Update 831 — CPI’s Elusive Soft Landing;
FTC Pick Named; FSOC, SEC’s Stalled Out
This week’s CPI report for November showed the road back to the Fed’s two percent target inflation rate remains bumpy – but the new data is unlikely to push the Fed to readjust its downward interest rate trajectory – though Donald Trump acknowledged that grocery prices will be hard to bring down. As to whether his tariffs might also cost consumers more: “I can’t guarantee anything.”
This week, Trump nominated Federal Trade Commissioner Andrew Ferguson to replace Lina Khan as its chair. Nominations for the SEC and the Financial Stability Oversight Council (FSOC) have been stalled out by the Senate Banking Committee and will not come to a vote. Rep. French Hill (R-AR) was tapped yesterday to Chair House Financial Services in the next Congress. These and other developments this week are covered below.
Good weekends all…
Best,
Dana
Headline
CPI Inflation Rises to 2.7% in November
Inflation has cooled but remains higher than the Federal Reserve would prefer and the path to lower inflation remains bumpy — the key takeaway from the November Consumer Price Index (CPI) report released on Wednesday.
Inflation, as measured by the CPI, rose to 2.7 percent on an annualized basis last month, up from 2.6 percent in October and 2.4 percent in September. Meanwhile, core CPI – which excludes food and energy prices – rose 3.3 percent on an annualized basis in November, on par with the 3.3 percent annualized increases in core CPI in each of the prior two months. The figures mark the second consecutive increase in headline inflation and the third consecutive month in which core inflation has remained steady on an annualized basis. Both headline and core had been moving down earlier this year but data over recent months suggests that that near-steady progress has stalled.
Source: Council of Economic Advisers
Consumer prices rose by 0.3 percent on a monthly basis in November, slightly up from the 0.2 percent increase in consumer prices on a monthly basis in each of the four months prior, while core prices rose by 0.3 percent on a monthly basis, just as it had in each of the three months prior.
The shelter index – a measure of the cost of housing – rose by 0.3 percent on a monthly basis in November, at a slower pace than in October when shelter prices rose by 0.4 percent — a welcome development as the shelter index had been stubbornly high in recent months.
Notably, grocery prices rose by 0.5 percent on a monthly basis, up from 0.1 percent in the month prior. An increase in the price of eggs due to the avian flu is partially responsible for the increase. Energy prices rose by 0.2 percent on a monthly basis last month after remaining flat in October.
The new inflation information is the last major economic data to be released ahead of the Federal Open Market Committee’s (FOMC) meeting next week, during which it will decide whether to cut interest rates once again. Headline inflation has fallen significantly from its peak of 9.1 percent in mid-2022 and core inflation has fallen from its peak of 6.6 percent in late-2022, but inflation remains higher than the Federal Reserve would prefer. The expected CPI data will likely push the FOMC to cut rates by 25 basis points next week, likely before holding rates steady at its following meeting in January.
Other Developments
Trump Nominee
Trump Taps Ferguson to Replace Khan at FTC
Donald Trump has tapped Andrew Ferguson to chair the Federal Trade Commission (FTC). As Ferguson is already an FTC commissioner, he would not need approval from the Senate in order to take the position. Ferguson would replace Lina Khan, who gained a favorable reputation even among “Khanservatives” for combating market consolidation by scrutinizing large mergers and aggressively seeking the breakup of large corporations such as Amazon and Meta. Ferguson was chosen specifically to go after “Big Tech censorship,” which has become a near-obsession among the GOP and especially Trump.
Biden Nominees
Gordon Ito – FSOC
A Biden pick that seems certain not to proceed to a confirmation vote from the Senate is Gorton Ito for the Financial Stability Oversight Council (FSOC). The FSOC works with the US Treasury, the Federal Reserve Board, and other agencies to identify risks that threaten the stability of the financial system, encompassing banking, insurance, and the financial markets. While the FSOC does not directly regulate America’s financial system, it serves an important consultative role and facilitates communication between key agencies. Gordon Ito, picked for his insurance expertise, is currently serving the second of two terms as Hawaii’s insurance commissioner. Ito handled insurance claims in the aftermath of the Maui wildfires in 2023 that caused billions of dollars in damages. As it stands, it is unlikely that Ito’s confirmation will even come to a vote without the support of Senators Manchin and Sinema.
Caroline Crenshaw – SEC
SEC Commissioner Caroline Crenshaw was nominated to serve another term as commissioner of the SEC in June, but her confirmation process has since stalled. Crenshaw has been a vocal proponent for climate-related disclosures by corporations and stricter enforcement of regulations on crypto markets during her time with the SEC, both of which have made her numerous enemies in the corporate world. The crypto lobby in particular, which has become surprisingly powerful in a short amount of time, has gunned for her confirmation to be blocked. What’s more, Republicans are hoping that Trump will get to appoint her replacement, allowing the GOP to dominate the SEC and upsetting the partisan balance that usually helps to moderate the agency. The Senate Banking Committee has stalled moving on her confirmation and has effectively run out the clock until the 118th Congress comes to an end. So it is now all but certain that Crenshaw will not be confirmed.
Hill Confirmed to Chair HFSC Next Congress
House Financial Services Committee Vice Chair and Subcommittee on Digital Assets, Financial Technology and Inclusion Subcommittee Chair French Hill (R-AR) is set to replace Representative Patrick McHenry (R-NC) as chair of the House Committee on Financial Services. Hill was selected over other Republican contenders for the position such as Representative Andy Barr (R-KY) by the House Republican Steering Committee yesterday.
Hill is a well-known ally of the crypto industry. He has put forward pro-crypto legislation, especially regarding the question of the regulation of digital assets. He has attacked the SEC and Chair Gary Gensler in particular for attempting to enforce stricter oversight of the crypto industry. Hill has previously supported his fellow Committee Republicans in attacking the Consumer Financial Protection Bureau (CFPB) and will likely continue to be supportive of legislative efforts to weaken the bureau next Congress. Hill has outlined several concerning principles on banking which are likely to be included in his agenda for next Congress.
CFPB Finalizes Overdraft Fee Rule
On Thursday, the Consumer Financial Protection Bureau (CFPB) finalized a rule to protect consumers from overdraft fee abuses by America’s largest financial institutions. The rule would reduce overdraft fees charged by insured depository institutions and credit unions with more than $10 billion in assets from the average $35 charged today to $5. The CFPB estimates that this will save consumers up to $5 billion in annual overdraft fees, or $225 per household that pays overdraft fees.
The rule closes a longstanding loophole that exempts overdraft lending services from provisions in the Truth in Lending Act (TILA) and other consumer financial protection laws which have allowed banks to make billions in profit from overdraft fees. Despite policy changes at some banks in recent years, banks continue to take in about $9 billion per year in overdraft fee revenue.
We applaud the CFPB for finalizing the rule for the benefit of the approximately 23 million households that pay overdraft fees each year. In the coming months, it will be crucial to defend the rule against attacks from the financial services industry. Several industry groups, including the American Bankers Association, have already filed a challenge to the rule in the U.S. District Court for Southern Mississippi. The rule is set to go into effect on October 1, 2025.
Hearings
Chopra Appears Before Senate Banking Committee
Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra appeared before the Senate Committee on Banking, Housing, and Urban Affairs on Wednesday, delivering his final semi-annual review of the CFPB before the incoming Republican trifecta takes office.
Chopra suggested that he may not resign on January 20 when President-elect Trump is sworn in. In response to a question from Ranking Member Tim Scott (R-SC) about his plans to resign, Chopra responded, “As you know, we serve and are confirmed for a five-year term. The president can remove us at any time, any day — we obviously completely respect that right.” Responding to a later question from Senator John Kennedy (R-LA), Chopra acknowledged that the President has the power to remove him as the Bureau’s leader.
In his remarks to the Committee, Chopra focused on areas in which members of both sides of the aisle had found common ground during his tenure. He reminded the panel that Trump, on the campaign trail, expressed support for capping credit card interest rates and highlighted the importance of ensuring credit card interest rates are competitive. He noted that there are proposals to limit credit card interest rates from members on both sides of the aisle.
Democrats, including Committee Chair Sherrod Brown (D-OH), highlighted the CFPB’s crucial work to protect consumers as the Bureau comes under increasing attacks from the financial industry and their Republican allies in Congress, with Republicans set to take control of both chambers next Congress. Ranking Member Scott is poised to lead the Senate Banking Committee, with Representative French Hill (R-AK) set to replace Representative Patrick McHenry (R-NC) as Chair of House Financial Services. Democrats must prepared to be outspoken in their defense of the CFPB and its work to protect consumers.
Look Ahead
Tuesday, December 17
- December FOMC meeting (Day 1)
Wednesday, December 18
- December FOMC meeting (Day 2)
Thursday, December 19
- Q3 GDP third estimate
Friday, December 20
- November PCE report