Prices rose at an even faster rate in June than in May despite the government’s efforts to bring them down. We’ll also look at a key addition to the Federal Reserve and Sen. Joe Manchin’s (D-W.Va.) concerns about the latest attempt to revive Biden’s economic agenda.
But first, a new rule that may transform student loan interest.
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Despite government efforts, inflation hasn’t stopped
No matter what the federal government does, inflation keeps rising with no clear end in sight.
Consumer prices jumped 1.3 percent higher in June and a whopping 9.1 percent over the past 12 months, according to data released Wednesday by the Labor Department, despite the best efforts of the Biden administration and Federal Reserve to bring inflation down.
While a June surge in gas prices was responsible for much of the overall increase in inflation, prices grew across almost every sector.
That’s a troubling sign for the U.S. economy after the federal government scrambled to stop the highest annual inflation in more than four decades from getting worse.
“It’s going to be a long and tough road ahead. This is not going to come down very quickly,” said Derek Tang, co-founder and economist at research firm Monetary Policy Analytics.
“The hope was that inflation would start coming down on its own, but it looks more and more like it’s not going to happen. That’s why there’s so much worry,” Tang added.
Sylvan explains here.
Read more about the surge of inflation:
Five takeaways from the stunning inflation numbers
Manchin: Inflation ‘now poses a clear and present danger to our economy’
Democrats say reconciliation bill could help fight inflation
RAISING THE BARR
Senate confirms Michael Barr as top Fed bank watchdog
The Senate confirmed President Biden’s pick for a key Federal Reserve position on Wednesday with broad bipartisan support, giving the central bank a full board of seven governors for the first time since 2013.
The Senate approved Michael Barr to be a member of the Fed board and the Fed vice chair of supervision, with more than a dozen Republicans joining Democrats in support of the nomination.
Barr was confirmed to finish out the remainder of a term on the Fed board lasting through 2032 and a four-year term as the Fed’s pointman on financial regulations in two separate votes Wednesday, each ending 66-28.
As vice chair of supervision, Barr will be responsible for overseeing the Fed’s regulation of major banks operating in the U.S., including the stress tests conducted under Dodd-Frank for banks deemed “too big to fail.”
He will also play a critical role in the Fed’s approach to cryptocurrencies and stablecoins, which the central bank sees as both innovations as serious risks to financial stability.
Sylvan has the latest here.
PUMP THE BREAKS
Manchin pumps brakes: Bill ‘needs to be scrubbed much better’
Centrist Sen. Joe Manchin (D-W.Va.) on Wednesday pumped the brakes on negotiations with Senate Majority Leader Charles Schumer (D-N.Y.) over a budget reconciliation bill, warning that it “needs to be scrubbed much better” after a new report showed that inflation hit 9.1 percent in June.
Manchin told reporters Wednesday he’s not sure if he can agree to anything beyond the prescription drug reform component of the bill, which has already been sent to the Senate parliamentarian’s office and has the support of all 50 members of the Democratic caucus.
He said that “deficit reduction is going to be 50 percent” of the new revenue gained from prescription drug savings and higher taxes on wealthy Americans.
Manchin did not rule out including a provision to continue subsidies of health insurance plans provided under the Affordable Care Act
“Basically, take your time and make sure we do it and do it right. We can’t afford mistakes in the highest inflation we’ve seen in the last 40 years,” Manchin said.
Alexander Bolton has more here.
CHILL BILL CONCERNS
McConnell ultimatum endangers China competition bill
The fate of bipartisan legislation to boost U.S. competitiveness with China could be imperiled by political battles.
Senate Majority Leader Charles Schumer (D-N.Y.) aims to pass a party-line economic package to lower drug prices and raise taxes on high earners despite Senate Minority Leader Mitch McConnell’s (R-Ky.) threat to block the China-centric measure if Democrats move forward with a reconciliation bill.
The push and pull between Senate leaders could undermine legislation that would provide $52 billion in subsidies to restore domestic semiconductor manufacturing.
Manufacturers unveiled new U.S. chipmaking facilities this year, but they’re warning that they’ll roll back those plans if lawmakers don’t pass the bill before the August recess.
“There’s this constant tug of war between Schumer and McConnell on every issue, and this has somewhat gotten caught in the crossfire,” said Stewart Verdery, CEO of Monument Advocacy and a former Senate GOP aide.
Karl has more here.
Good to Know
The Federal Reserve’s rapid interest rate hikes are taking a serious toll on the housing market. Home prices and sales have fallen throughout the year as buyers recoil from rising mortgage interest rates — one of the first sectors of the economy affected by Fed rate hikes.
As the Fed boosts its baseline interest rate range, borrowing costs for consumers and businesses rise along the way. The average rate for a 30-year fixed-rate mortgage rose to 5.3 percent at the end of last week, according to Freddie Mac, up from
3.1 percent at the start of the year.
Here’s what else we have our eye on:
Members of the House Ways and Means Committee on Wednesday agreed that America is facing a housing crisis, but found little consensus on why, or what to do about it.
Democrats are putting pressure on the IRS to explain why two foes of the Trump administration were selected for a rare and intensive type of audit after being fired from their government posts.
Bank of America economists predicted that the United States will face a mild recession this year in a report released on Wednesday.
That’s it for today. Thanks for reading and check out The Hill’s Finance page for the latest news and coverage. We’ll see you tomorrow.
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