Nuclear power payment plan
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What is the main topic discussed in this episode?
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It's setting up to be a big news week. We've got a preliminary deal to end the war in Iran, a Fed meeting, some economic data dumps. Where should we begin? From American Public Media, this is Marketplace.
In New York, I'm Kristen Schwab in for Kai Risdahl. It's Monday, June 15th, and it's great to be here with you. I know the big news of the day is that we might be nearing the end of the war in the Middle East. The United States and Iran have signed a framework agreement. Details of the deal haven't been released. And listen, when it's all really, truly over, we'll pick apart the economic effects. But for now, let's focus on what in this economy is certain. The Federal Reserve's Open Market Committee meets this Wednesday, and it's Kevin Warsh's big debut as the new chair. He's gotten a lot of pressure from President Trump to cut interest rates and make borrowing cheaper. But markets don't expect the Fed to touch rates for now because Warsh enters the Fed at a tricky time.
Even if the war does officially come to a close soon, the effects are still churning in the background, including its toll on inflation, now above 4%. Marketplace's Henry Epp looks at how the Fed might navigate this moment.
Here's why this current bout of inflation is tricky for the Fed.
It's driven by a spike in energy prices caused by the Iran war, and energy and food prices tend to be too volatile to inform the Fed's decisions, says Andrew Clinton, head of Clinton Investment Management.
That's why historically they've looked through headline inflation, that is, that include food and energy, to the core inflationary numbers.
Core inflation last month was a lot closer to the Fed's target of 2%.
Fed officials might be tempted to think this spike in inflation is temporary, except that's what they did a couple years ago, and it didn't work out. Peter Conte-Brown is a professor of financial regulation at the Wharton School.
The Fed's error in 2021 was precisely this, was to assume that the supply shocks were temporary, transitory in the word of the day, and they were caught flat-footed. They don't want to make that mistake again. So the bond market has started to indicate that it thinks the Fed will probably have to deal with inflation, says Derek Tang, an economist at the research firm MPA Macro. They do expect more of a chance the Fed might have to raise its policy interest rate sooner rather than later. And that's making some of these bond yields rise.
But the guy in the White House keeps pushing for the Fed to go in the opposite direction.
President Trump does have a history of saying he wants lower interest rates. And a recent history of threatening the Fed. The Justice Department opened criminal investigations into former Chair Jay Powell and Fed Governor Lisa Cook, who Trump also tried to fire. So what's the new chair, Kevin Warsh, to do? One option, says Peter Conte-Brown, is to say less. The more opaque the Fed is relative to its future policy position, the harder it is to be pinned down by politicians who want to beat up on it. But there's a challenge in that for Warsh.
He's just one of 12 members on the Open Market Committee, and they might not all want to stay quiet. I'm Henry Epp for Marketplace.
Wall Street today, the promise of a deal and a drop in oil prices makes for a lot of optimism. We'll have the details when we do the numbers.
Electricity prices are one of the many things contributing to inflation. And even as energy prices have been rising, so has demand. Now some customers and lawmakers are advocating for a reinvestment in nuclear energy as a long-term, carbon-free source of power. But that set off a debate on who pays for the cost of building new nuclear plants.
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:00–9:09
2
How does the current inflation impact the Federal Reserve's decisions?
9:09–23:18
3
How can nuclear energy help reduce electricity bills?
23:18–23:50
4
What are the costs associated with building new nuclear power plants?
23:50–24:25
5
Who should bear the financial burden of new nuclear plants?
24:25–26:32