Warsh Says the Fight Against Inflation Isn’t Over

Key takeaways

The Federal Reserve emphasizes that the fight against inflation is ongoing, with potential interest rate hikes on the horizon.
U.S. corporations are strategically balancing political donations, supporting both parties to hedge against changing political landscapes and potential regulatory scrutiny.
U.S. energy companies are expanding investments in Venezuela’s oil fields despite slow recovery in production, aiming for future growth over several years.
International efforts, such as Japan's currency interventions and Iceland’s EU referendum, demonstrate global economic and political responses to current challenges.

Summary

Federal Reserve's Stance on Inflation and Interest Rates

Federal Reserve Chairman Kevin Warsh, in his first speech as Chair, signaled that the fight against inflation is not over. He indicated that current financial conditions are not restrictive enough to bring inflation down to the 2% target, suggesting the possibility of further rate hikes. Investors reacted to his cautious tone with increased expectations of a rate hike in the upcoming month. The discussion also covered recent labor market revisions, which showed fewer jobs added than previously thought, impacting market sentiment.

Corporate America and Political Betting Ahead of Midterms

Major corporations that historically supported Trump are now diversifying their political contributions, donating to Democrats and hiring aides from Biden and Obama administrations. Companies are also forming internal task forces to prepare for potential subpoenas if Democrats regain the House, reflecting a strategic repositioning to avoid political backlash and regulatory risks. Companies like Meta and Amazon are highlighted for their significant donations and political activities, often using 'dark money' channels to conceal their contributions.

U.S. Energy Sector's Engagement in Venezuela

Chevron and other U.S. energy companies are nearing billion-dollar deals to expand their operations in Venezuela’s oil fields. This move is separate from the Trump administration's negotiations for a stake in Venezuelan oil reserves, which aim to mitigate geopolitical risks and secure access to resources amidst Venezuela's slow recovery in oil production. While the potential deals could help increase production, significant investments and years of effort are needed to reach pre-plant levels.

International Economic and Political Developments

Japan has intervened heavily to support the Yen, spending nearly $100 billion in recent months to stabilize its currency amid a 40-year low. In other international news, Iceland is holding a closely contested referendum on potentially rejoining the EU, driven by geopolitical concerns, especially regarding Greenland. The outcome of this vote could influence Iceland’s future economic and political alignments.

Show notes

P.M. Edition for Aug. 28. Economics correspondent Nick Timiraos reports from Jackson Hole on how investors are interpreting Federal Reserve Chairman Kevin Warsh’s speech. Plus, some of President Trump’s biggest corporate donors are now cutting checks to Democrats, too. WSJ’s White House reporter Annie Linskey explains how American companies are preparing for a potential Democratic comeback in November. And WSJ's global energy reporter Collin Eaton unpacks how Chevron and other U.S. energy companies are closing in on deals worth billions to expand in Venezuela's oil fields. Sabrina Siddiqui hosts.

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