Two key federal elements of the US economy will appear before the US Senate Banking Committee and the House Financial Services Committee this week.
First up is newly minted Federal Reserve Chairman Kevin Warsh, who will visit the House Committee today and the Senate Committee tomorrow.
Warsh, selected by President Trump to replace the outgoing chairman, Jerome Powell, will speak to the Committee following a CPI report that indicates declining inflation – a key indicator for the economy and a driver of rate decisions. President Trump, a vocal advocate of lower interest rates, has raised questions as to whether or not Warsh will follow what markets are saying and perhaps raise rates – or bend to the President’s will. The report today may provide some breathing room for Warsh, who has indicated he will veer from past practices of messaging the direction of the Fed to waiting until the FOMC makes a decision. As this will be Warsh’s first trip to Capitol Hill as Chair, his prepared remarks and responses from Committee members will be keenly watched by financial services insiders.
As posted on the Fed’s website, Warsh explained that currently, the most important aspects of the economy are business investment, the rise of Artificial Intelligence, and the construction of data centers. He shared that investment in this sector increased by about 8% in the first quarter, and high-tech spending posted an “impressive growth” rate of nearly 25% over the four-quarter period.
On another note, Warsh messaged changes at the Fed as they review communications and current practices in pursuing its mandate. Warsh has created five task forces to review: the form and function of Fed communications, the Fed’s balance sheet policies, evaluate new data sources and consider methodological changes to improve, a survey on the pace, reach, and impact of new general-purpose technologies and jobs, and finally, whether inflation models provide a robust view of prices and outputs in the economy.
On Wednesday, the Consumer Financial Protection Bureau (CFPB) acting Director Russell Vought will deliver his semiannual report before the House Committee and return to the Hill on Thursday to do the same before the Senate Banking Committee. The agency has been beleaguered since its inception, created amid the dustup of the Great Recession and the ensuing reactionary legislation; it has taken on a diminished role during the Trump Administration. While his prepared testimony is yet to be published, it should be interesting to hear an update on his views of the agency’s mission. There is pending legislation in the House that will restructure the CFPB, make it more beholden to Congress, and modify its supervisory and enforcement authorities.
Both hearings will be livestreamed on each respective Committee’s websites.
