The Fed: The unemployment rate will fall to 9 percent by end of year but expect no interest rate hikes through 2022. In its latest Federal Open Market Committee statement the Federal Reserve said yesterday the US economy will slow by 6.5 percent in 2020 but the unemployment rate will fall to 9 percent by the end of the year. While that’s an improvement over May’s 13.3 percent rate, it still is terrible. Thus, the Fed said it plans to hold interest rates near zero, with no increases expected through 2022.

For the first time in its 63-year-history, the CPI fell for three consecutive months. The Bureau of Labor Statistics reports that the Consumer Price Index minus food and energy dropped 0.1 percent in May after falling 0.4 percent in April and 0.1 percent in March. The bad news: Falling prices are more evidence of how COVID-19 reduced consumer demand. The good news: price declines moderated in May, suggesting the worst may be over. Still, without a rebound in demand, the economy (and government coffers) can’t bounce back.

Expect the Senate to continue to slow-walk another coronavirus bill. Buoyed by the latest job numbers and other economic indicators, Majority Leader Mitch McConnell does not anticipate the Senate will take up another coronavirus relief package before it returns from its July 4 recess on July 20. The Senate would then have three weeks to pass a bill before its August recess.

The next bill may have more PPP loans and UI changes, says Treasury Secretary Mnuchin. Secretary Steven Mnuchin told the Senate Small Business Committee that the next bill will likely provide more—but targeted—Paycheck Protection Program loans. Mnuchin also suggested he may want to scale back the plussed-up federal unemployment benefits included in the CARES Act but said he does not favor cutting capital gains taxes, an idea being promoted by White House economic advisor Larry Kudlow.

Does President Trump mean to defund the police? TPC’s Howard Gleckman weighs President Trump’s opposition to “defunding” police departments against his criticism of new federal aid to state and local governments. But he’ll have a hard time reconciling these two ideas, Howard says: “The quickest way to slash local police budgets is to block federal assistance to state and local governments.”

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