Expected Rate Hike From Fed, New Congressional Spending Proposal

Policy Watch

• Congress to unveil 1.2 trillion-dollar spending proposal. Congress is on the verge of unveiling a 1.2 trillion-dollar spending package which would fully fund the government, ending the series of stopgap Continuing Resolutions and budget squabbles, until the FY 2019 budget deadline in September 2018. The new bill could push 2018 budget deficits to $800 billion, making it a tough pill to swallow for some conservative fiscal hawks, especially during economic good times. That reality gives Democrats leverage to include some of their objectives, like funding for the “Gateway” New York-to-New Jersey infrastructure project, which the President opposes. Lawmakers have attached a variety of initiatives to the “must pass” bill, including anti-abortion measures, gun safety and “arming teachers” grants, and other language. Regardless, Congress has five days to pass a bill before facing another government shutdown. [Reuters]
• Senate Intelligence Committee schedules election security hearing. Senate Intel Committee has scheduled an open hearing on the topic of election security, a politically fraught topic considering the upcoming 2018 midterms and Russian interference in the 2016 presidential election. The hearing will likely address efforts by the Department of Homeland Security to engage with states, which each run their elections independently, and security for election databases, voting machines, etc. The intelligence committee is also expected to release a report on the state of election security, which the Wall Street Journal reported would be released in March of 2018. [The Hill]

Economic Indicators & News

• Federal Reserve expected to raise rates Wednesday. New Federal Reserve Chair Jerome Powell heads into this week with his first interest rate increase, with rates expected to rise from 1.5 to 1.75%. Largely viewed as a continuation of the policies of Janet Yellen, former Fed Chair, economists and traders view Powell as focused on prolonging the economic recovery and building consensus amongst the other Federal Reserve governors. One key indicator of whether Powell will adjust current policy is whether the central bank alters its neutral rate of interest, the projected rate that neither stimulates nor suppresses the economy. The current rate is a median of 2.75, but if the figure were to increase in Wednesday’s economic report, that might indicate the Fed will try to raise rates for longer, allowing more room to slash rates in the event of a downturn. [CNBC]