Relief checks: summary news 5 January
Headlines: Thursday, 5 January 2023
- US housing market likely to slow in 2023, experts warn
- California inflation relief payments will conclude this month
- Social Security recipients receive COLA boost of 8.7% to start the year
- Medicaid expansion reversed as part of $1.7 trillion spending bill
- Supreme Court to hear challenges to Student Loan Forgiveness in February
- What next for interest rates as inflation starts to ease?
- Minimum wage to rise in several US states in 2023
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What have experts said about interest rates this year?
The inflation data received so far in October and November show a welcome reduction in the pace of price increases, but it will take substantially more evidence to give confidence inflation is on a sustained downward path.
It has been easy, and necessary, for the Fed to raise interest rates aggressively in 2022 with interest rates starting from zero, unemployment below 4 percent, and inflation at a 40-year high. It gets a lot tougher to raise rates once the economy slows, unemployment rises and inflation remains stubbornly high.
WHat is the Federal Reserve likely to do with interest rates in 2023?
As inflation is nowhere near the 2% target set by the Fed it is unlikely that there will be a reduction in the interest rate and a near certainty that it will increase further.
A forecast from the central bank showed that the interest rate could still be at 5% in a year’s time, meaning more increases are likely before they begin to taper off. Currently, inflation stands at 7.1%.
Which states' health insurance is getting much more expensive?
Two states, Wyoming and West Virginia, have healthcare costs that are 50% more expensive compared to the national average, with both having annual costs of over $10,000 a year on the silver plan alone.
Three states have silver plans that cost less than half of this crazy figure: New Hampshire, Maryland, and Minnesota.
Healthcare costs are increasing for most Americans in 2023. Without a public healthcare system price rises in some states may put thousands onto worse coverage plans and potentially leave them staring at financial ruin for a problem that was not their fault.
According to valuepenguin.com, the average monthly cost of health insurance in the United States is $560, a 4% increase on 2022′s $531. This is based upon the average silver plan cost for a 40-year old applicant.
At the start of the year 23 states imposed an increase on the state minimum wage, giving some respite to low-paid workers after a year of rampant high inflation.
Three states will raise their minimum wage to $15 or more joining California and the District of Columbia as well as a handful of municipalities that have already mandated the sought for level. That amount is more than twice the federal minimum wage of $7.25 per hour which has been in place since the summer of 2009.
Here's what that could mean for you...
Will inflation fall in 2023?
The Federal Reserve is trying desperately to bring down the rate of inflation after a year of historic price rises in 2022. After a series of interest rate hikes the November CPI report showed that inflation was beginning to fall in the United States, giving reason for optimism in the New Year.
Along with New York, California is one of the most expensive US states for buying a home. House prices nationally rose by 45 percent between January 2020 and June 2022, that’s 15 percent more than the run up to the last housing market bubble.
In the same period house prices in California rose 47%, putting it slightly above the national average. Does this mean that a market correction is on the cards for the Golden States? We take a look...
Fed says it's too early to reverse interest rate hikes
The Federal Reserve implemented a number of interest rate increases during 2022 in a bid to keep inflation under control. These rate hikes, however, are a fairly blunt tool and have left borrowers dealing with sky-high interest rates on their loans, mortagges, and other financial products.
But, for now at least, the Federal Reserve does not appear likely to reverse the increases and may in fact enforce further rises in the coming months.
“While I believe it is too soon to definitively declare that inflation has peaked, we are seeing increasing evidence that it may have,” Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, wrote in a statement. “In my view, however, it will be appropriate to continue to raise rates at least at the next few meetings until we are confident inflation has peaked.”
When will the December inflation report be released?
Each month the Bureau of Labor Statistics (BLS) releases a Consumer Price Index report for the previous month, outlining how typical prices have changed. The figures offer a crucial insight into the rate of inflation and are compared to the same month in the previous year, to give an annualised rate.
The next CPI report will come out next week, on Wednesday, 12 January at 8:30am Eastern Time.
After inflationary pressures pushed up prices across the board in 2022, household incomes have effectively been devalued. This has encouraged the IRS to update income thresholds for the upcoming tax year, which could save you money when it comes to filing time.
Here’s a look at what has changed for 2023...
The past few years have seen great upheaval in the United States’ housing market, a period of instability sparked by the covid-19 pandemic in early 2020.
At first the economic shutdown left interest rates, and therefore mortgage rates, on the floor. However to address sustained high inflation during 2022 the Federal Reserve instituted a number of interest rate hikes, making borrowing especially expensive.
We take a look at what real estate experts expect from 2023...
Auto industry struggled in 2022
Two key factors conspired to stangle the United States' automobile market in 2022, resulting in a significant fall in the number of car and truck sales. The decrease was largely due to a shortage of semi-conductor chips required to make modern cars, a consequence of the global supply chain issues.
In addition to that shortage, rising interest rates made financing options much more expensive and squeezed out a portion of the market.
EV tax credits from the Inflation Reduction Act
The Biden Administration's Inflation Reduction Act was heralded as a key legislative achievement when it was signed into law last year, but not everyone is aware of the programs included in the package. One such measure is a significant tax credit for anyone who buys a new electric car, worth up to $7,500.
A statement from the White House reads: "The Inflation Reduction Act lowers energy costs for consumers and small businesses while creating good-paying jobs as America’s clean energy economy and manufacturing sectors grow."
Has my state raised the minimum wage?
Workers in California will now receive at least $15.50 per hour after the state's employment laws upped the minimum wage. The Golden State was one of 23 states who introduced a minimum wage increase at the start of 2023, with another four set to impose a boost later on this year.
Full list of minimum wage increases
Will interest rates fall in 2023?
Throughout 2022, in a bid to tackle the sustained high rate of inflation, the Federal Reserve imposed a series of interest rate hikes. Their aim was to cool the overheating economy by making borrowing more expensive, but this move has also had broader consequences in the economy. There are hopes that the Fed may be able to lower interest rates in 2023, but inflation remains the top priority.
What are the Standard Deduction thresholds for 2023?
- Single; or Married and filing separately - $13,850
- Married filing jointly and Surviving spouses - $27,700
- Head of household - $20,800
The most well known change to the 401k retirement plan at this stage is the increase of the contribution limits. The IRS will increase the thresholds in 2023, allowing workers to contirbute more towards their retirement.
However, it isn’t just the contributions limits that are increasing. Plans inside the latest yearly spending bill for 2023 set to make a few key changes to the retirement plan that look set to make it easier for workers to save money for their future life.
Here's everything you need to know...
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Good morning and welcome to our dedicated financial news live feed. We'll have all the latest throughout the day on Social Security payments, the California inflation relief and other programs in the United States.