- Beige Book will keep pressure on Fed to discuss QE tapering
- Biden holds bipartisan infrastructure talks again today as he runs past his original deadlineÂ
- U.S. Covid pandemic continues to fade with new infections falling to 14-month low
Beige Book will keep pressure on Fed to discuss QE tapering — Today’s Beige Book report will likely report booming economic conditions in some sectors of the U.S. economy. That will keep pressure on the Fed to continue its warnings about QE tapering. The Fed needs to reassure the bond market that it will not let a booming economy push inflation out of control.
The markets were surprised to hear from the April 27-28 FOMC meeting minutes, released on May 19, that “a number” of FOMC members suggested that discussions might have to begin at some point on QE tapering.
In the past two weeks, the Fed has been running what looks like a planned PR campaign with warnings every day or two from various Fed officials that talks about QE tapering are coming soon. Just yesterday, St. Louis Fed President Bullard said the U.S. jobs market is “tighter than it looks” and the Fed is close to launching a discussion about QE tapering.
The markets are now braced for the possibility that the talks about QE tapering could begin as soon as the next FOMC meeting on June 15-16. The announcement of QE tapering could come at one of the following two meetings on July 27-28 or Sep 21-22. Fed Chair Powell could also effectively announce a specific timeline for QE tapering at the Fed’s August Jackson Hole conference.
The markets are still not expecting the Fed’s first rate hike until early 2023, according to the federal funds futures market and the 3-month Eurodollar futures market.
Biden holds bipartisan infrastructure talks again today as he runs past his original deadline — President Biden today will meet today with Senator Capito, the leader of the small group of Republican Senators looking for a bipartisan infrastructure deal. Mr. Biden originally set a deadline of Memorial Day for significant progress on a bipartisan infrastructure bill, but that deadline is now past.
Meanwhile, the House continues its process of writing an infrastructure bill that resembles President Biden’s $2.25 billion American Jobs plan. A House committee next Wednesday is due to mark up a surface transportation bill, imposing somewhat of a deadline for progress between the White House and the small group of Republican Senators.
The odds for a bipartisan infrastructure bill continue to be virtually nil since the two sides are tens of billions of dollars apart. Mr. Biden said he would be willing to bring his package size down to $1.7 trillion from $2.2 trillion. The group of Republican Senators raised the nominal size of their package to $1 trillion, but that was not all new money.
In addition, Republicans are relying on user fees and unspent pandemic aid money for financing the package, which is a non-starter for Democrats who don’t want to put user fees on people making less than $400,000 and instead plan to raise corporate taxes to pay for the plan.
Mr. Biden apparently intends to continue the bipartisan talks since they at least have the key side benefit of placating moderate Democratic Senators such as Democratic Senator Manchin, who is demanding a maximum bipartisan effort.
While the bipartisan talks go around in circles, House Democrats are writing President Biden’s American Jobs plan into a legislative bill. Speaker Pelosi has set an informal deadline of the 4th of July for the House to pass that bill, which is only a month away. Senate Majority Leader Schumer has said that the Senate plans to consider the infrastructure bill in July.
U.S. Covid pandemic continues to fade with new infections falling to 14-month low — The Covid pandemic in the U.S. continues to fade. The 7-day average of new daily U.S. Covid infections on Monday fell to a new 14-month low of 17,305, the lowest level since two months into the pandemic in late March 2020. The 7-day average of daily U.S. Covid deaths on Monday of 577 deaths was just mildly above last week’s 14-month low of 532 deaths.
The 7-day Covid infection rate is now down by -93% from the peak of 250,558 seen earlier this year in January. The fading pandemic is due to the sharp increase in vaccinations and also to a general seasonal decline in respiratory viruses. The CDC reports that 40.9% of the total U.S. population has now been fully vaccinated, and 50.8% have received at least one dose.
Bloomberg reports that the U.S. has administered an average of 1.23 million doses per day in the last week. That is well below recent levels above 2.0 million, but is still high enough to make steady progress in getting the U.S. population vaccinated. Bloomberg says that it will take another 5 months at the current vaccination rate to get 75% of the U.S. population vaccinated.
There is good news on the global pandemic front, with India’s Covid daily infection rate plunging by more than half in the past several weeks to about 155,000 from the early-May global record of 395,000.
