Elizabeth Warren is hot! No change in the Fed Funds rate.
Elizabeth Warren is hot! (RedHot)
Elizabeth Warren has completed a remarkable journey from respected legal scholar to the Senate’s resident kook. Perhaps it’s the godlike feeling that comes with being elected a US senator. Perhaps it’s the marble floors. Either way, her latest missive is strange even by her standards, and that is a high bar.
This is weird because McCormick already owns Frank’s RedHot and Cholula Hot Sauce. So how can this merger raise those prices? Only in Warren’s mind. You can’t monopolize something you already own. Unilever, meanwhile, brings mayonnaise to the party. I won’t pretend to be an expert on competition in the mayo and spice markets, but I’m fairly confident nobody has ever reached for the mayo jar when they ran out of wing sauce. (If you have, please keep it to yourself.) I also don’t think we have a worry about a merger of McCormick and Unilever monopolizing the hot sauce market. I prefer Melinda’s and at last count there are over 2,000 different brands being sold in the US. Now it is true that the top brands, Huy Fong (Sriracha), Frank’s Red Hot, Cholula, and Texas Pete have 45 percent of the market share with Huy Fong’s sriracha being number one. But where is Tabasco? I was stunned not to see it on the list. Somewhere in Louisiana, a red pepper is weeping.
But if Warren thinks that a merger of Frank’s Red Hot with Cholula will somehow increase our grocery prices, she needs to heed Scott Bessent’s advice and take an Economics 101 class.
But brace yourself, America. If the Democrats take back the Senate, Warren is slated to chair Senate Banking, which means the same economic instincts, now with a gavel. Expect her to keep going after the banks, crypto firms, insurers, and the Federal Reserve, which is to say anyone with a balance sheet. Also look for a crackdown on artificial intelligence, specifically restrictions on Nvidia’s chip exports to China, a push where she’s already teamed up with Indiana GOP Sen. Jim Banks. Bipartisanship isn’t dead; it just needed the right target. And watch for a sequel to this year’s weird bipartisan housing law that tried to limit private equity’s role in home ownership.
The Fed’s October Meeting
I don’t expect the Fed to touch rates in October, even with prices still climbing. CME Group’s FedWatch puts the odds of a hold at 88.9 percent, which is about as close to a sure thing as Washington gets. https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
This isn’t because prices have suddenly taken a vacation. It’s because I don’t think the Fed has the political will to up the rate. The technical term is “guts.” Last month the CPI rose 3.7 percent, up from 3.4 percent the month before. Core inflation, which excludes food and energy (you know, the stuff people actually buy), was up 2.6 percent from last year. And AI? Prices for computers, peripherals, and smart-home assistants were 9.7 percent higher in September than a year earlier. Computer software and accessories jumped 28.4 percent. But those are small slices of the CPI pie.
While Cleveland Fed President Beth Hammack has signaled in interviews that she’d like to raise the rate at this meeting, she won’t have the votes. She’s like the one guest at the potluck who brought ghost-pepper chili (a homage to Elizabeth Warren). So expect a hold this month and a hike in December if things don’t cool down, which, come to think of it, is the opposite of what you want from a good hot sauce.
