On The Money — Yellen warns of global shock from US inflation battle 

The Treasury secretary and former Federal Reserve chief said the central bank’s rate hikes could have a brutal effect on the rest of the world. We’ll also look at dark economic projections and a major shift in the way the federal government polices cannabis. 

But first, we take you inside the Senate GOP battle over Trump’s first impeachment. 

Welcome to On The Money, your nightly guide to everything affecting your bills, bank account and bottom line. For The Hill, we’re Sylvan Lane and Karl Evers-Hillstrom. Someone forward you this newsletter? Subscribe here.

Yellen warns of ‘spillover’ effects of rate hikes

Treasury Secretary Janet Yellen on Thursday acknowledged the negative effects that continued interest rate hikes by the Federal Reserve and other central banks are having outside U.S. borders. 

“For major economies facing high inflation, the immediate task is to return to an environment of stable prices. Central banks bear the prime responsibility. But it is important to recognize that macroeconomic tightening in advanced countries can have international spillovers,” said Yellen, who served as Fed chair between 2014 and 2018 after two stints as a central bank governor. 

“Emerging markets and developing countries are often most acutely affected both by global shocks and by spillovers from the policies of advanced countries,” she said. 

The background:  

• Her remarks come after a highly critical report from a United Nations economic body earlier in the week that urged against continued rate hikes that spelled trouble for the global economy. 
  
• The warning from Yellen also comes after the International Monetary Fund (IMF) on Thursday warned of a “darkening global outlook,” and other voices in the global economy have also expressed displeasure with the Fed’s rate hikes. We’ll have more on that below too. 

The Hill’s Tobias Burns has the latest here. 

PASS THE CHIPS 

Biden touts recent IBM, Micron investments amid broader economic concerns 

President Biden traveled to New York on Thursday to tout another major manufacturing investment, this time from IBM, as a sign of confidence among business leaders in the U.S. economy. 

Amid concerns about gas prices, broader inflation and rising interest rates, Biden on Thursday sought to focus on a particular bright spot for the administration: Recent investments by major tech companies spurred by federal legislation to support semiconductor manufacturing and shore up the domestic supply chain. 

• Biden celebrated a planned $20 billion investment from IBM and an up to
  $100 billion investment from Micron to manufacture microchips, which could help prevent another situation where a shortage of chips sends consumer prices soaring. 
  
• Still, those long-term solutions won’t alleviate economic headwinds and policy decisions from the Federal Reserve that are largely out of the Biden administration’s control.  

Karl and Brett Samuels have more here. 

BIG LOSSES

IMF predicts darkening outlook for global economy, $4 trillion loss 

The International Monetary Fund (IMF) is predicting an increasingly gloomy global economic outlook for the coming years, projecting a $4 trillion loss in global output from now to 2026.  

Kristalina Georgieva, the managing director of the IMF, said in remarks at Georgetown University on Thursday that the world is seeing a “fundamental shift” in the global economy from relative predictability to greater uncertainty.  

• She said the IMF predicted a strong economic recovery from the COVID-19 pandemic as global growth reached 6.1 percent in 2021.  
  
• Most economists thought the recovery would continue and inflation would subside with vaccine access helping restore supply chains, but multiple economic shocks have changed the outlook, she said.  

“Multiple shocks, among them a senseless war, changed the economic picture completely,” she said, referencing Russia’s invasion of Ukraine. “Far from being transitory, inflation has become more persistent.”  

The Hill’s Jared Gans takes us there. 

THC TURNAROUND

Biden to pardon all federal offenses of simple marijuana possession 

President Biden will pardon everyone who has been convicted of simple possession of marijuana under federal law, the White House announced Thursday. 

The White House is urging governors to take similar action. Administration officials told reporters the pardons could benefit about 6,500 people, though officials said there is nobody in federal prison for simple marijuana possession. 

Biden is also asking the secretary of Health and Human Services and the attorney general to “expeditiously” review how marijuana is scheduled under federal law. 

The Hill’s Nathaniel Weixel has more here. 

Read more: Advocates cheer Biden marijuana decision, call for legalization

Good to Know

California Gov. Gavin Newsom (D) announced on Thursday that his state will begin sending tax refunds of up to $1,050 to residents. 

State lawmakers approved the refunds, which vary in amount based on individuals’ 2020 tax returns, as part of California’s annual budget signed by Newsom in June to aid residents as they face high inflation. 

Here’s what else we have our eye on: 

• Amazon announced Thursday it will hire 150,000 workers in the U.S. for the upcoming holiday season. 
• Elon Musk’s attorneys asked a court for a stay Thursday in the trial between the billionaire and Twitter, the social media company he is seeking to buy.  
• A former Uber executive has been convicted on charges that he obstructed a Federal Trade Commission (FTC) investigation involving two hacks of the company that happened in 2014 and 2016.  
• Toyota has restarted its electric vehicle (EV) production after fixing issues with car wheels and airbag units following a mass recall earlier this year.  

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.