Plus: The $400,000 missile bringing down those balloons
â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â â [The Fisc]( Â Â By Yuval Rosenberg and Michael Rainey Happy Valentineâs Day! Budget geeks may be more excited about tomorrow, when the Congressional Budget Office is set to release its updated budget and economic outlook along with a fresh report on federal debt and the nationâs borrowing limit. Are your hearts aflutter too? Hereâs what you should know until then. Lael Brainard, the preident's new top economist (Reuters) Biden Taps Brainard and Bernstein for Top Economic Posts
President Biden on Tuesday named Federal Reserve Vice Chair Lael Brainard to lead the National Economic Council and said he intends to nominate economist Jared Bernstein, a longtime aide, as chair of the White House Council of Economic Advisers. Brainard, regarded as a leading progressive economist, had been No. 2 at the Federal Reserve since May 2022 and a Fed governor since 2014. She is âan economic heavyweight at the central bank, known for her meticulous and thorough preparation, and particular expertise on global economics,â says [Reuters](. âA bane of Wall Street, Brainard has also pushed the Fed to take more actions on requiring banks to account for the risks of climate change and has been the most high-profile supporter of a central bank digital currency, both of which have pitted her against both [Fed Chair Jerome] Powell and other senior colleagues in scope and ambition.â She will replace Brian Deese, who announced earlier this month that he would be leaving the White House. If confirmed by the Senate, Bernstein would replace Cecilia Rouse, who is returning to Princeton University after a couple of years as the top White House economist. She was the first Black American to serve in that position. âJared is a brilliant thinker and one of my closest and longest-serving economic advisers,â Biden said in a statement. âHe is an expert on worker empowerment and a worker-centric economic policy, which has long been the heart of my economic vision.â As the president reshapes his economic team, he also named Bharat Ramamurti, the deputy director of the National Economic Council, as an adviser for strategic economic communications and Heather Boushey, a member of the Council of Economic Advisers, to also serve as chief economist for his âInvest in Americaâ cabinet. Biden also tapped Joelle Gamble, chief economist at the Department of Labor, to be deputy director of the National Economic Council. The bottom line: Bidenâs picks are familiar players in the capital and will likely play key roles as the administration looks to implement the new infrastructure law and other major legislation passed over the last couple of years while also navigating risky budget and debt talks with House Republicans. Bringing Brainard over from the Fed leaves an important opening at the central bank as officials there look to tame inflation without driving the U.S. economy into a deep downturn. âIt likely means a key role remains unfilled for months at an especially tricky time for the central bank,â Reuters adds. Inflation Eases, but Only Slightly as More Interest Rate Hikes Loom
The annual rate of inflation continues to moderate, the U.S. Bureau of Labor Statistics [announced]( Tuesday, but the pace of price increases remains significantly elevated and may not be easing fast enough to prevent the Federal Reserve from clamping down even tighter on the U.S. economy. Consumer prices rose 0.5% in January on a monthly basis, while the 12-month inflation rate was 6.4%, the Bureau said. Housing costs, which rose by 0.7% on the month and 7.9% on the year, played a significant role in the results, providing about half of the inflationary boost seen in January. Energy (up 2% monthly and 8.7% annually) and food prices (up 0.5% monthly and 10.1% annually) also rose sharply. The price of eggs saw a particularly large jump, rising 8.5% in January and 70% over the last year to $4.82 a dozen on average â more expensive than a pound of ground beef or a gallon of gasoline. Core inflation â a measure closely watched by the Fed that leaves out volatile food and energy prices â rose 0.4% monthly and 5.6% from a year ago, with the annual rate continuing a downward trend that began in September. However, both numbers were higher than the expectations of 0.3% and 5.5% respectively. What the experts are saying: The numbers provide ammunition for both inflation hawks and doves. The latter will note that the 12-month rate of 6.4% was down from 6.5% the month before, continuing a string of reductions in the inflation rate since the peak of 9.1% was recorded in June. âInflation in America is continuing to come down, which is good news for families and businesses across the country,â President Biden said in a statement. âTodayâs data confirm that annual inflation has fallen for seven straight months.â Analysts at Bank of America said the report did little to change their outlook. âIn our view, there is not a lot of new information in this report,â they wrote in a research note. âToday's report did not drastically alter the risks around the policy outlook.â Hawks, meanwhile, are focused on the fact that the annual inflation rate remains well above the Fedâs target of 2%, while the monthly rate of 0.5% in January increased sharply from the 0.1% rate recorded in December, suggesting that the path ahead could be uneven at best, with no guarantees that inflation will be brought under control anytime soon. âInflation remained searingly hot in January, which is bad news for consumers,â [wrote]( Diane Swonk, chief economist at KPMG. âThe Fed has not yet beaten inflation. Brace for at least two more rate hikes.â Economist Edoardo Campanella of UniCredit Bank said that the January inflation report âdissipates hopes for a rapid disinflationary process. ⦠The Fed will likely see todayâs number as corroboration of its assessment that the economy is at the very early stages of whatâs likely to be a bumpy disinflation process. Bringing inflation sustainably to the 2% target will require tight monetary policy for some time.â In a speech Tuesday, Dallas Fed President Lorie Logan said the central bank may need to raise rates higher than expected. âWe must remain prepared to continue rate increases for a longer period than previously anticipated, if such a path is necessary to respond to changes in the economic outlook or to offset any undesired easing in conditions,â she [said](. The growing likelihood that the Fed will act more aggressively to contain inflation means that the odds of the central bank causing a recession are probably rising as well. âThis idea that we can get continued disinflation without a material slowdown in the economy has been the narrative the market has run with,â Priya Misra of TD Securities [told]( The New York Times. âBut that has come under pressure, and today reinforced it.â The bottom line: The latest inflation report supports the view that the Fed will raise interest rates again, probably by 25 basis points at its next meeting in March, and it could do so again at its following meeting in May. The new concern raised by Tuesdayâs report is that the Fed may take interest rates even higher and stay there for even longer than previously expected, raising the risk of recession along the way. Number of the Day: $439,000
The United States military has fired AIM-9X Sidewinder air-to-air missiles to down the alleged Chinese spy balloon and other mysterious flying objects spotted over Alaska, Michigan and Canada in recent days, but the first missile shot at an object over Lake Huron on Sunday missed its target and landed âharmlesslyâ in the water, the Pentagon said Tuesday. It was a somewhat expensive miss. Those Sidewinder missiles, produced by Raytheon Technologies, cost some $439,000 each, according to [Bloomberg News](. That figure is based on the Defense Departmentâs desire to procure 255 missiles for about $112 million in fiscal year 2023. âThe US does not disclose the exact number of such missiles in its arsenal, but itâs likely to be significant with the US Air Force receiving its [10,000th]( such missile in 2021,â Bloomberg reports. Defense experts have said the Sidewinder was the most effective choice for these missions. âWhile the Sidewinder wasnât designed for shooting down flying objects like balloons, they are cheaper and less likely to destroy payloads on the flying object that officials want to recover, unlike a radar-guided weapon like the AIM-120 AMRAAM medium-range missile,â Bloombergâs Low De Wei and Gregory Korte write, citing retired US Air Force Colonel Michael Pietrucha. On the other hand, [Timeâs Sanya Mansoor]( notes that the United States still needs to get a better sense of the threat involved from these flying objects and that âitâs unlikely that using Sidewinder air-to-air missiles at about $400,000 a pop fired from $150 million F-22 stealth fighters will be an economical response in the long term.â Ian Williams, deputy director of CSISâs Missile Defense Project, tells Time: âIf this is something weâre gonna start doing on the regular, we may want to look for more cost effective ways.â Quote of the Day: McConnell Talks Social Security, Medicare
âLet me say it one more time: There is no agenda on the part of Senate Republicans to revisit Medicare or Social Security. Period.â â Senate Minority Leader Mitch McConnell (R-KY), reiterating Tuesday that Senate Republicans donât intend to push for reforms to Medicare or Social Security. McConnell was pushing back on renewed attacks President Biden targeting plans floated by other Republicans that could affect Social Security and Medicare. McConnell had dismissed one such plan from Sen. Rick Scott (R-FL) shortly after it was released last year. --------------------------------------------------------------- Send your feedback to yrosenberg@thefiscaltimes.com.
--------------------------------------------------------------- News - [Yellen Describes âEconomic Catastropheâ That Will Result if Debt Limit Isnât Raised]( â CBS News
- [Prices Are Falling, but Not for Food. Groceries Remain a âPain Pointâ]( â CBS News
- [El-Erian, Rogoff Say Itâs Too Late to Fix Too-Low Inflation Target]( â Bloomberg
- [Hereâs Where Inflation Is Easing in the US]( â Bloomberg
- [Lael Brainardâs White House Move Leaves Major Hole at the Fed]( â Washington Post
- [Republicans Say In-Person Congress Will Help Bipartisanship; Not Everyone Agrees]( â Roll Call
- [Biden Administration Announces $231 Million to Fund Red-Flag Laws, Other Gun Violence Prevention]( â The Hill
- [More Than 1 in 6 Americans Now 65 or Older as U.S. Continues Graying]( â Washington Post Views and Analysis - [Why the McConnell-Scott Feud Isn't Ending Any Time Soon]( â Leigh Ann Caldwell and Theodoric Meyer, Washington Post
- [Three-Quarters of House GOPs Endorsed Social Security Cuts Last Year]( â Josh Marshall, Talking Points Memo
- [The G.O.P.âs Long War Against Medicare and Social Security]( â Paul Krugman, New York Times
- [Why the GOP Squabble Over Social Security and Medicare Is About Power More Than Policy]( â Philip Elliott, Time
- [Mitch McConnell Offered a Debt-Ceiling Fix in 2011. We Should Do It Now]( â Sens. Jeff Merkley (D-OR) and Tim Kaine (D-VA), Washington Post
- [Is Rick Scott Looking to Sunset His Senate Seat?]( â Ed Kilgore, New York
- [The Trouble With Sunsets]( â Paul Krugman, New York Times
- [This Inflation Report Will Lead to Bad Fed Decisions]( â Karl W. Smith, Bloomberg
- [Inflation Is Catching Its Breath. Should We Worry?]( â John Authers, Bloomberg
- [Donât Believe What Anyone Says About the Economy. Including Me]( â Catherine Rampell, Washington Post
- [A Land Tax Wonât Make Cities More Affordable]( â Tyler Cowen, Bloomberg Copyright © 2023 The Fiscal Times, All rights reserved.
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