text: ￼Good morning. Here’s your Early Warning for Thursday, 04 August 2022.TODAY’S BRIEFING:READ TIME: 9 mins 6 secondsInFocus: Weekly Economic OutlookInside the BeltwayDomestic INTSUMGeostrategic INTSUMLow Intensity Conflict Activity Rollup & Outlook￼InFocus: Weekly Economic OutlookOfficials at the Federal Reserve are warning that they may take a more aggressive approach if interest rate hikes are unable to combat inflation. Chicago Fed President Charles Evans said they “might have to rethink the [current] path” and warned of the possibility that “we have a lot more [inflation and interest rate hikes] ahead of us.” St. Louis Fed President Jim Bullard discussed higher than expected inflation, adding that the Fed may have to raise its target federal funds rate. Other regional Fed bank presidents echoed the sentiment that the Fed has much more work ahead of them, with San Francisco’s Mary Daly adding that they are “nowhere near almost done.” Cleveland’s Loretta Mester said she wants to see “several months” of decelerating inflation before she feels comfortable that inflation is trending down.This is why the Biden administration’s refutations of the recession are detached from reality. The economy is slowing to the point of two consecutive quarters of contraction while the Fed is talking about more aggressively raising interest rates, which causes further economic slowing. The Fed is signaling that the recession will worsen until they’re able to bring down inflation, which has been a theme in this report since last year. The current federal funds rate is 2.5%, and Fed officials say the neutral rate may need to be revised higher than 3.5%.Rising interest rates will become problematic for large holders of debt. According to the latest information, Americans added $312 billion worth of debt, including $46 billion in new credit card debt, during the second quarter of this year. Household debt increased by 5.5% since Q1 and 13% year over year. As recently as this week, the Fed has pointed to record personal savings as a sign that Americans can weather an economic downturn, however, the personal savings rate has dropped to levels not seen since the Great Recession of 2008. Having entered a recession where jobless rates are likely to climb – because part of the Fed’s strategy to combat inflation is to crush consumer demand – more Americans will become financially distressed. With debt levels up and savings down, American consumers probably aren’t in the great shape the Fed claims. If this has felt like a slow moving train wreck, it’s because it is. – M.S.￼WHITE HOUSE: Nothing Significant to Report (NSTR)CONGRESS: Nothing Significant to Report (NSTR)BIPARTISAN SENATORS INTRODUCE FOOD SECURITY BILL: Senators Jim Risch (R-ID) and Chris Coons (D-DE) introduced the “Securing Allies Food in Emergencies Act”, or SAFE Act, in response to a “looming global food crisis”. In part, the bill directs the U.S. Agency for International Development to deliver a food security strategy to the House and Senate Foreign Relations Committees. Among other things, the bill requires the strategy to address “the correlation between rising food costs and social unrest in areas of strategic importance to the United States,” as well as existing resources the United States has to reduce the impact or avoid a food crisis for these countries. (AC: The most important part of this draft bill is the direction that it provides to USAID to prioritize the procurement of U.S. agricultural products when local or regional food procurement is impossible. We’ve previously warned that the U.S. government may direct the sale or export of American agricultural production to “strategically important” regions experiencing food shortages, at the risk of food availability for Americans. It appears the bill will direct exactly that. – M.S.)