US: Politics is eclipsing economics - BBH

In the US, politics is eclipsing economics in the week after the FOMC hiked the Fed Funds target for the third time since last November's election, according to the analysts at BBH.  

Key Quotes

“Fed signaled its intention to begin reducing the balance sheet "relatively soon," which we take to mean an announcement in September to start in October.  The Republicans won both special congressional elections this week, which would seem to suggest that despite the President's low support rating, his base remains intact.”  

“The would seem to bode well for the legislative agenda.  However, the Senate is having similar problems as the House of Representatives did in agreeing on health care reform.  Specifically, the strategy of bypassing the opposition Democrats entirely does not leave the Republicans with much room for dissent.  The Republicans can afford to lose no more than two votes, assuming no Democrats support it.  A 50/50 vote would allow Vice President Pence to cast the tie-breaker.”

“However, nearly immediately, four Republican Senators expressed their disapproval, and several others indicated intentions to submit amendments to the bill when the vote is held, likely next week.  Ahead of the vote, there will likely be a great deal of shuttle diplomacy to trying to secure the votes.  A defeat would be a significant blow to the legislative agenda.  The summer recess would likely be shortened, if not abandoned.  It would also raise questions about key legislation that is needed in September to raise the debt ceiling and grant new spending authorization as part of the new budget for the fiscal year that begins October 1.”