Happy Pi Day! You can celebrate the ratio of a circle’s circumference to its diameter by reading this, or maybe by grabbing a slice of a yummy baked good.
Here’s what’s happening.
Inflation Dips Again, but the Details Are More Troubling
Consumer price inflation eased a bit in February, according to data released by the Bureau of Labor Statistics Tuesday, but a key inflation measure watched closely by the Federal Reserve showed an unexpected increase, underlining the difficulty bank officials face as they contemplate their next move in their battle to restore price stability in the U.S. economy.
The headline consumer price index rose by 0.4% on a monthly basis and 6% relative to a year ago, with both measures easing from the results in January. The annual rate was the lowest since September 2021. However, the core price index, which ignores volatile food and fuel prices, rose unexpectedly on a monthly basis, climbing 0.5%, the largest increase since September 2022.
Inflation in the services sector remains hot, with the closely watched “services less energy services” index rising 7.3% over the last year. “The broad story remains the same: goods prices are flat but core services are rising strongly,” said former Obama administration economist Jason Furman.
Furman also noted that there is plenty of good news in the overall inflation numbers. “Every measure of CPI inflation is down from its peak over the summer, partly because some of that inflation was truly transitory and partly because the Fed's rate hikes has kept the economy from getting much hotter and kept long-run inflation expectations anchored,” he wrote. At the same time, though, inflation is “still way too high” and shows no sign of dropping down to the Fed’s 2% target level anytime soon.
To hike or not to hike: The turmoil in the banking industry following the failure of Silicon Valley Bank late last week has some analysts thinking that the Federal Open Market Committee could pause its campaign of interest rate hikes at its upcoming meeting to give the financial sector some breathing room. “In light of the stress in the banking system, we no longer expect the FOMC to deliver a rate hike at its next meeting on March 22,” Goldman Sachs economist Jan Hatzius said in a note Sunday.
But the latest inflation data could spur the Fed to press ahead. “These data support a quarter-point rate hike,” said Rubeela Farooqi of High Frequency Economics in a research note, though she added that concerns about financial stability “could keep the Fed on the sidelines” for now.
RSM Chief Economist Joseph Brusuelas said he thinks the Fed will stick with its rate-hiking plan, but he said that his projection of a 25-basis-point hike “turns on the degree to which financial stress eases or increases over the next several days,” and that if there is further financial instability, the Fed could postpone its rate hike until May.
Priya Misra, global head of rates strategy at T.D. Securities, said the inflation report suggests the Fed will raise rates and likely takes any talk of a rate cut off the table. “It’s a strong report,” she told The New York Times. “It’s really hard for the Fed to respond by not hiking — or cutting, that’s crazy talk.”
Saying that the Fed does not “have the luxury to sit around and wait,” Derek Tang, an economist at LH Meyer/Monetary Policy Analytics, told Bloomberg that the successful bailout of Silicon Valley Bank should give the Fed the leeway to move ahead. “The weekend intervention was also meant to contain the financial crisis to create room for continued monetary tightening,” he said. “That way, they don’t want to pick between financial and price stability.”
Trump Attacks DeSantis Over Social Security, Medicare
Former President Donald Trump on Monday ramped up his attacks on Florida Gov. Ron DeSantis, widely seen as a leading rival for the 2024 Republican presidential nomination.
Days after DeSantis visited Davenport, Iowa, Trump used his own campaign stop there — his first since announcing another bid for the White House — to bash the Florida governor in familiar fashion. Trump derided DeSantis as “DeSanctimonious.” He told the Iowa crowd that DeSantis “strongly opposed” ethanol, a key issue in the corn-growing state. Then he returned to an issue he has been using recently to hammer GOP foes: Social Security.
Trump told his audience that DeSantis had “fought against” the program. “He wanted to decimate it and voted against it three times,” Trump said of DeSantis. “Voted against Social Security – that’s a bad one. A lot of people don’t know that. But I think they’ve been finding out over the last four weeks.”
Trump said the DeSantis wanted to lift the retirement age to 70 and voted to “severely cut” Medicare. He went on to try to portray DeSantis as a member of the GOP’s old guard, the party establishment Trump had upended.
“You have to remember, Ron was a disciple of [former House Speaker] Paul Ryan,” Trump said, tagging the former House speaker as a “RINO loser” who “would constantly vote against entitlements.” Trump added the DeSantis also reminds him of Mitt Romney, the Utah senator who lost the 2012 presidential election with Ryan as his running mate.
“I will not be cutting Medicare and I will not be cutting Social Security,” Trump told the crowd.
Of course, he made similar pledges as a candidate in 2016 but his budget proposals as president all included cuts to both programs.
DeSantis’ record: DeSantis has in the past expressed support for privatizing Social Security. While in Congress, he voted in favor of a series of nonbinding annual budget resolutions that called for substantial changes to Medicare, including raising the retirement age to 70 and providing “premium support” or vouchers for new beneficiaries. The plans also proposed to raise Social Security’s full retirement age to 70 and slow future growth of benefits. (See here or here for more.)
Earlier this month, DeSantis sought to distance himself from those positions, telling Fox News that Republicans are “not going to mess with Social Security.”
The bottom line: Political analysts and TV pundits are examining what Trump’s attacks against DeSantis, along with the crowd reaction and Iowa voters’ comments, might mean for the Republican presidential race — see, for example, here, here or here. What’s already clear, though, is that Trump sees his populist attacks over Social Security and Medicare as an effective wedge issue with the party base — and that other Republicans are left scrambling to adjust.
Another Drugmaker Slashes Prices for Some Insulins
Danish drugmaker Novo Nordisk said Tuesday that it will cut the U.S. list prices of several of its insulin products by as much as 75% starting next year, following a similar announcement by rival Eli Lilly earlier this month.
Novo Nordisk said that the list price of a vial of its NovoLog and NovoLog Mix 70/30 will be cut by 75%, from more than $289 to $72.34. Levemir and Novolin vials and FlexPens will see prices cut by 65%, and the prices of unbranded products will be dropped to match the new branded prices.
The price cuts come after the Inflation Reduction Act passed by Congress last year enacted a new $35 cap on monthly out-of-pocket insulin costs for Medicare beneficiaries. That cap took effect this year.
Insulin makers including Novo Nordisk, Eli Lilly and Sanofi have long faced pressure to cut their insulin prices, which have soared over the past couple of decades, forcing many patients to ration their doses.
“Insulin affordability in the United States depends largely on whether patients have health insurance and the details of that coverage,” Tom Murphy of the Associated Press notes. “People with employer-sponsored coverage, for instance, may pay little out of pocket for their insulin, or they might pay hundreds of dollars if they must first meet a high deductible before the coverage kicks in.”
A nonprofit named Civica Rx said last year it is working to introduce generic versions of insulin next year at no more than $30 per vial and no more than $55 for a box of five pen cartridges.
The bottom line: “The actions by Novo Nordisk and Eli Lilly probably won’t affect most diabetics who are covered by commercial insurance,” The Washington Post’s Daniel Gilbert writes, citing experts, “but it could deliver meaningful savings for the uninsured and those with high-deductible health plans.”
- Analysts Say the Inflation Data Clouds the Outlook for Interest Rates – New York Times
- The Economy Is Performing a High-Stakes Juggling Act – Axios
- ‘Watershed’ $1 Trillion Defense Budget on the Horizon – Roll Call
- Insulin Price Cuts Could End Up Making Money for US Drugmakers – Bloomberg
- U.S. Government Provides Cyber Budget Specifics – Washington Post
- Dems Tout CBO Report on House GOP Ambitions to Balance the Budget – Politico
- Some Republicans Want Gen Z to Retire Later to Avoid Outright Cuts to Social Security – Insider
- Republicans Introduce Major Energy Package With Party’s Top Priorities – The Hill
- Senate Republicans Are Breaking With Ron DeSantis Over His Opposition to More Ukraine Aid – Politico
- U.S. Sues Rite Aid, Saying It Ignored ‘Red Flags’ in Opioid Prescriptions – Washington Post
- Aggressive Medical Care Remains Common at Life’s End – New York Times
Views and Analysis
- Biden’s Budget Refuses to Face Reality – Bloomberg Opinion Editors
- Joe Biden, Scandinavian – Jeff Greenfield, Politico
- Fearing Backlash, Republicans Backpedal on Social Security and Medicare Cuts – Sasha Abramsky, Truthout
- The Right-Wing Zealot Who Wrecked the Budget Process and Made Washington Dysfunctional – Michael Tomasky, New Republic
- The Fed Can’t Abandon the Inflation Fight, Despite Bank Turmoil – Catherine Rampell, Washington Post
- Silicon Valley Is Again in Denial About Its Dependency on the Feds – Adam Lashinsky, Washington Post
- How to Make This the Last Banking Bailout – New York Times Editorial Board
- The Economy Could Not Exist Without Government – Ryan Grim, American Prospect
- The Silicon Valley Bank Bailout Didn’t Need to Happen – David Dayen, American Prospect
- ‘OK’ Isn’t an Acceptable Answer for Women’s Health in America – Martha Nolan, The Hill