On The Money — Why the Fed can’t fully control inflation 

We explain why the price of some goods may be beyond the Fed’s power. We’ll also look at debt ceiling jockeying in the Senate and the departure of a top White House economic adviser. 

But first, find out why you may be able to get a tax break for having a gas stove in Florida. 

Welcome to On The Money, your guide to everything affecting your bills, bank account and bottom line. For The Hill, we’re Sylvan Lane, Aris Folley and Karl Evers-Hillstrom.

The Fed can’t fix inflation alone. Here’s why.

The Federal Reserve has driven up borrowing costs and slowed the economy in an effort to reduce demand for goods and services, which leads to lower prices. 

But several other factors that weigh on prices, such as geopolitical conflicts and natural disasters, are outside of the Fed’s control. And the Fed can only go so far with interest rate hikes without cooling the economy too much and causing a recession.  

• Rate hikes have made an impact: Inflation is moderating, consumer spending is slowing, and oil prices and freight rates are relatively low. 
  
• On the other hand, the Fed can’t control things like the bird flu outbreak that drove up the price of eggs or China’s COVID-19 reopening that could send oil prices spiking.   
  
• The Fed knows it can’t solve other inflationary factors such as the labor shortfall of 3.5 million workers, which is driven by 2 million early retirements.  

The Fed also can’t stop corporations from continuing to mark up prices to keep their profits at record levels. Federal Reserve Vice Chair Lael Brainard pointed to corporate profit margins in recent remarks, noting that “final prices have risen by more than the increases in input prices.” 

Karl has more here. 

NO NEGOTIATIONS

Schumer: Biden unified with Democratic leaders against negotiating over debt limit 

Senate Majority Leader Charles Schumer (D-N.Y.) told reporters Thursday that there’s no daylight between himself and President Biden on the question of standing firm against negotiating with House Republicans on raising the debt limit until they manage to pass a package of cuts or fiscal reforms. 

Schumer said Biden and White House staff assured him the president is not looking to cut a debt limit deal with Speaker Kevin McCarthy (R-Calif.) if House Republicans can’t prove they have the votes to pass spending cuts through their narrowly divided chamber.   

• His comments contradicted McCarthy’s optimistic prediction Wednesday that he would be able to strike a deficit reduction deal with Biden in exchange for raising the debt ceiling. 
  
• McCarthy promised House conservatives that he would not support legislation to raise the debt limit without major spending cuts or fiscal reforms attached but he has remained vague about exactly what cuts he favors. 
  
• Schumer is betting that McCarthy doesn’t have enough Republican votes to pass a fiscal reform package of any size given his small five-seat majority. 

The Hill’s Alex Bolton takes it from here.  

STILL FALLING

Mortgage rates fall below 6 percent for first time since September 

The average 30-year fixed mortgage interest rate dropped to 5.99 percent Thursday, falling below 6 percent for the first time since September, according to a key gauge of home loan borrowing costs. 

The benchmark home loan rate fell by 0.05 percentage points on Thursday for the third consecutive daily decline, according to the Mortgage News Daily survey of mortgage lenders. 

• The dip in mortgage rates came despite another interest rate hike from the Federal Reserve on Wednesday, which pushed the central bank’s baseline rate range up by 0.25 percentage points to a span of 4.5 to 4.75 percent.  
  
• The Fed doesn’t directly set mortgage rates, but the central bank’s rate movements heavily influence borrowing costs across the economy, including for home loans. 

Sylvan explains here. 

DEESE DEPARTING

Top Biden economic adviser to leave White House 

Brian Deese, the top White House economic adviser to President Biden for the past two years, will depart the White House in the coming days, the president announced Thursday. 

Deese served as the director of the National Economic Council and helped craft Biden’s economic agenda. He was also a key player in negotiations with Congress on major legislation Biden signed during his first two years in office, including the Inflation Reduction Act, which contained several of Biden’s major priorities on climate change and health care. 

• It is not yet clear who will replace Deese to lead the National Economic Council.  
  
• Federal Reserve Vice Chair Lael Brainard and Deputy Treasury Secretary Wally Adeyemo are considered two of the likeliest candidates. 

The Hill’s Brett Samuels fills us in here. 

Good to Know

Senate Minority Leader Mitch McConnell (R-Ky.) has pulled Sen. Rick Scott (R-Fla.), who tried to oust him as the Senate’s top Republican in a bruising leadership race, off the powerful Commerce Committee.   

McConnell also removed Sen. Mike Lee (R-Utah), who supported Scott’s bid to replace McConnell as leader, from the Commerce panel, which has broad jurisdiction over a swath of federal agencies.  

Other items we’re keeping an eye on: 

• The Federal Election Commission raised political donation limits to account for historic inflation, boosting the potential influence of wealthy donors in the 2024 election cycle.  
  
• In a new survey, two-fifths of millennials say their parents still pick up one or more of their monthly bills.  

That’s it for today. Thanks for reading and check out The Hill’s Finance page for the latest news and coverage. We’ll see you tomorrow.