Despite Ukraine, Fed Pushes Ahead on Rate Hike

Plus - Biden's 'Buy American' plan ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ [The Fisc](   By Michael Rainey Our deepest sympathies are with the people of Ukraine following the brutal invasion of their country by Russian forces Thursday. President Joe Biden announced “additional strong sanctions” on the aggressor country this afternoon, taking aim at major banks, state-owned enterprises and national elites. “Putin is the aggressor,” Biden said. “Putin chose this war. And now he and his country will bear the consequences.” Here's what else is going on. --------------------------------------------------------------- Fed Officials Say Interest Rate Hike Still on Track Leaders at the Federal Reserve said Thursday that they expect to start raising interest rates next month as planned, despite the increased economic risk and uncertainty generated by Russia’s invasion of Ukraine. “Barring an unexpected turn in the economy, I believe it will be appropriate to move the funds rate up in March and follow with further increases in the coming months,” Cleveland Fed President Loretta Mester [said](. The course of events in Ukraine will likely influence the pace at which rates are increased, Mester added. Atlanta Fed President Raphael Bostic said that the central bank has its own estimates of how the Russian invasion will affect the economy. “If the numbers come in close to that I think that can we continue with our liftoff plan,” he said. “We’ll just have to see where things go. I know we have seen over the past several weeks that oil prices have increased dramatically, as have natural gas. That could have ripples.” In a note to clients, Goldman Sachs economists Joseph Briggs and David Mericle said the level of inflation in the U.S. makes it more likely that the Fed will plow ahead. “The current situation is different from past episodes, when geopolitical events led the Fed to delay tightening or ease, because inflation risk has created a stronger and more urgent reason to tighten today than existed in past episodes,” they wrote. Quote of the Day “Treasuries provide protection in an environment like this. I think recession risks are rising, and there has never been a recession in modern history where long-term Treasuries didn’t make you money.” — Economist David Rosenberg, talking to [The New York Times]( about the role of Treasury bonds during difficult economic times. The interest rate on the 10-year Treasury fell below 2% Thursday, to 1.96%, as investors sought safe havens amid growing international tensions. Number of People on Unemployment Hits 52-Year Low New jobless claims fell by 17,000 to 232,000 last week, the Labor Department announced on Thursday. The four-week average also fell, down 7,250 to 236,250, indicating that businesses continue to recover from the omicron wave of the coronavirus during the holidays. The number of people continuing to collect jobless aid also moved lower, decreasing by about 112,000 in the week ending February 5. In all, about 1,476,000 Americans were collecting unemployment benefits – the lowest number since 1970. “Demand for labor is strong and there are no reasons to believe that this will change any time soon, barring another wave of a new COVID variant,” analyst Thomas Simons and Aneta Markowska of Jefferies Financial Group [said]( in a note. “We expect that both initial and continuing claims will continue to grind lower in the weeks ahead.” White House to Issue New ‘Buy American’ Guidelines The Biden administration announced Thursday that it will be taking steps to strengthen the supply chain in the U.S., including new rules governing the federal government’s purchase of American-made goods. “The White House Office of Management and Budget will soon issue a new Buy American rule that will create a new category of critical products that will be eligible for enhanced price preferences,” the White House said in a [statement](. “By allowing the Federal government to pay an additional premium for critical domestic-made products and components essential to the Administration’s supply chain resiliency strategy, the new rule will create a steady source of demand that will help catalyze domestic production and bolster thin supply chains.” The announcement comes a year after President Joe Biden signed an executive order directing the federal government to look for ways to improve the U.S. supply chain. The White House released a [report]( Thursday laying out the conclusions of the analysis, as well detailed reports on the issue from seven cabinet agencies, including Defense, Energy and Commerce. New State and Local Tax Deduction Plan Takes Shape Despite resistance from critics across the political spectrum, a handful of blue-state lawmakers are continuing to push for an increase in the state and local tax (SALT) deduction. An earlier effort to do so was included in the Build Back Better bill that Democrats have largely abandoned, but now Democratic Reps. Tom Malinowski of New Jersey and Katie Porter of California have offered a revised version that would cost less while still providing significant relief to middle- and upper-middle-class families living in high-tax jurisdictions. The proposed plan would eliminate the current $10,000 cap on the SALT deduction for households earning less than $400,000 a year. Households earning above amount would face a $60,000 cap on their deduction, with the cap shrinking as incomes rise and phased out entirely above $1 million. Taxpayers claiming the deduction would also have to declare that they are not billionaires. The plan would raise about $150 billion over 10 years, the lawmakers say – not as much as the current law, but enough to cover the cost of adding hearing and vision benefits to Medicare, which comes with an estimated $120 billion price tag over a decade. “When I first ran for congress, I promised to right the wrongs of the 2017 GOP tax bill by restoring the SALT deduction for my middle-class constituents,” Malinowski said in a statement. “This is a win-win approach that we hope will produce compromise on the SALT issue.” Whatever its appeal, though, the plan is not expected to advance. “The SALT plan is unlikely to be taken up in Congress anytime soon,” Bloomberg’s Laura Davison [wrote](. --------------------------------------------------------------- Please tell your friends they can [sign up here]( for their own copy of this newsletter. --------------------------------------------------------------- News - [Russia Invades Ukraine on Many Fronts in ‘Brutal Act of War’]( – Associated Press - [Biden Ramps Up Russia Sanctions as West Fears Fall of Kyiv]( – Bloomberg - [New U.S. Sanctions on Russia Mainly Hit Banks, Miss Energy Sector]( – Politico - [Five Takeaways From Biden’s Speech on Russia’s Invasion of Ukraine]( – Bloomberg - [World Leaders Move to Slap Sanctions on the Kremlin]( – Associated Press - [Biden Suggests US Will Release Oil From Reserves ‘As Conditions Warrant']( – The Hill - [Biden, Bipartisan US Lawmakers Condemn Russia for Escalation in Ukraine]( – Washington Post - [White House Spokesman Calls Trump, Putin ‘Pigs’ Who ‘Hate What America Stands For']( – The Hill - [Inflation Threatens to Erode Impact of $1 Trillion Infrastructure Law]( – Wall Street Journal - [COVID-19 Vaccine Sales Push Moderna to $12 Billion Profit in 2021]( – Associated Press - [Troubled Littoral Ship Still Can’t Perform Mission, GAO Says]( – Bloomberg Views and Analysis - [The West Must Show Putin How Wrong He Is to Choose War]( – Richard Haass, New York Times - [America Could Have Done So Much More to Protect Ukraine]( – Alexander Vindman, The Atlantic - [Putin’s War Reminds Us Why Liberal Democracy Is Worth Defending]( – Fareed Zakaria, Washington Post - [Six Early Thoughts on Russia's Invasion of Ukraine]( – Jonathan Bernstein, Bloomberg - [How to Beat Putin With Natural Gas]( – Kenneth C. Griffin and Niall Ferguson, Wall Street Journal - [Why Biden’s Sanctions Won’t Stop Putin]( – Kevin T. Dugan New York - [Congress Passed Up an Obvious Policy Tool to Fix Wealth Inequality]( – Washington Post Editorial Board - [Do Democrats Have a Technocrat Problem?]( – Paul Krugman, New York Times Copyright © 2020 The Fiscal Times, All rights reserved. You are receiving this newsletter because you subscribed at our website or through Facebook. The Fiscal Times, 399 Park Avenue, 14th Floor, New York, NY 10022, United States Want to change how you receive these emails? [Update your preferences]( or [unsubscribe](