Stimulus checks news summary | 8 March 2023
US Finance: Latest Updates
Headlines: Wednesday, 8 March 2023
- 3.8 million workers quit their job in January, down from 4 million in December.
- Fed Chair Jerome Powell warns of further interest rate hikes in congressional appearance
- How to claim the Child Tax Credit in 2023
- Biden proposesnew Medicare tax plan
- Student-loan borrowers should have a “Plan-B” for debt forgiveness
- Experts warn of an impending 20% drop in US housing
- Markets quiet ahead of crucial February jobs report
2023 Tax Season
- Who can claim the additional standard deduction?
- The way to access IRS transcripts to ensure a faster tax refund
- Did you receive a state stimulus check? No need to report the payment as income to the IRS.
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Rates will keep rising in 2023
With the labor market showing signs of strength, the central bank is laser-focused on bringing down inflation to stabilize prices.
In December, the FOMC projected that the median Federal Funds Rate (FFR) in 2023 would be 4.6 percent. After the Federal Reserve pushed up rates twenty-five basis points, they currently stand between 4.25 and 4.75 percent.
The Fed is set to announce further rate hikes in late March, and based on the projections and votes of FOMC members in December, the new median could be shifted to five percent or higher.
During Federal Reserve Chairman Jerome Powell’s opening remarks at his semi-annual economic updates to each chamber of Congress, he affirmed the central bank’s commitment to their dual mandate: “to promote maximum employment and stable prices.”
Chairman Powell informed congressional leaders that FOMC will likely raise rates to levels " higher than [they] previously anticipated.”
FILE PHOTO: An eagle tops the U.S. Federal Reserve building's facade in Washington, July 31, 2013. REUTERS/Jonathan Ernst/File Photo / Jonathan Ernst / REUTERS
Federal Reserve reports higher interest rates and inflation have decreased purchasing power
The Federal Reserve has released the March 2023 Beige Book, which reports on economic conditions across the country. The information is collected through the various districts that make up the Federal Reserve network.
"Several Districts indicated that high inflation and higher interest rates continued to reduce consumers’ discretionary income and purchasing power, and some concern was expressed about rising credit card debt," reads the report.
In many districts current economic conditions are reducing household savings, leading to increased vulnerability throughout the economy. If inflation does not come down and wages continue to fall, many households may face significant challenges if a recession materializes towards the end of this year or early next. Additionally, small and medium sized banks are reporting a drop off in loan demand as rates price many could-be borrowers out. ofthe market.
Layoffs increased in January, reached highest level since November 2020
Layoffs in the US in January hit 1.7 million, the highest level since November 2020, when another wave of covid-19 led to a minor wave in firings.
The 1.7 million figure is more aligned with the levels tracked before the pandemic, where in January 2020, the economy saw 1.8 million involuntary removals from the workforce. The increase, coupled with the fact that voluntary quits dropped as well, shows that businesses may be starting to react to higher interest rates.
Quits had come in over four million since May 2021, so the 3.8 million figure marks a shift in the labor market --however marginal.
Check out the BLS report for more information.
The 2023 tax season is well underway, starting 23 January this year. The official deadline for most taxpayers to file 2022 tax returns is 18 April 2023, but those filers who need some extra time can file for an extension to get six extra months to pull papers together, but they will still need to pay any outstanding taxes owed by Tax Day. Already, millions of Americans have submitted their declarations and refunds are going out.
While refunds are expected to be smaller this year, as the covid-era financial assistance doled out through the IRS through beefed up tax credits and stimulus payments have ended. But there are still thousands of dollars that Americans may be eligible for this tax season to reduce their tax burden or even increase their refund. However, you can only claim a tax refund if you file a tax return, and meet the qualifications of course.
One such credit for taxpayers that can be worth up to $2,000 per eligible child is the Child Tax Credit. Here’s a look at how to claim the credit.
President Biden has proposed some key changes to the tax system that he hopes will extend Medicare’s solvency by up to 25 years. The changes would see the wealthiest Americans pay a slightly higher rate of Medicare tax and would close several loopholes in the existing tax system.
The Child Tax Credit can be worth thousands of dollars for eligible families, provided that their tax dependents are below the age threshold.
Lawmakers stand behind Biden student loan forgiveness
The Supreme Court heard oral arguments on the legality of the Biden-Harris adminstration's student loan forgiveness program at the end of February. The fate of the program, which would cancel up to $20,000 in federal student loan debt for eligible borrowers, rests in the hands of the nine Justices after it was blocked by lower court decisions.
While Republican lawmakers have railed against the program as "unfair, costly, and an overreach of executive authority" Democrats are standing behind the President. 126 Democratic lawmakers signed a letter to Biden expressing support for the plan to provide relief from student loan debt. They are optimistic that the legal challenges to the program will fail, thus benefiting 40 million Americans who will see their debt burden reduced if not completely erased.
While campaigning for the presidency in 2020, Joe Biden promised to enact widespread student debt relief if he won election. Yet after more than two years in the White House, there is still uncertainty regarding the future of President Biden's Student Loan Forgiveness progam.
The matter is currently being considered by the Supreme Court, leaving borrowers in limbo until the summer. What would happen if the Justices decide not to allow the program to go into effect?
How high will interest rates go in the US?
The Federal Reserve is considering further interest rate hikes this year, Jerome Powell suggested on the first day his testimony before Congress on Tuesday. Interest rate hikes have a major impact on the mortgage payments made by millions of Americans every month. The Fed is determined to stick to this policy to bring down inflation, but it will have some negative consequences in the short term.
If you're in the process of filing your tax return, you may be on the lookout for tax credits to boost your tax refund. In an attempt to move the United States toward sustainability, the Internal Revenue Service (IRS) is offering a tax credit of up to $7,500 for Americans who purchase an electric vehicle (EV).
The credit was inhanced in the Inflation Reduction Act passed by President Joe Biden in 2022. Through this legislation, the government allocates more than $370 billion in subsidies for technologies solar, wind and electric cars.
Here's how you could claim the $7,500 tax credit in your 2023 filing...
Sen. Warren grills Jerome Powell on unemployment
The Federal Reserve has been following a policy of interest rate hikes for the past 12 months, attempting to bring down inflation by making borrowing more expensive. Fed Chair Jerome Powell seems intent on sticking to this policy until inflation shows more sign of falling, but these measures have been criticised by Sen. Elizabeth Warren.
The progressive Senator told Powell yesterday that his proposals risk making 2 million American unemployed.
Need help with your IRS tax filing?
Tax season can be a stressful time of year with significant consequences if you submit a filing incorrectly. To make sure you have everything in order, and to help maximise the tax benefits you may be eligible for, the IRS is offering an Interactive Tax Assistant tool to answer any questions you may have.
There is not little over five weeks until the tax deadline, so make sure to take advantage of this handy resource...
The IRS once again faces a massive job to oversee tax season 2023. The tax agency is expecting to process over 168 million tax returns this year and so far the process is going more smoothly than the previous two cycles.
This is in part down to a simpler filing process without last minute changes like those that were implemented during the pandemic and subsequent economic disruption.
What did Jerome Powell say about interest rates?
Jerome Powell, Chair of the Federal Reserve, told Congress yesterday that interest rates will likely have to rise further to address the continued problem of inflation. Powell told lawmakers that the strength of the US economy, underlined by extraordinarily high job creation numbers this year, will push the central bank to hike interest rates further in the coming months.
Food stamps, also known as SNAP benefits, are jointly overseen by federal and state authorities, meaning that the delivery of the support varies across the country. In California the program is known as CalFresh; a state-supervised and county-operated initiative.
California has no asset or resource limit for SNAP benefits, but does have eligibility requirements on both gross and net income. The gross income limit is 200% of the federal poverty level, while the gross figure is 100%.
We take a look at who is eligible for the program...
Jerome Powell reiterates 2% inflation target
"My colleagues and I are acutely aware that high inflation is causing significant hardship, and we are strongly committed to returning inflation to our 2 percent goal. Over the past year, we have taken forceful actions to tighten the stance of monetary policy. We have covered a lot of ground, and the full effects of our tightening so far are yet to be felt.
"Even so, we have more work to do. Our policy actions are guided by our dual mandate to promote maximum employment and stable prices. Without price stability, the economy does not work for anyone. In particular, without price stability, we will not achieve a sustained period of labor market conditions that benefit all."
What next for the housing market in 2023?
Robert Reffkin, CEO of online real estate brokerage Compass, spoke with CNBC's Closing Bell: Overtime on where the housing market is headed. In December, pending listings that had accepted offers were down 40 percent, but in every week since then the number of listings with accepted offers has increased.
Even in February when prices were higher than in January. Given what he sees now, he stands by his call that the fourth quarter of 2022 was the bottom of the housing downturn.
Will there be a recession this year?
Nine of the last ten US recessions have been predicted by an inverted yield curve between 2-year and 10-year US Treasury bonds. While the curve first went negative in July 2022, after Federal Reserve Chair Jerome Powell made hawkish statements on interest rate policy going forward in Tuesday’s Senate hearings the curve hit levels not seen since 1981.
The key indicator shows that investors are more pessimistic about the future of the economy, worried that the Fed will overcorrect plunging the economy into recession. However, not all analysts are convinced that will be the outcome, as the US economy has show itself to be incredibly resilient in the face of aggressive rate hikes up to now with economic data exceeding forecasts.
All the latest financial news and information...
Good morning and welcome to AS USA, where we'll be bringing you all the latest from Congress as Federal Reserve Chair Jerome Powell testifies before the House today. The central bank chief hinted yesterday that more interest rate hikes may be on the cards to help bring down inflation.