Yellen Considers Raising Rates Short Term, Senate Confirms Treasury Secretary

February 15, 2017
Senate confirms Steven Mnuchin as new Treasury secretary; Federal Reserve Chair Janet Yellen Says Central Bank Will Consider Raising Short-Term Interest Rates; Pilot program could fund home-based assistance for some Medicare patients; Producer Price Index (PPI) posts largest gain in wholesale inflation since 2012; Small business optimism index rose in January to highest level since December 2004.

Policy Watch

  • Senate confirms Steven Mnuchin as new Treasury secretary. The Senate confirmed Steven Mnuchin to be President Trump’s Treasury secretary on Monday evening. Mnuchin was confirmed 53-47, with one Democrat joining Republicans in approving the nomination. Sen. Joe Manchin (D-W.Va.) was the only member of the Democratic caucus to help Mnuchin get over a procedural hurdle during an early Friday morning vote and the only Democrat to vote for final confirmation. [The Hill]
  • Federal Reserve Chair Janet Yellen Says Central Bank Will Consider Raising Short-Term Interest Rates. In a testimony to Congress on Tuesday, Federal Reserve Chairwoman Janet Yellen signaled that the central bank would consider increasing short-term interest rates at its next policy meeting in March. During her presentation of her semiannual monetary policy report to the Senate Banking Committee, Janet Yellen said that if job gains and rising inflation continue to improve as the Fed expects, an increase in the benchmark federal-funds rate likely would be appropriate “at our upcoming meetings.” Yellen commented on the largely upbeat picture of the U.S. economy, noting job gains in recent months and higher wage growth in recent years, “a further indication that the job market is tightening.” However, she also noted “considerable uncertainty” about the economic outlook. These sources of uncertainty include possible changes in U.S. fiscal and other policies, productivity growth, and developments abroad. [WSJ]
  • Pilot program could fund home-based assistance for some Medicare patients. Senators Chuck Grassley (R-Iowa) and Ben Cardin (D-Md.) are pushing legislation to give the Centers for Medicare and Medicaid Services (CMS) the authority to test potential savings from offering home and community-based care to a group of Medicare beneficiaries 65 and older. The demonstration would provide data on state and federal savings from supporting seniors aging in place by helping with their diet, transportation for medical care and providing relief for family caregivers. The pilot would be included in five commercial Medicare Advantage plans and cover up to 5,000 beneficiaries. The program would be allocated $3 million in seed money that would not impact the budget. Grassley cited an estimate that delaying or preventing hospital or nursing home admissions for 5,000 seniors could save about $60 million over the course of four years. Expanding Medicare and upfront costs may be difficult considering the ongoing debate over discussions to repeal and replace ObamaCare and Republicans’ desire to cut healthcare costs. [The Hill]

Economic Indicators & News

  • Producer Price Index (PPI) posts largest gain in wholesale inflation since 2012. Inflation at the U.S. wholesale level posted the biggest gain in January since 2012, propelled by rising gasoline prices. The Producer Price Index jumped 0.6% in January, the government said Tuesday, which marked the largest advance since the fall of 2012. Economists polled by MarketWatch had estimated a 0.3% gain. Over the past 12 months, wholesale costs have risen 1.6%, but as recently as one year ago, they were negative. The recent rise in wholesale prices, similar to the decline in 2015, has been accelerated by a rebound in the cost of oil. Wholesale gas prices surged nearly 13% in January. Margins for retailers also increased sharply in January, though it is a volatile category that changes sharply from month to month. If food, energy and retail margins are excluded, the more stable core PPI index rose a smaller 0.2%. So-called core producer prices have climbed 1.6% in the past year, down from a two-year high of 1.8% two months ago. [MarketWatch]
  • Small business optimism index rose in January to highest level since December 2004. Small business optimism rose again in January to its highest level since December 2004, according to the monthly National Federation of Independent Business (NFIB) Index of Small Business Optimism. The Index reached 105.9 in January, an increase of 0.1 points. The gain follows the largest month-over-month increase in the survey’s history. Five of the Index components increased, while five decreased. Many held near their record high, according to NFIB. [NFIB]

PENN WHARTON PPI
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