| | | | |  | | By Sudeep Reddy | Presented by Citi | | 
Cars drive past the Federal Reserve building today in Washington, DC. | Anna Moneymaker/Getty Images | POWELL’S PUNCH — Just weeks before a presidential election, Federal Reserve Chair Jerome Powell will exit the central bank’s two-day policy meeting on Wednesday and implicitly declare victory against the most contentious economic issue of the campaign. The battle against a historic burst of inflation — the fastest increases in consumer prices in four decades — will be over. It’s going to be an uncomfortable moment for Donald Trump. The former president is expected to rail against the Fed, discarding the longstanding principle of Fed independence (as he did while sitting in the White House) to argue that the central bank is helping Vice President Kamala Harris’s campaign by cutting interest rates so close to an election. Never mind that inflation has finally returned to pre-pandemic rates, after plummeting during the pandemic crisis and soaring in the recovery. Never mind that some of Trump’s own White House advisers see rate cuts as justified given a deteriorating labor market. Never mind that Trump has said interest rates would come down under a Trump presidency — presumably after November, when he’d want looser policy to help his own economic record if he were steering the nation. A central bank cutting interest rates before an election is certainly rare in recent decades — and usually not a good sign for the party controlling the White House. It happened once in September 1992 as the economy struggled to recover from the 1990-91 recession. It came in a big way in 2008 as layoffs surged and markets tumbled during the financial crisis. In both cases, Republicans lost control of the Oval Office. But the Fed’s actions may help the Harris campaign on one point: by sending a message that sky-high inflation is yesterday’s problem. The Biden administration’s approval ratings worsened noticeably once inflation took off in 2021 and plagued his reelection efforts. Harris herself has repeatedly sidestepped direct questions about inflation to focus on other pieces of her agenda. Trump in recent weeks has struggled to land a coherent and consistent message about inflation — or much else about the current state of the economy. He could highlight the deterioration in job openings and the rise in unemployment, as every economist has noted. He could scream loudly about an impending recession, as plenty of other commentators have done. He could relentlessly remind voters about still-high prices in dozens of areas and trigger the anxiety they’ve felt in recent years as prices soared. Whenever he’s tried this, however, the former president rarely dwells on everyday concerns and quickly moves on. The latest facts on the ground aren’t quite cooperating with Trump’s inflation messaging, either. Gas prices are easing as oil prices dip on fears of slower global demand. Mortgage rates are finally easing for homebuyers on the sidelines. Wednesday’s rate cut will come as job growth continues (though at a slower pace), the unemployment rate remains historically low (though noticeably higher in recent months) and the stock market hovers around record levels. The most prominent foundation of Trump’s economic policy centers on the threat of tariffs, creating more anxiety about inflation among many businesses — and the central bank. Leading Republican lawmakers, perhaps surprisingly, were already stating the obvious ahead of the Fed meeting and giving the Fed a pass for bringing rate cuts just before an election. “This economy — particularly the labor market — is softening very, very, very quickly,” Sen. John Kennedy (R-La.) told my POLITICO colleagues last week. House Financial Services Committee Chair Patrick McHenry (R-N.C.) called Powell, the Fed chief, “one of the greats” and trusts him for keeping politics out of central bank decision-making. “The Fed should act in the way that the data indicates they should act — period,” he said today. After watching the data worsen, Powell has indicated he’s determined to prevent more damage to the job market. The central bank has a long-standing principle inside the building: politics be damned. Waiting longer than merited, simply to satisfy a political calendar, would mean relinquishing the Fed’s independence and its mandate to rescue a faltering economy without regard to politics. The result is that Trump is likely to show again that he’s uninterested in keeping the Fed out of politics. He may be better off reading between the lines of Powell’s remarks — as other Republicans will — to latch onto what’s not going so well in the economy. Welcome to POLITICO Nightly. Reach out with news, tips and ideas at nightly@politico.com. Or contact tonight’s author at sreddy@politico.com or on X (formerly known as Twitter) at @Reddy.
| | A message from Citi: Over one-third of suppliers reported focusing on nearshoring in 2023. With global flows and geopolitics continuing to change, supply chain resilience has proven to be critical – and as a result, nearshoring is gaining further momentum. Many companies are executing nearshoring strategies to diversify their supply chains, reduce risks associated with distant manufacturing hubs, and move production closer to their end-consumers. Learn more in the Citi GPS Report, The Future of Global Supply Chain Financing. | | | | | — Republicans block Democratic bill on IVF protections: Senate Republicans blocked passage today of a Democratic bill that would federally protect access to in vitro fertilization and require public and private insurance coverage of IVF and other fertility treatments. Just as they did when they voted down the same bill earlier this year, Republicans argued the measure was both unnecessary and problematically broad, and dismissed it as a political stunt they felt no pressure to endorse. “It’s a messaging opportunity,” said Sen. Mitt Romney (R-Utah), adding that the bill has unspecified “poison pills that Republicans find unacceptable.” — DeSantis floats charging apparent, would-be Trump assassin with attempted murder: Florida Gov. Ron DeSantis today kicked off a state investigation into the apparent assassination attempt against former President Donald Trump, and raised the possibility that it might result in charging the suspect with attempted murder. The Republican governor promised to pursue the “most serious charges that are on the books to hold this guy accountable.” Should those charges materialize — and the suspect is found guilty — it could result in a sentence of life in prison. — Johnson ‘looking at’ potential new Secret Service funds in short-term spending bill: Speaker Mike Johnson said today that House Republicans are “looking at” potentially adding new funding for the Secret Service into a short-term funding bill — though he appeared skeptical that more money is the solution for the agency. “We’re looking at that. I think it’s a matter of manpower allocation. We don’t want to just throw more money at a broken system. We’re looking at all aspects of it, and we’ll make the right determination,” Johnson told reporters when asked if he thought there was a need to include more Secret Service funding in the stopgap spending bill, known as a continuing resolution or CR.
| | | | DON’T MAKE NEWS — Kamala Harris largely stuck to her script during an interview today with a panel of National Association of Black Journalists members, carefully parrying questions about hot-button issues like the war in Gaza, reparations and other critical election topics. It was the vice president’s second high-profile national media interview since announcing her presidential run, and though she spoke passionately at times about abortion rights and other policies, she did not break much ground or stray far from her talking points during the near hour-long conversation. During Harris’ interview in Philadelphia today, at the public radio station WHYY’s headquarters, she laced into Trump for spreading a conspiracy theory about Haitian immigrants eating pets in Ohio, saying that he was “spewing lies that are grounded in tropes that are age-old.” FEELING SALTY — Former President Donald Trump indicated today that he’d lift a cap on deductions for state and local taxes that he signed into law as part of his 2017 tax package. “I will turn it around, get SALT back, lower your Taxes, and so much more,” Trump said in a Truth Social post previewing a campaign rally he is set to hold Wednesday on Long Island. The move would appeal to voters in high-tax states such as New York, California and New Jersey, who saw many of their tax bills go up as a result of the $10,000 deduction cap. DON’T WAIT — In New York, which has become a key battleground state for control of the House, Republicans are pushing early voting. It’s a significant departure from Republican concerns about early and mail-in voting that arose in 2020. Rep. Elise Stefanik is leading that push in New York, which mirrors GOP efforts in other battleground states. She’s committing at least $1 million to drive up early GOP turnout in an effort to boost five of her congressional colleagues and help elect two new ones.
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People cast their ballots at a community center in Potomac, Md. in 2018. | Brendan Smialowski/AFP via Getty Images | DEMOCRACY IN DECLINE — Last year had the worst decline in credible elections and parliamentary oversight in almost a half-century, driven by government intimidation, foreign interference, disinformation and the misuse of artificial intelligence in campaigns, an organization promoting democracy said today. The International Institute for Democracy and Electoral Assistance, or International IDEA, said election credibility is threatened by turnout dropping and results are increasingly being contested. One in three elections are being disputed in some way, it said. The organization with 35 member governments said the average percentage of the voting age population who actually cast ballots has declined from 65.2% in 2008 to 55.5% in 2023. “Elections remain the single best opportunity to end democratic backsliding and turn the tide in democracy’s favor,” said International IDEA’s Secretary-General, Kevin Casas-Zamora. “The success of democracy depends on many things, but it becomes utterly impossible if elections fail.” The Stockholm-based organization said its Global Report on the State of the Democracy, which measures democratic performance in 158 countries from 1975 till today, found that 47% of countries have experienced a decline in key democratic indicators over the past five years, marking the eighth consecutive year of global democratic backsliding. EXPLODING PAGERS — Hundreds of handheld pagers exploded near simultaneously across Lebanon and in parts of Syria today, killing at least eight people, including members of the militant group Hezbollah, and wounding the Iranian ambassador, government and Hezbollah officials said. Lebanon’s foreign ministry has condemned what it called an “Israeli cyber attack.” The ministry said in a statement that it is preparing to submit a complaint to the U.N. Security Council. “This dangerous and deliberate Israeli escalation is accompanied by Israeli threats to expand the scope of the war against Lebanon on a large scale, and by the intransigence of Israeli’s positions calling for more bloodshed, destruction and devastation,” it said.
| | | | $1 billion The price that Alaska Airlines will acquire Hawaiian Airlines for, after the Biden administration dropped its concerns about the deal. The airlines agreed to certain conditions, including continuing to offer its current service from Hawaii to the U.S. mainland. | | | | | LOBBYING LOGIC — When immigrants from India first began to arrive en masse to the United States in the 1960s, they were mostly from “upper castes” — wealthy in India and moving to the U.S. Many of them were Hindu. And as the Indian American population has grown — totaling around 4.6 million people — they’ve been very economically successful. A 2020 Carnegie Endowment Study found that on average, Indian Americans enjoy a standard of living twice that of other Americans. But some caste-based discrimination has found its way into the U.S. as well. Pockets of Indian Americans are much less successful than others. And wealthy Indian Americans have grown their political power, and have at times used it to attempt to maintain that advantage — like earlier this year, when Indian American lobbyists convinced California Gov. Gavin Newsom to veto a bill that banned discrimination on the basis of caste. In Harper’s, Andrew Cockburn reports on the growing influence that a small number of Indian Americans have on American politics.
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On this date in 1992: Then-Democratic presidential hopeful Bill Clinton (center) waves to supporters at a rally in Denver. At his side are then-Colorado Gov. Roy Romer (left) and then-Denver Mayor Wellington Webb. | Stephan Savoia/AP | Did someone forward this email to you? Sign up here.
| | A message from Citi: Over one-third of suppliers reported focusing on nearshoring in 2023.
With global flows and geopolitics continuing to change, supply chain resilience has proven to be critical. As a result, many companies are finding it more relevant to execute a nearshoring strategy, shifting their manufacturing and production operations closer to their primary markets. Benefits associated with nearshoring include helping to diversify supply chains, bolster resilience, and reduce risks associated with distant manufacturing hubs.
Explore this and other supply chain trends in the Citi GPS Report, The Future of Global Supply Chain Financing. | | | | | | | Follow us on Twitter | | | | Follow us | | | | |
