USA finance and payments | Child Tax Credit, Inflation, interest rates, CPI report, S.S. disability | 17 June
Headlines: 17 June 2022
- Federal Reserve announces plan to hike interest rates with historic speed to combat inflation
- Pandemic-era relief measure providing free meals for school students comes to an end
- Fed Chair Powell: We are "focused on returning inflation to our 2 percent objective"
- Elon Musk faces $258bn lawsuits for alleged Dogecoin "pyramid scheme"
- Biden may remove certain trade tariffs on China in a bid to reduces prices for consumers
- Real wages fell 0.6 percent while inflation led to an average price increase of one percent across the market in May
- Bitcoin drops under $24,000
- 'Shrinkflation' reduces product sizes for consumers
Helpful links & Information
- Gas prices in US: Are gas prices more expensive in other countries?
- When will President Biden make a decision over student loan forgiveness.
- Do I have to pay taxes on Social Security benefits? How much?
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Americans have been battered by rising prices at the pump, in the supermarket and for those buying a home, mortgage rates that have rocketed at the same time housing prices continue to surge. Despite a brief dip in mortgage rates, the 30-year fixed-rate surged more than half a percentage point last week, the largest one-week increase in Freddie Mac’s survey since 1987.
Some experts predicting that they could top 6 percent by end of year.When will they come down again?
GM becomes latest carmaker to raise prices to cover higher supply chain costs
Those looking to buy a new GM electric Hummer will need to fork out $6,250 more on top of the current $80,000 to $110,000 price tag. Starting Saturday, the carmaker will raise the price for purchases of its EV trucks. The price hike will not affect the nearly 80,000 Hummer EVs already booked.
The move was made to offset $5 billion in the higher cost of commodities and shipping, along with cutting expenses.
Other carmekers have made similar moves. Tesla has raised prices five times in just a few months and Rivian raised prices on its pickup trucks by 20%. The latter had to modify its price hike after customer outrage, applying the increase to purchases made after 1 March.
On Wednesday the Federal Reserve opted to impose a substantial increase to its interest rates in the hope of cooling the red-hot American economy. The move was announced by Fed Chair Jerome Powell at a press conference.
The Federal Reserve is led by a 14-person Board of Governors, of which Powell is currently the Chair. The 69-year old was first nominated to the Board of Governors by President Barack Obama in 2012 and he took office as the group’s Chair in 2018. We take a look at who he is, and how he got this illustrious role...
The Federal Reserve is attempting to slam the handbrake on the rapidly growing United States economy by introducing a substantial interest rate hike. The raise of three-quarters of a percentage point is the largest since 1994, taking the benchmark rates to between 1.5% and 1.75%.
The move was announced by Fed Chair Jerome Powell on Wednesday, as part of a concerted effort to tackle inflation. The logic behind the decision is that high interest rates make borrowing less attractive and saving more profitable. It is hoped that this will cool the economy and bring down inflation.
Fed Chair explains types of inflation
“The public’s expectations, why would they be distinguishing between core inflation and headline inflation? Core inflation is something we think about because it is a better predictor of future inflation, but headline inflation is what people experience. They don’t know what core is. Why would they?”
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Fuel prices in the United States have reached record highs for the second time in recent months, according to figures released by AAA on Tuesday. They found that the average price of a gallon of gasoline has risen above $5 for the first time this week, while a gallon of diesel now costs $5.798 on average across the United States.
The cost of diesel in particular has undergone an astonishing increase in the past 12 months, and was at just $3.075 at the same point last year. This equates to a year-on-year increase of more than 75%.
What is being done to address the high gas prices?
Today AAA has calculated that the average cost of a gallon of gasoline in the United States sits at exactly $5. THat is a slight dip on the peak recorded earlier this week but remains extremely high and poses a major headache for Americans at a time when prices are rising across the board.
This threatens to become even more of a problem in two weeks' time when millions of Americans are expected to engage in long motor journeys to visit friends and family for Fourth of July celebrations. The White House is under pressure to provide real relief for motorists ahead of the holiday.
On Wednesday the Federal Reserve announced that it was enacting an interest rate hike worth three-quarters of a percentage point. This was the largest single increase since 1994 and comes at a time when the rate of inflation in the United States is spiralling out of control at 8.3% year-on-year.
But how will this help? And what are the risks associated with using such a blunt tool on an American economy that is still in the process of returning to pre-pandemic conditions? We take a look...
Fed Chair Jerome Powell outlines inflation plans
“The Federal Reserve’s strong commitment to our price stability mandate contributes to the widespread confidence in the dollar as a store of value. To that end, my colleagues and I are acutely focused on returning inflation to our 2 percent objective."
“Meeting our dual mandate also depends on maintaining financial stability... The Fed’s commitment to both our dual mandate and financial stability encourages the international community to hold and use dollars.”
Fourth of July celebrations could bump up inflationary pressures
The 4th July is normally a time to celebrate for Americans but it could be a bleak holiday for President Biden, according to pollster and political strategist Frank Luntz. He told CNBC's 'Squawk Box' that the high price of gasoline, groceries and other essentials could come to a head in two weeks time when Americans all across the country begin to celebrate Independence Day.
Millions will be filling up their tanks for long drives to see family and friends. Those who are hosting will be stocking up the cupboards with food for cook-outs and barbecues. There is also an uptick in spending habits at this time more generally. If that all happens as usual this year the demand will increase substantially and prices will likely do the same.
The Child Tax Credit in 2022 will return to the conditions offered by the IRS before the American Rescue Plan expanded it. The amount of the credit is smaller, and eligibility is more restricted than last year under the rules which were established through the 2017 Tax Cuts and Jobs Act (TCJA).
These changes will be in effect through the 2025 fiscal year, if no action is taken by Congress to modify the credit before then. So how does this affect who is able to receive the financial support, and how much could your payment be worth?
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The maximum retirement benefit one could receive in 2022 is $4,194 per month. However, this is only for people who retire at 70 beyond the full retirement age of 67. For the majority of Americans, the maximum retirement payment will be $3,345.
Federal Reserve will do whatever it takes to cut inflation
The Congressional mandate of the Federal Reserve is to create the conditions for maximum employment, for example to have the maximum number of people who want a job to have one, and price stability.
"Labor market is extremely tight and inflation is far too high," said Powell.
An increase of .75 percent has been announced and more increases, at a smaller scale are expected in the weeks and months ahead. What such high interest rates could mean is forced lower spending, potentially putting many jobs at risk. But the Fed will power on in the face of this,
Largets conservative group in Congress pushes for Social Security cuts
The Republican Study Committee (RSC), the largest conservative caucus in the House, released its annual model federal budget proposal. They say it will take 7 years to balance the federal budget. Dubbed the "Blueprint to save America," would cut federal spending by $16.6 trillion.
Incredibly, though perhaps not surprising for a conservative group, those cuts would not include military spending, which would be boosted by 5 percent. It also prevents funding to abortion rights groups and includes more than 30 anti-abortion measures. It lists eight bills aimed at barring principles based on “critical race theory”, though this conservative bogeyman has not been proven to exist and is wielded to attack re-evaluations of American history.
The world’s richest man, Elon Musk, was sued for $258 billion on Thursday after a Dogecoin investor accused him of manipulating the price of the cryptocurrency and running a “pyramid scheme” to boost its value.
Plaintiff Keith Johnson filed the complaint in a federal court in Manhattan, accusing the Tesla CEO of racketeering. Johnson described himself as “an American citizen who was defrauded out of money by defendants’ Dogecoin Crypto Pyramid Scheme.”
The complaint continues: “Defendants falsely and deceptively claim that Dogecoin is a legitimate investment when it has no value at all.”
Reconciliation is a Senate matter. We passed our bill, we made our views known. And that is a closely held negotiation on the Senate side. Suffice to say that we expressed our interest in the timing, when it would happen. But we did not get into the details. It’s alive, I would say that.
Reconciliation bill still alive, says Pelosi
Speaker Nancy Pelosi said that negotiations on a massive social spending and climate package remain active despite little movement from right-wing opposition from Joe manchin and Kristen Sinema in the Senate.
The Speaker emphasized that House Democrats, who passed a roughly $2 trillion reconciliation package in November, are essentially sidelined as Senate leaders seek to continue the talks. Senator Bernie Sanders has railed against the talks, arguing they have been a waste of time when Democrats sorely need to pass some legislation before they likely lose the Senate and the House in the November elections.
While people living in the US may think they have it bad, and in relative terms they do, there is a much bleaker future for nations that have to near exclusively import their fuel. The price of a gallon of fuel in Europe has skyrocketed, forcing many countries to bring in radical policies in an effort to stifle the price rise.
US oil production grows under Biden
Many of his political opponents have claimed that the current high price of gasoline is entirely President Biden's fault, but there are numerous factors contributing to the sharp increase. The United States has actually increase oil output under Biden's presidency, helped in part by the rush to return to a normal economy as the pandemic-era restrictions were lifted.
Wall St slips further into a bear market
There's more bad news for investors as the S&P 500, a key barometer of strength of confidence in Wall Street, dropped further on Thursday, reaffirming the status of a bear market. Yesterday the Federal Reserve increased the interest rate by 0.75 percentage points, a huge increase, with the hope of addressing the high rate of inflation. However that effort is likely to affect confidence in the markets too.
Business Times explains: "The Dow Jones Industrial Average lost 741.5 points, ending down 2.4 per cent at 29,927.07 - its first close below 30,000 since January 2021."
Two common terms used by Wall Street are bull and bear markets to talk about the indexes like the S&P 500, the Dow Jones Industrial Average and the Nasdaq Composite rising or falling respectively. A bear market occurs when a market has dropped 20 percent or more from a recent high for a sustained period of time.
According to the Merriam Webster dictionary, the term bear market came first, based on a proverb that cautions against selling “the bear’s skin before one has caught the bear.” The original expression “to sell or buy the bearskin” was quickly shortened to “bear” to talk about a speculator selling stock or the stock itself being sold by a speculator.
Biden wants fuel companies to up their production
The sky-high price of gasoline in the US is fueled by a number of factors, which have brought about a real scarcity in the product at a time when Americans have been returning to normal pre-pandemic routines. The sanctions on Russia-produced oil and contined supply chain disruption has made it more difficult to produce gasoline and diesel, but President Biden has called on companies to step up productions to meet the demand. He will hope that increased supply can bring down prices for Americans in the fairly near-term.
Biden promises to address supply chain issues
My administration is going to continue to do everything we can to lower the prices for the American people. And the Congress has to act, and they have been of late.
One of the key ways to fight inflation is by lowering the cost of moving goods through the supply chain.
When I first started talking about the supply chain, when I came here well over a year ago, the American people understandably wondered, “Supply chain — what…” — I mean, that’s not a usual part of their jargon every day. But they understand it fully now. They understand it.
The US is in the grips of serious supply chain disruption. You will have heard over the last weeks about the baby formula shortage and no doubt have been affected by the increasing price of fuel as many countries reduced their supply from Russia. Now, basic sanitary products are being threatened by shortages; tampons.
LEGO group statement on new Virginia factory
This is an exciting step for the LEGO Group. More and more families are falling in love with LEGO building and we are looking forward to making LEGO bricks in the US, one of our largest markets. The location in Virginia allows us to build a solar park which supports our sustainability ambitions and provides easy links to country-wide transportation networks. We are also looking forward to creating fantastic employment opportunities for the people of Virginia.
LEGO factory coming to the US
Sixteen years after closing its factory in Connecticut, LEGO has announced that it will invest over $1 billion to build a new factory, this time in Virginia. The company has plans for a 1.7-million square foot carbon-neutral plant, which when completed in 2025 will employ roughly 1,800 people.
The decision comes as the plastic brick toymaker has seen a surge in sales, jumping 27 percent last year, as families look for at home entertainment. By building the factory in one of its largets markets LEGO can shorten the distance between where it makes its beloved plastic bricks and its customers avoiding supply chain issues.
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We'll bring you all the latest financial news from the United States as President Biden looks to address the high rate of inflation and nation-wide price rises.