Fed Week Ahead, War Continues

L . Thomas Block

After a week that saw the first step towards the Senate confirming Kevin Warsh to succeed Jerome Powell as Federal Reserve Chair, on Friday the Justice Department made the dramatic announcement that it would drop its criminal investigation of Powell. It had become clear during the hearings that continuing the investigation would make a speedy confirmation of Warsh difficult, if not impossible.  However, putting an end to the investigation should allow for the Senate to move expeditiously on Warsh’s confirmation.

Next Wednesday is the Federal Open Market Committee’s meeting. The Justice Department’s decision means that this will likely be the last rate-setting meeting chaired by Powell, as his term ends on May 15.  After the coming FOMC meeting, the Committee is next scheduled to convene on June 16-17.

Mideast War

The war in Iran continues with mixed messages from Tehran and DC.  The cease-fire extension declared by President Trump seems to have stopped the bombing, but hostilities on the seas continue, with both sides stopping ships carrying Iranian oil or moving through the Strait of Hormuz.  The pressure on energy prices continues largely unabated, and neither side appears to have an exit strategy. 

President Trump is under growing pressure from Congressional Republicans to end the war that polling shows to be unpopular, and midterm election prospects for Republicans continue to decline.  Although its legal status is still being disputed, this past week saw Virginia voters approve a new Congressional map which tilts the field towards Democrats.  This move by Virginia is on top of the action in California that also shifted Congressional districts to favor Democrats.  There are still several months for the electoral outlook to change, but an end to the war seems like an essential step if the Republicans have any hope of reversing current trends.

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