The Fed’s Rift Over Rate Cuts & Mamdani Wins NYC’s Mayoral Primary
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It's your turn. Visit ServiceNow.com. Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, Jeff Bezos' wedding in Venice is getting people angrier than when a best man speech runs over 10 minutes. Then mayoral candidate Zoran Mamdani pulled off one of the biggest political upsets in New York City history last night. It's Wednesday, June 25th. Let's ride.

If you're like me, every single one of your meetings over the last few days has started with five minutes of chatting about how hot it is. And it's entirely justified. A heat dome over the East Coast has set June records for a bunch of major cities. Yesterday, Boston hit 102 degrees, the hottest it's ever been in June. And Providence, Rhode Island reached 100 degrees. Newark was 103, tying a June record. And Philly notched 100 degrees for the first time since 2012.

If there's any silver lining about this, it's that the humidity has been relatively low. So you can make like the people in Arizona and say it's a dry heat. Temperatures got so intense that some of the bench players at the FIFA Club World Cup games watched from inside the locker room, which is kind of nuts. Temperatures also got so intense in the Morning Brew Daily studio that I wasn't sure if we were going to make it through yesterday's show. But the good news is that relief is on the way. Today will be hot, but not

quite as extreme, while cooler temperatures more typical of the June period will appear on Friday along the East Coast. So hold out. You got this. Get some air conditioning.

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While the Indiana Pacers fell just short of pulling off an upset in the NBA Finals, a different upstart underdog got the dub last night. State Assemblyman Zoran Mamdani defeated former Mayor Andrew Cuomo in the New York City mayoral Democratic primary last night.

While Cuomo was trying to pull off a comeback of his own after resigning from office in 2021 amid a sexual harassment scandal, Mamdani, a 33-year-old Democratic socialist, emerged out of nowhere to storm to victory. Their race was an ideological battle between the moderate Cuomo, who had the backing of the city's billionaires,

and the socialist Mom Donnie, who brought out young New Yorkers in record numbers thanks to a social media savvy campaign. Also driving support for Mom Donnie is a housing crisis in New York City that is worse than ever. Mom Donnie campaigned on promises of rent freezes on stabilized apartments,

$70 billion going towards affordable housing and the use of public land to build more homes. He's also floated ideas like free public buses, universal childcare, and creating a city-run grocery store, all paid for by taxes on the rich. That put him at odds with New York City's establishment, who broke out their checkbooks in support of the centrist Cuomo. DoorDash's

plowed a million dollars into Cuomo's campaign, while billionaires Bill Ackman, Barry Diller, Ken Griffin, and former Mayor Michael Bloomberg all contributed as well. But it wasn't enough to defeat Mamdani, who now heads to the general election, where he is set to face off against incumbent Mayor Eric Adams.

Nate Silver called this a pretty thorough blunder.

He used the A word, and I think it's because Mamdani focused solely on one particular issue, and that is affordability. People can't afford to live in New York City. He hit that over and over again. The city's vacancy rates for apartments right now dropped to a record 1.4 percent. The monthly rent for a two-bedroom apartment is $1.4 billion.

is up 17.5% over the past year to over $5,500. That was the biggest jump of any U.S. city. He ran mostly a single-issue campaign, saying the regular person can't afford to live in New York City, and that propelled him from obscurity to a stunning victory. And then outside of the affordability crisis, Mamdadi's

tax plan is also what has wealthy New Yorkers ears perking up because he wants to impose a 2% income tax on New Yorkers who earn more than $1 million a year. He also wants to bump up the city's corporate tax rate to match that of New Jersey to 11.5%. He thinks that those

alone will bring in $9 billion in new revenue. But also, New Yorkers are saying that if that does happen and if those tax bans do pass, they'll just leave. That has happened before where taxes raise and wealthy people move to other states. Daniel Loeb, a hedge fund manager, said that a lot of people are going to go to Greenwich. Ron DeSantis chimed in and said he thinks a lot of expats will come down to Palm Beach, which

consider the source, he's the leader of Florida. So it does look like that is one thing that has the Wall Street type very nervous because if those taxes go up, they might make their home somewhere else. - Yeah, the chief executive of the Partnership for New York City represents the top business leaders. This is the most influential business community lobby in the entire city.

She said, Catherine Wilde, terror is the feeling. And I think they're probably looking to places like Chicago where certain policies and a lack of public safety led to a and higher taxes led to a major corporate exodus from the city in the past few years. Companies like Boeing, Caterpillar, Citadel and Tyson Foods left.

all have moved their headquarters or significant parts of their presence in Chicago out of the city. Ken Griffin, who is the leader of Citadel, kind of led the charge down to the southeast coast of Florida. I think that many business elites here are worried. And to be clear, Cuomo said that he does plan to run as an independent in the general election, regardless of what the primary outcome was. He didn't actually confirm that last night as he was processing the

the loss but it is setting up another showdown between mom donnie between incumbent mayor eric adams and uh... andrew cuomo so this is not the last in this uh... showdown of these two ideologies so expect to see more billionaires rally behind cuomo and expect to see more you know everyday people show their support for mom donnie who really resonated with his

social media first campaign. I mean, Mamdani walked the entirety of Manhattan tip to tip and just kind of appealed to a lot of younger people. So his campaign being a flood the zone approach of let's just hammer social media really resonated with a lot of people and is why he pulled off this shocking upset last night.

To cut or not to cut, that is the question Jerome Powell was asked numerous times as he testified on Capitol Hill for day one of his two-day hearing gauntlet in front of lawmakers eager to hear about the Fed's plans for this year. To those questions, Powell essentially answered, not yet, but I'm open to it.

For six months, the Fed has left interest rates at an elevated level, saying that the fight against inflation wasn't over and that President Trump's tariffs could cause inflation to go even higher later this summer as they made their way through the economy. Powell maintained that wait-and-see approach during his testimony yesterday, telling lawmakers that since the economy is hard to get through,

Thank you.

which is breaking with Powell's strategy. The most recent defector, the Fed's vice chair for supervision, Michelle Bowman, said that if inflation continues to hold steady, then, quote, it is time to consider adjusting interest rates to keep the job market healthy. And that jives with President Trump's repeated calls for Powell to lower rates.

So, Toby, Powell is facing pressure from the most powerful person in the world and from people within his own ranks to take out the exacto knife and begin cutting. Can he withstand the heat? He usually can because he is very good at sticking to his message. We want to wait and see. And the big wait and see here is tariffs, which, if you look back historically, have typically resulted in price increases, but usually one-time price increases. Only very rarely have they been responsible for longer-term inflation pressure. And so,

Powell is kind of weighing that where he wants to see those price increases appear and see what they do to inflation before making any moves. But then you start thinking back to a few years ago where similar rhetoric was being pushed out by Powell during the pandemic, saying that we think inflation will be transitory. That word was thrown a lot during the pandemic. Turned out inflation was not transitory at all. It was here to stay. And we went through a very elevated

long period of elevated inflation. So maybe that is something that is in the back of the Fed's mind right now, where they still just want to wait and see and make sure that these tariffs aren't going to jack up inflation over an extended period of time. Right. And until now, we haven't seen these tariffs come through inflation at all. CPI, the Consumer Price Index for May, jumped

just not jumped, ticked up barely 0.1%. Powell is still telling lawmakers that I think tariffs will come at some point. He said all the professional forecasters that I know outside of the Fed do expect a meaningful increase in inflation over the course of this year. And he pointed to reports going in June and July as when he can start seeing those tariff increase. But

You also saw the stock market soar yesterday. The Nasdaq hit a new record, and that is probably because one of the reasons is that Powell did leave the door open to a July cut, which those other Fed governors were pushing for. He didn't say it was guaranteed at all, but he didn't necessarily close the door. He said if inflation pressures do remain contained, then we could get to a place where we cut rates sooner rather than later. Yeah, we'll just look at what

market is pricing those percentages at. And right now, there's still only about a 23% probability of a cut at that July meeting. So that means there's a 77% chance that investors stay pat there. There's definitely a higher probability come September's meeting that we will see a rate cut then.

If you look at a map of planes flying around the world, you'll notice that there are more holes than the plot of Interstellar. As more geopolitical conflicts have sprouted up, certain regions have become no-fly zones for planes, scrambling the aviation map and causing higher headaches and costs for airlines.

We saw that happen this week when the missiles flying from the Israel-Iran war all but emptied the airspace above Jordan, Lebanon, Syria, Iraq, and Iran, one of the busiest zones for commercial aviation, which forced dozens of airlines to cancel flights to the region and forcing planes flying between Asia and Europe to take the longer way around. And on Monday, Qatar and Dubai's international airports closed temporarily while Iran attacked a U.S. Army base, shutting down one of the most important global flying hubs and stranding thousands of passengers.

Airlines have gotten used to improvising around wars happening 40,000 feet below since Russia invaded Ukraine in 2022, when most Western governments banned their airlines from flying over Russia. And that's led to much longer flight times. For instance, traveling between Helsinki and Tokyo now takes up to 3.5 hours longer than it did before the war began. Toby, all these detours to avoid geopolitical hotspots are not just a headache.

it's expensive. It's super expensive. And you're right. I pulled up flight radar yesterday. Usually that's more of a you thing, but I was looking at it and you do just see these gaping holes on it. And it's so clear where the airspace is closed. And yes, that does put a ton of pressure on the airline's bottom line because longer routes means more fuel expenditure. It means less happy customers because people are having to travel for longer. It's

also less efficient, which means you're burning more fuel, which is bad for the environment. So the ripple effects do start to occur when you have these narrow corridors that are the only places where airlines can travel through right now, and they are shrinking right now. And then also, it's just a little unsafe out there for a lot of planes when you have drones and missiles flying around. GPS spoofing has been another big issue that these pilots have been contending with, where

The military forces on the ground are jamming GPS signals, which affects commercial airliners who are flying above. And it just makes it, they say it's still safe to fly because they can fly without relying specifically on their instruments, but not a comfortable flying experience when your GPS monitor is going, hitting the fritz. Now, all of this map scrambling has led to some

quirky unintended consequences like the Taliban getting rich. So during while the Israel-Iran war was going on, there was a increase of 500 percent over planes flying over Taliban controlled Afghanistan because they wanted to avoid Iranian airspace. So that led to

A huge windfall for the Taliban because every time a plane flies over Afghanistan, they pay the government $700 for each flight. So each week while that war was going on, that led to an inflow of more than $1 million for the Taliban. So the scrambling of flights, the entire aviation map has led to some really interesting indirect consequences where money is shuffling around the world as well. Now let's take a quick break before we tell you about Jeff Bezos' big old wedding.

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Jeff Bezos just wanted to get married like any normal guy. But it's really hard to do that when you're one of the richest men alive and you're throwing a massive multi-million dollar party in Venice, Italy, one that locals really, really don't like. Bezos' wedding to journalist Lauren Sanchez this week has already seen some events moved to a more isolated part of the city due to security concerns and protesters.

That comes after the pair has withstood pressure from groups within Venice that claim the ritzy nuptials will turn the city already drowning in tourists into a private amusement park for the rich. The backlash has been vocal and plentiful. Climate and anti-inequality activists recently unfurled a big banner in the middle of the iconic St. Mark's Square that read, if you can rent Venice for your wedding, you can pay more tax.

The wedding has touched a nerve as residents feel neglected within their own city. The number of people living in the city center has dropped from 100,000 in the 1980s to less than 50,000 today, a period during which hotels and tourism rentals have surged.

There are reports that residents and protesters are planning to jump into Venice's many canals and use their own bodies and boats to block water taxis, bringing guests to the wedding this weekend. That is some serious dedication, Neil. They're already claiming a victory, too, because reportedly they had they wanted to have this big ceremony on Saturday at this 14th century building called the Scuola Grande della Misericordia. And

That is not happening anymore, according to Venetian officials, specifically because of the protesters. So these people who are opposed to the wedding say, hey, we've already got a huge W on our hands. We're already disrupting Bezos' wedding plans. But in general, this wedding has just become a flashpoint for a lot of things that people see that's wrong in the world, excess wealth and mega billionaires and Bezos, Amazon exploiting—

Venice the way that he exploits Amazon's workers and over tourism and climate change. So everything's kind of coming together in this whirlwind, in this few days, this celebrity-packed wedding right in Venice. Which is interesting too, because Venice has been home to a lot of these ritzy events for decades now, because people come for the art and architectural shows, they come for their annual film festivals. And then back

Back in 2014, George Clooney got married to his now wife, Amal Clooney, there as well. So this is not the first big party that Venice has seen. But you're right, it is emblematic of what a lot of citizens feel is everything wrong with the city. They think that their mayor, Luigi Brugano, cares more about boosting tourist numbers than actually improving the residents' lives there. So you're right, it is just this flashpoint, a lot of coming together of mayorals.

many themes of frustration amongst its citizens. Let's go to this mayor because he is ecstatic about Bezos coming to Venice. He said Bezos could have chosen anywhere in the world and we're happy that he chose Venice. He said he we will have to apologize to Bezos on behalf of the protesters.

I hope that Bezos comes. Not all Venetians think like these protesters. So he has rolled out the red carpet and said, well, welcome to my city. I think this is overall a good thing. And you also have other business owners around the city saying, yeah, well, I'm getting a lot of business from this. So I'm pretty happy. It also drew a rare audience.

a statement from the wedding planner, Lanza and Bosina. Now, wedding planners are extremely secretive. I went to their website yesterday. There's nothing on it. It just says contact us. So, you know, this is a very exclusive, elite, secretive firm. And they pushed back on the contention that they were taking over the city. They said the instructions from our client and our own guiding principles were abundantly clear. The minimizing of any disruption to the city, the respect to its residents and institutions is

and the overwhelming employment of locals. They pointed to a big chunk of donations that Bezos made to Venetian charities. So they're saying it's 200 guests. That's not actually a big wedding. We're not taking over the city. Everybody calm down. And if you thought that wedding planning was stressful enough, this couple has already made it even more stressful because they've booked multiple options, multiple places, multiple buildings for each one of their events, multiple

both to mislead paparazzi and then also to try to dodge and weave protesters. So imagine getting married, but you're not even sure where the party's going to happen or where the nuptials will actually occur because you have so much going on. Just get married in your backyard, Jeff Bezos. I don't understand the reason to...

put all this stress upon things, but you want a big party. So he's throwing a big party. All right, let's bring to the finish with some final headlines. More Amazon trucks are about to be chilling on a dirt road after the company announced plans to bring same day and next day delivery to the tens of millions of people who live in 4,000 smaller cities, towns, and rural communities across the United States.

The $4 billion investment in new facilities and more delivery drivers is an attempt to bring the people of small-town America the speedy Amazon service that big city folks are used to, and also a way to get a fresh new batch of customers signed up to its Prime subscription. Amazon said it will stock its rural warehouses with popular everyday items like wireless headphones, coffee pods, paper towels, and diapers, while being attuned to local preferences. For instance, they order a lot of wild bird food in Dubuque, Idaho,

travel backpacks in Finley, Ohio, and after sun body butter in Sharptown, Maryland. Yeah. What a fascinating logistical puzzle this is because they're using machine learning to predict what these communities like in large quantities. And then, yes, stocking up on those to increase efficiency. Also, this is happening ahead of Amazon Prime Day, which is coming up

soon July 8th through the 11th when all these big sales happen. So I do think that they've identified this as one of the last real markets that Amazon can expand to within the U.S., go after these smaller communities because there are people who live there who do need toilet paper just like everyone else. So just a fascinating perspective

positioning of what they're doing ahead of this big sale. You probably see even more criticism of Amazon wiping out mom and pop stores because a lot of the people who live in these areas do get those everyday essential items from the local stores in the area. So we'll start to see those. Maybe we'll see those flashpoints pop back up.

Atlanta ends the next time you pull up to the Buckhead Saloon in an Uber. It might be driven by nobody. Starting yesterday, Uber began offering customers rides from driverless Waymos in Atlanta, becoming the second market after Austin, Texas, where it's launched the partnership. Waymo will deploy dozens of robo taxis across 65 square miles of the ATL that riders can summon using the Uber app.

They think you'll enjoy the experience. Uber said that riders rate their Waymo trips in Austin 4.9 out of 5 stars on average. But while Waymo has a wide lead in the robo-taxi game, the competition is heating up. In Atlanta, rival Lyft could begin an autonomous ride-hailing service in partnership with a startup May Mobility as soon as this summer. And Tesla just launched its own robo-taxis in Austin on Sunday. Toby, it's an all-out turf war.

It is wild. I mean, we went from robo-taxis being only a thing over in San Francisco to now they're kind of everywhere and the competition is heating up. Speaking of that competition, Tesla did roll out its robo-taxi pilot in Austin over the weekend and they've already been...

contacted by the National Highway Traffic Safety Administration who saw all these videos on social media, some of them of which showed robo-taxis driving a little chaotically. There's one where a robo-taxi swerves into an intersection into oncoming traffic before crossing back over double yellow lines. So it's not a full investigation. These conversations are pretty normal to talk to automakers over these safety issues.

But that being said, once Bloomberg reported the news, Tesla shares fell around 1.5%. So a little bit of a nervy time if you are Elon Musk rolling out your robo-taxi program. One other funny detail of this Uber, Waymo, robo-taxi, Tesla beef and mashup right now is that Travis Kalanick, who founded Uber, followed up with Elon Musk.

followed the robo taxi account on X yesterday. So everyone's saying the funniest outcome possible would be Travis Kalanick coming back, heading up Tesla's robo taxi unit to take on Uber and Waymo in another showdown with the Uber founder. Finally, Krispy Kreme's partnership with McDonald's has gone from hot and ready to cold and stale with the companies announcing yesterday that they would stop

selling donuts at McDonald's restaurants by early July. This deal was initially heralded as a really good idea. After a successful single state test, Krispy Kreme expanded to 2,400 locations with expectations of a nationwide rollout by 2026.

But sales data trickled in that was softer than a fresh baked dozen, causing McDonald's to pause the partnership back in May. Overall, it's been a disaster of a year for the donut maker. Krispy Kreme stock is down about 73% so far this year. No more donuts with your McMuffins, Neil. Ultimately, efforts to bring our costs in line with unit demand were unsuccessful, making the partnership unsustainable for us. That's Krispy Kreme CEO Josh Bollinger.

Charles Worth. I guess people just don't want a donut after they have a Big Mac. Those two didn't pair together or McDonald's has enough sweet treats of its own where people didn't feel the need to opt for an additional donut. I know you have thoughts on that. Well, I have thoughts. I'm actually just going to piggyback off of Truist analysis. Bill's Chappell's notes. He said the issue is 2020 hindsight now, but the decision to go from a one state test to a national rollout versus FDIC.

a regional rollout was a mistake. So he's just putting it on the fact that this wasn't the right plan to introduce donuts to the entire community. But I think you are right. Like that amount of calories paired with the calories that you're already getting at McDonald's, that is a heavy breakfast for sure. And that is all the time we have. Thanks so much for starting your morning with us and have a wonderful Wednesday. If you have thoughts on today's episode, send an email with questions, comments, or feedback to morningbrewdailyatmorningbrew.com.

Let's roll the credits. Emily Milliron is our executive producer. Raymond Liu is our producer. Our associate producers are Olivia Graham and Olivia Lake. Hair and Makeup is opening up presents for Half Christmas. Devin Emery is our president, and our show is a production of Morning Brew. Great show today, Neil. Let's run it back tomorrow.

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