert. So this shouldn’t be a heavy lift. But as we’ve seen recently, confirmation hearings — heck, any hearing — can take an unexpected turn. Democrats will surely be on pins and needles for this one. Why it matters: We’re nearly 18 months into the administration, without a confirmed nominee in the government’s top bank regulatory job, even as the Fed considers rules on bank mergers, the Community Reinvestment Act and loss-absorbing capital. LOGAN TO DALLAS — In other central bank personnel news, the Dallas Fed has tapped one of the Fed system’s most highly respected financial market experts to be its next president. At least two people are not impressed: Sen. Bob Menendez (D-N.J.) and Rep. Raul Ruiz (D-Calif.) Lorie Logan, the head of the New York Fed’s trading desk, will take over as president of the Dallas Fed effective Aug. 22, our Victoria Guida reports. In her current role, Logan implements the central bank’s monetary policy decisions, overseeing its $9 trillion portfolio of assets, which the Fed will begin shrinking next month. Fed Chair Jerome Powell, in a statement, said, "we will continue to benefit from her analytical rigor, keen insights and good judgment.” Menendez, the highest-ranking Latino in Congress, and Ruiz, the chair of the Congressional Hispanic Caucus, slammed the pick in a statement, saying the Fed “chose to perpetuate a legacy that has largely excluded Latino voices at all levels of the institution.” Regional Fed presidents, which serve on the Fed’s policy-setting committee, are appointed by the directors of the regional banks, although the Fed board in Washington ratifies the hires. “In its 108-year history, not a single one of the now 138 regional Federal Reserve presidents is or has been a Hispanic or Latino person. Not a single one,” they wrote. “While the Federal Reserve has made some recent progress in addressing its diversity issues, it missed an opportunity to achieve a critical and easily attainable milestone by appointing a Latino as the next president of the Dallas Federal Reserve Bank.” Logan will succeed Rob Kaplan, who resigned last year in the wake of revelations that he had made multiple stock trades worth more than $1 million in 2020, during a period when the Fed was engaged in an extensive rescue of financial markets. Menendez has repeatedly called on the Fed to improve diversity in its upper ranks. And we reported in MM that the Congressional Hispanic Caucus had generally been frustrated with the lack of Latino candidates for financial nominations. President Joe Biden last year nominated two Black economists to join the Fed’s board of governors — Davidson College Professor Philip Jefferson and Michigan State University Professor Lisa Cook, who was confirmed Tuesday night and is the first Black woman to serve on the Fed board. Jefferson was confirmed Wednesday night by the Senate in a 91-7 vote. Biden also tapped Jaime Lizárraga, a top aide to House Speaker Nancy Pelosi and a favorite of the Congressional Hispanic Caucus, for an open slot on the Securities and Exchange Commission. IT’S THURSDAY — We're almost there! Have a tip or story idea? Email us at kdavidson@politico.com or @katedavidson, or aweaver@politico.com or @aubreeeweaver .
| | | | A message from ExxonMobil: At ExxonMobil, we’re working to supply the energy the world needs today, while developing solutions for tomorrow. Heavy transportation needs big solutions. Innovations like renewable diesel made from plants could help reduce emissions from trucks by about 3 million metric tons per year, compared to conventional fuel. Learn more about how we’re helping society move toward a net-zero future at ExxonMobil.com/fuels. | | | | | | Treasury Secretary Janet Yellen testifies at House Financial Services on the FSOC annual report at 10 a.m. … Senate Banking hearing on energy efficient housing at 10 a.m. FHFA JOINS GLOBAL CLIMATE RISK GROUP — Our Katy O’Donnell: “The Federal Housing Finance Agency has become a member of the Network for Greening the Financial System, the regulator said Wednesday. “The international group of central banks and financial regulators formed in December 2017 to boost the financial system’s ability to manage climate-related risks. The FHFA, which regulates mortgage giants Fannie Mae and Freddie Mac, is the latest of several U.S. agencies that have joined, including the Federal Reserve.” STUDENT LOAN RATES SET TO RISE — Our Michael Stratford: “The cost of borrowing money from the federal government to pay for college will increase this summer even as the Biden administration considers canceling some existing federal student loan debt. “The interest rates on new federal student loans will increase by more than a percentage point from their current levels starting July 1 following the Treasury Department’s sale on Wednesday of 10-year notes, the government security to which the rates are tied.” SENATE CONFIRMS FHA COMMISSIONER, FED GOVERNOR — Our Katy O’Donnell: “The Senate on Wednesday confirmed Julia Gordon as the next commissioner of the Federal Housing Administration on a 51-50 vote, with Vice President Kamala Harris as the tiebreaker. The Senate also confirmed Philip Jefferson to be a member of the Federal Reserve’s Board of Governors on a 91-7 vote.”
| | | APRIL INFLATION REPORT CINCHES FED’S HALF-POINT RATE RISE PATH — WSJ’s Nick Timiraos: “Another strong inflation reading in April is likely to keep pressure on the Federal Reserve to continue raising rates in half-percentage-point increments at the central bank’s next two policy meetings and possibly beyond that. The rapid pace of U.S. inflation stayed strong last month, offering little reassurance to the Fed even though the year-over-year rate of growth slowed.” But did the Fed act too slowly? — NYT’s Jeanna Smialek: “Some Federal Reserve officials have begun to acknowledge that they were too slow to respond to rapid inflation last year, a delay that is forcing them to constrain the economy more abruptly now — and one that could hold lessons for the policy path ahead.” FED’S BOSTIC BACKS ‘MOVING MORE’ ON RATES IF INFLATION PERSISTS — Bloomberg’s Steve Matthews: “Federal Reserve Bank of Atlanta President Raphael Bostic said he is open to raising interest rates to restrict economic growth if inflation, which accelerated more than forecast in April, persists at elevated levels. “‘We are going to get our policy rate certainly to a neutral space where we are no longer providing accommodation,’ Bostic told the World Affairs Council of Jacksonville, Florida, Wednesday. ‘If inflation stays at high levels or levels that are too high — by too high, it’s really not moving back towards our 2 percent target — then I am going to be supporting moving more.’
| | | HAS BITCOIN BECOME JUST LIKE ANY OTHER TECH STOCK? — NYT’s David Yaffe-Bellany: “Bitcoin was conceived more than a decade ago as ‘digital gold,’ a long-term store of value that would resist broader economic trends and provide a hedge against inflation. But Bitcoin’s crashing price over the last month shows that vision is a long way from reality . Instead, traders are increasingly treating the cryptocurrency like just another speculative tech investment.” Coinbase is tumbling, too — Bloomberg’s Yueqi Yang: “Coinbase Global Inc. shares and bonds plunged to new lows, signaling investor skepticism about the prospects of the crypto exchange in a worsening bear-market.” HOW THE LEFT IS TACKLING CRYPTO — Our Bjarke Smith-Meyer: “To their backers, crypto assets offer a liberating, egalitarian alternative to conventional finance, allowing ordinary people to seize control of their finances away from big banks. “But this rhetoric is hitting a hard political reality of late: Widespread wariness toward crypto among policymakers on the left. And it's causing new political fault lines to open up in the never-ending debate over the merits of crypto.”
| | | |   | | | | | | David Lourie has joined the Managed Funds Association as vice president and senior counsel for regulatory affairs. Lourie was most recently associate general counsel and vice president at General Atlantic, where he worked closely on issues relating to ESG. (h/t POLITICO Influence)
| | | | DON'T MISS DIGITAL FUTURE DAILY - OUR TECHNOLOGY NEWSLETTER, RE-IMAGINED: Technology is always evolving, and our new tech-obsessed newsletter is too! Digital Future Daily unlocks the most important stories determining the future of technology, from Washington to Silicon Valley and innovation power centers around the world. Readers get an in-depth look at how the next wave of tech will reshape civic and political life, including activism, fundraising, lobbying and legislating. Go inside the minds of the biggest tech players, policymakers and regulators to learn how their decisions affect our lives. Don't miss out, subscribe today. | | | | | | | | The U.S. government posted a $308 billion surplus in April — a record for any month — as receipts nearly doubled from a year earlier amid a strong economic recovery from the Covid-19 pandemic, the Treasury Department said on Wednesday. — Reuters’ David Lawder Companies including Chevron Corp. , Quest Diagnostics Inc. and Ernst & Young LLP are pushing to narrow proposed cybersecurity rules from the Securities and Exchange Commission, in the private sector’s latest attempt to shape a growing array of regulations by Washington. — WSJ’s David Uberti and James Rundle Investment banks have raked in billions of dollars by feeding the frenzy for blank-check companies, and they have done so largely without risking any of their own money on hundreds of deals that have left many investors with punishing losses. — Reuters’ Jessica DiNapoli
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