On The Money — Fed hikes rates again

The Federal Reserve has hiked interest rates again, but this time it was a relatively small bump. We’ll also look at the McCarthy-Biden debt ceiling meeting, new federal rules targeting credit card fees and the surprising rise in job openings. 

🎤 But first, see why Beyonce fans are not OK right now.  

Welcome to On The Money, your guide to everything affecting your bills, bank account and bottom line. For The Hill, we’re Sylvan Lane, Aris Folley and Karl Evers-Hillstrom.

Fed ups interest rates in smallest hike since March

The Federal Reserve raised interest rates by 0.25 percentage points on Wednesday at its first meeting of the year, its eighth straight rate hike since it began a program of tightening borrowing costs last year in an effort to bring down inflation. 

• It’s the smallest rate hike since last March, coming off a 50-basis-point hike in December that followed four, 75-basis-point hikes starting last June.  
  
• It will lift the federal funds rate to a range of 4.5 to 4.75 percent as the Fed pushes toward a projected target rate of 5.1 percent, which was last updated in December. 

The background: The more modest increase comes as inflation has been falling throughout the economy.  

• The consumer price index (CPI) has dropped every month since June, landing at 6.5 percent annually in December. The personal consumption expenditures price index (PCE), which is the Fed’s preferred gauge of inflation, has fallen to 5 percent annually, off a June high of 6.8 percent. 
  
• With inflation coming down and unemployment levels remaining at a 50-year low, the Fed is aiming for what it calls a “soft landing,” meaning it wants to bring inflation back down to an annual rate of 2 percent without triggering a serious recession. 

Read more here from The Hill’s Tobias Burns. 

What caught our attention: 

• Fed Chair Jerome Powell said most Federal Open Market Committee (FOMC) members are not anticipating a recession this year: “Different participants have different forecasts, but generally those forecasts are for continued subdued growth, some softening in the labor market but not a recession — not a recession.” 
  
• Powell said Wednesday that the Fed cannot protect the economy if an impasse between lawmakers and the White House on Capitol Hill results in a default on U.S. debt, which could occur as soon as in June if the debt ceiling isn’t raised. 
  
• Powell said Wednesday the Fed is observing disinflation in parts of that economy, but isn’t seeing these downward trends everywhere. 

Tobias has more of the big takeaways here. 

STRIKE A DEAL

McCarthy leaves Biden meeting optimistic about debt talks  

Speaker Kevin McCarthy (R-Calif.) on Wednesday left a meeting with President Biden signaling optimism about the chances of an agreement between the White House and Congress to avoid a government default, though neither side made any commitments.  

“I think there is an opportunity here to come to an agreement on both sides,” he told reporters. 

• McCarthy acknowledged he and Biden had differing perspectives on the debt ceiling, though he did not get into specifics, saying he would not negotiate through the press. 
  
• The Speaker did rule out the idea of raising the debt limit in exchange for the creation of a commission studying ways to curb spending.
  
• Biden reiterated that Congress must avoid a catastrophic default at all costs. 

Brett Samuels has more here. 

FIGHTING FEED

Biden administration wants credit card late fees slashed to $8  

The Biden administration proposed a rule that would reduce credit card late fees from roughly to $30 to $8, saving consumers up to $9 billion annually, the White House announced on Wednesday.  

The rule from the Consumer Financial Protection Bureau (CFPB), along with other actions — like the White House urging Congress to pass a bill to crack down on entertainment, utility and travel fees that hit many consumers — was announced in the fourth meeting of the President’s Competition Council. 

• CFPB Director Rohit Chopra said the agency analyzed current costs and found that fees are five times higher than they need to be. 
  
• Chopra said at the meeting that he expects people will start to see real relief due to these actions next year.  

Alex Gangitano has more here. 

SURPRISING RISE

Job openings jump in December as labor market stays strong  

Job openings increased to 11 million in December from 10.4 million in November for an increase of 5.5 percent as the U.S. labor market continues to show signs of strength even as concerns about a recession loom.  

The data released Wednesday by the Labor Department brings the number of unemployed persons per job opening down to 0.5 in December from 0.6 in November, indicating resilience in both the job market and in the economy as a whole.  

The largest increases in job openings last month occurred in the accommodation and food service sector, which posted 409,000 new positions, and the retail sector, which had 134,000 new positions. 

Tobias has more here. 

Good to Know

As the debt ceiling fight heats up on Capitol Hill, House Democrats are eyeing an end-around strategy to bypass Speaker Kevin McCarthy (R-Calif.) — and the conservative hawks driving his agenda — to avoid a federal default later in the year. 

Democratic leaders have already begun talks about tapping a procedural tool, known as a discharge petition, to force a debt-limit hike to the floor without the accompanying cuts McCarthy is demanding. 

Other items we’re keeping an eye on: 

• After more than a decade of low borrowing costs, rising interest rates are forcing tech companies to rethink their strategies, with companies needing to show their profitability over the possibility for growth. The change could be squashing nascent startups and be one factor in the widespread layoffs from industry giants. 
  
• The growth of private payrolls stayed flat in January for employees staying in their jobs, according to a report released Wednesday.   
  
• House Democrats pushed Republicans to clarify the implications of a new bill that would denounce the “horrors of socialism” and socialist policies, expressing concern that it may include Medicare and Social Security benefits.   

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.