Federal Reserve Cuts Interest Rates for the First Time Since Pandemic

Happy Thursday! To exist on the internet these days is to be inundated with images of the dewy-looking, toothless, baby pygmy hippo named Moo Deng. She’s out on the town with Pete Davidson (always a red flag), going on Hot Ones, and being favorably compared to Kevin Durant. 

But we’ll know her time as an internet phenomenon has come to an end when Moo Deng—which loosely translates to “bouncy pig”—shows up on the social media account of a member of Congress: Such is the lifecycle of a meme. 

Quick Hits: Today’s Top Stories

• The central bank’s Federal Open Market Committee lowered the federal funds rate on Wednesday by 50 basis points to a target range situated between 4.75 and 5 percent, marking the first rate cut since 2020. Federal Reserve officials hiked rates 11 separate times between March 2022 and July 2023 to battle inflation, which has since eased from its year-over-year high of more than 9 percent in June 2022. This cut came in the wake of successive jobs reports that seem to indicate a weakening U.S. labor market; maintaining high unemployment is the other half of the Fed’s dual mandate, in addition to keeping inflation in check. In a press conference following the central bank’s decision, Fed Chair Jerome Powell said he hoped the rate cut would improve “price stability without fostering higher rates of unemployment.” 
• Ukrainian military drones struck and blew up a large Russian ammunition arsenal—that included ballistic missiles—early Wednesday morning in the Russian Tver oblast town of Toropets, nearly 250 miles west of Moscow. One Ukrainian official told the Washington Post that the Russian warehouse was “literally wiped off the face of the Earth.” Although there were no reported casualties, explosions from the attack’s blast were detected by NASA satellite heat sensors, and earthquake monitors nearby recorded the explosion as a 2.8 magnitude earthquake. Russia’s regional governor for Tver claimed that its defenses destroyed all of the Ukrainian drones—some 54, according to Russian-state media, though a Ukrainian official claimed that more than 100 drones were used in the strike. Meanwhile, a new Wall Street Journal report suggested that more than one million people have been killed or wounded in Russia’s war in Ukraine since February 2022. 
• Lebanese officials reported Wednesday that more than a dozen people were killed and some 450 others were injured after more communication devices used by Hezbollah—the Iranian-backed terrorist group—apparently exploded in Lebanon, just one day after thousands of the group’s pagers detonated at once. The devices targeted in Wednesday’s detonation were radio communication devices, mostly walkie-talkies, though Lebanese state media claimed that several solar energy systems in the Lebanese capital of Beirut also exploded. The Israeli government has not commented on the mass explosions, though Mossad—the Israeli intelligence agency—is reportedly behind the attacks. 
• Meanwhile, Israeli Prime Minister Benjamin Netanyahu said Wednesday that Israel “will return the residents of the north securely to their home” in brief and cryptic remarks posted to social media, referring to the tens of thousands of Israeli civilians who have been displaced from their communities for nearly a year amid ongoing Hezbollah attacks. The same day, Israeli Defense Minister Yoav Gallant announced more troops were being sent to the border with Lebanon as the “center of gravity” of the war with Hamas and other Iran-backed proxies shifts northward. 
• The Biden administration issued new sanctions—just over two years after the death of Mahsa Amini in Iranian police custody sparked mass protests and brutal government crackdowns—on Wednesday against 12 people accused of committing human rights abuses in connection to the Iranian regime. Those sanctioned include members of the Iranian Revolutionary Guards Corps, Iranian prison officials, and others located outside of Iran who were “responsible for lethal operations overseas,” according to the State Department. Some of the Iranian operatives sanctioned are accused of killing prisoners who demanded better living conditions, torturing and sexually assaulting prisoners, denying medical treatment to political prisoners, and kidnapping Iranian dissidents outside of Iranian territory. 
• U.S. intelligence officials said Wednesday that Iranian hackers sent illegally obtained documents from former President Donald Trump’s presidential campaign to people associated with President Joe Biden’s campaign earlier this summer, but that the recipients in the Biden campaign did not reply. According to officials with the Office of the Director of National Intelligence, the FBI, and the Cybersecurity and Infrastructure Security Agency, Iranian hackers have continued their efforts to send the stolen material—lifted from the email accounts of longtime Trump adviser Roger Stone—to U.S. media organizations. In a statement earlier this summer, Director of National Intelligence Avril Haines warned that Iran was trying aggressively to stoke discord ahead of the November elections.
• The House of Representatives on Wednesday failed to pass a continuing resolution (CR)—put forward by House Speaker Mike Johnson—to extend government funding for six months that included a measure that would require showing proof of citizenship to vote. The funding vehicle failed by a vote of 202-220, with 14 Republicans voting against the bill, two voting present, and three Democrats—Reps. Jared Golden of Maine, Marie Gluesenkamp Perez of Washington, and Don Davis of North Carolina—crossing the aisle to vote in favor of the measure. The GOP members were a mix of defense hawks concerned that six months was too long to extend military funding at current levels and those who typically vote against CRs because they’re opposed to current government funding levels. The federal government will shut down if Congress does not pass either the 12 funding bills required to fully fund the government or a stopgap bill to extend funding before September 30. The Senate will likely now try to negotiate their own version of a CR.
• The Justice Department filed a lawsuit on Wednesday against two Singaporean companies that owned and operated the container ship, the Dali, that crashed into and destroyed Baltimore’s Francis Scott Key Bridge in March after a power outage on the ship. The federal government is seeking $100 million in damages, alleging that the two companies were negligent in maintaining the vessel, which the suit calls “abjectly unseaworthy.” According to the DOJ, the ship’s owners knew the vessel was at risk of power outages and that four systems intended to provide steering in the event of an electrical failure did not function properly. “This was an entirely avoidable catastrophe, resulting from a series of eminently foreseeable errors made by the owner and operator of the DALI,” Principal Deputy Assistant Attorney General Brian M. Boynton said in a statement. 

Mission Accomplished? 

Wednesday was a win for devotees of the Purple Tie Theory. Addressing reporters in a regal-looking tie that close Federal Reserve watchers swear is an indicator of Fed Chair Jerome Powell’s mood, Powell announced that the Federal Open Market Committee (FOMC) had decided to cut the federal funds rate by an aggressive .50 percentage points, from the 5.25 to 5.5 percent range to 4.75-5.0. 

The move is a sign that the Fed believes that the U.S. economy has mostly emerged from a period of high inflation and that it now must focus on the other part of its “dual mandate”: ensuring low unemployment.

It was an atypical meeting for the members of the FOMC. The unusually large cut—the first half-point in four years—was not unanimously decided, as is typically the case. Governor Michelle Bowman, who favored a less aggressive 0.25 rate cut, dissented—the first time a governor has voted against the Fed’s ultimate decision since 2005. 

Still, the central bankers seemed generally bullish on achieving their dual mandate. “The committee has gained greater confidence that inflation is moving sustainably toward 2 percent,” the central bankers said, “and judges that the risks to achieving its employment and inflation goals are roughly in balance,” meaning that the risk of overshooting the Fed’s official target of 2 percent inflation is …

As a non-paying reader, you are receiving a truncated version of The Morning Dispatch. Our 1,541-word item on the Fed’s rate cut is available in the members-only version of TMD.

Worth Your Time

• In the Wall Street Journal, Rainer Zitelmann reflected on Friedrich von Hayek’s Road to Serfdom on the book’s 80th anniversary. “In the 1940s, state interventionism was on the rise in Europe and the U.S.,” he wrote. “As today, the prevailing belief was in aggressive government intervention in the economy, high taxes and strict regulations. There was a misconception among intellectuals that National Socialism was a form of capitalism. In 1939, the philosopher Max Horkheimer, co-founder of the Frankfurt School, said: ‘But whoever is not willing to talk about capitalism should also keep quiet about fascism.’” Road to Serfdom, Zitelmann noted, served to counter that narrative. “Hayek later explained that his book was primarily addressed to those among the British socialist intelligentsia who saw Nazism as a reaction to classical socialist trends. In reality, it was a necessary outcome of those tendencies.”
• Can political exiles save Russia from Russian President Vladimir Putin? Not likely, Michael Kimmage and Maria Lipman argued in Foreign Affairs. “The country’s political future will be written not in Berlin or London or New York but in Russia itself,” they wrote. “It will be written by those who live out the war there, whether or not they support it. To leave is to lose the opportunity to participate in the process and to abandon the country in wartime, inviting shame and stigma, especially for those who settle in the West. To leave is also to join the exiled opposition, an unstructured network far removed from the levers of power in Moscow. … Instead of fantasizing about political revolution, the West should recognize the richness of that diaspora, which lies in its many forms of ability and expertise, from the academic to the journalistic to the artistic. It is in the West’s self-interest to grant political asylum to Russians fleeing Putin’s despotism and to direct funding in a manner that promotes their cultural and intellectual contributions.”

Presented Without Comment

Wall Street Journal: How the Trump Campaign Ran With Rumors About Pet-Eating Migrants—After Being Told They Weren’t True

A Vance spokesperson on Tuesday provided The Wall Street Journal with a police report in which a resident had claimed her pet might have been taken by Haitian neighbors. But when a reporter went to Anna Kilgore’s house Tuesday evening, she said her cat Miss Sassy, which went missing in late August, had actually returned a few days later—found safe in her own basement.

Kilgore, wearing a Trump shirt and hat, said she apologized to her Haitian neighbors with the help of her daughter and a mobile-phone translation app.

Also Presented Without Comment

The Hill: [Pennsylvania Gov. Josh] Shapiro Forgets ID, Denied Alcohol While Trying To Celebrate Canned Cocktails Law

Also Also Presented Without Comment

New York Post: Rutgers President Jonathan Holloway To Resign From $1M-a-Year Job Over Toxic Campus Environment

“I haven’t talked about this until now. … I don’t want to be in an environment where I need, where my family needs, protection. That’s the part I didn’t bargain for.”

In the Zeitgeist

Two days before the 50^th anniversary of Billie Jean King’s victory in her famous “Battle of the Sexes” tennis matchup against Bobby Riggs, Congress voted to award the tennis icon the Congressional Gold Medal—making King the first female athlete recipient to receive the prestigious national honor, once President Joe Biden signs his approval.

King’s 1973 victory in the first “Battle of the Sexes” matches still ranks as the most-watched tennis event in television history. 

Toeing the Company Line

• In the newsletters: The Dispatch Politics team covered a Tim Walz rally in purple North Carolina, Jonah panned (🔒) faux outrage about media bias, and Nick took stock (🔒) of the incoherence of the nominally populist Republican ticket. 
• On the podcasts: Jonah is joined on The Remnant by Tom Standage, historian and deputy editor of The Economist, to discuss how humans react to innovation, and on Advisory Opinions, Sarah and David reflect on their controversial trip to Princeton.
• On the site: James Bloodworth writes about the recent convulsions of the European right—and why they might have more to do with declining working classes than animus toward immigrants.