Overnight Finance: Fed holds rates steady but sees inflation rise | Crucial month ahead for Trump on trade | US businesses added 204K jobs in April | Lawmakers eye new powers for panel on foreign investment

Happy Wednesday and welcome back to Overnight Finance, where we would happily accept an interview with Robert Mueller. I’m Sylvan Lane, and here’s your nightly guide to everything affecting your bills, bank account and bottom line.

See something I missed? Let me know at slane@digital-stage.thehill.com or tweet me @SylvanLane. And if you like your newsletter, you can subscribe to it here: http://bit.ly/1NxxW2N.

 

THE BIG DEAL: The Federal Reserve on Wednesday kept interest rates steady as the central bank continues to gauge increases in inflation and industrial stresses on an otherwise solid economy.

The Fed kept interest rates at the 1.5 to 1.75 percent target range it set in March — the first rate hike under Chairman Jerome Powell, who took control of the bank in February.

Fed officials were not expected to raise rates Wednesday, but will likely increase rates at least twice more in 2018. The bank is aiming to return interest rates to historic normal averages while allowing the economy to grow at a stable pace.

The Fed said “on a 12-month basis, both overall inflation and inflation for items other than food and energy have moved close to 2 percent.”

“Inflation on a 12-month basis is expected to run near the Committee’s symmetric 2 percent objective over the medium term,” the Fed said.

The Fed indicated that it would continue with gradual rate hikes without accelerating the timeline in response to inflation. I’ve got more here. 

Reactions:

• “A Fed hold on interest rates in May likely sets up a rate hike in June. We have increased our forecast for federal funds to a total of 4 rate hikes this year – with an additional increase in June, September, and December.” — Ben Ayers, senior economist at Nationwide.

• “The Fed’s gradual approach to interest rate increases was justified by inflation running below 2 percent, but with inflation now on the cusp of that threshold the Fed may become more proactive about raising rates in an effort to keep inflation contained.”  — Greg McBride, Bankrate’s chief financial analyst.

 

ON TAP TOMORROW

• The American Enterprise Institute hosts an event entitled: “The 2018 Farm Bill: The future of farm subsidy programs and U.S. agriculture sector productivity,” 11 a.m.

 

LEADING THE DAY

US firms add 204,000 jobs in April: U.S. businesses added 204,000 jobs in April as the labor market maintains steady growth and shows no signs of slowing down. 
Hiring was strong across a broad range of sectors as monthly jobs growth eclipsed 200,000 for the sixth straight month, payroll processor ADP said on Wednesday. 

Mark Zandi, chief economist at Moody’s Analytics, which oversees the ADP report, said U.S. companies are “aggressively” hiring despite increasing headwinds. 

“Despite rising trade tensions, more volatile financial markets and poor weather, businesses are adding a robust more than 200,000 jobs per month,” Zandi said.

“At this pace, unemployment will soon be in the threes, which is rarified and risky territory, as the economy threatens to overheat,” he said. The Hill’s Vicki Needham has more here.

Big month ahead for Trump’s trade agenda. Trump’s trade agenda is at a crossroads, with the White House facing a series of key decisions this month that could determine whether he can successfully map out a new course on one of his signature issues.

On at least three different fronts, Trump is likely to have big decisions to make in May.

1) U.S. Trade Representative Robert Lighthizer is scheduled to meet his counterparts in the North American Free Trade Agreement (NAFTA) on Monday, with the administration hoping to complete talks on a revised NAFTA this month.

2) High-level talks will take place in China on Thursday and Friday between Washington and Beijing.

3) And a fight is also brewing with Europe and other U.S. allies over Trump’s proposed tariffs on steel and aluminum imports.

The Hill’s Vicki Needham and Niv Elis have more here on what is shaping up to be a crucial May for Trump on trade.

 

Top Chinese economic adviser to meet with US trade delegation: Chinese President Xi Jinping’s senior economic adviser is slated to meet with a U.S. trade delegation in Beijing on Thursday and Friday as tensions over trade between the two countries heat up.

China said in a statement on Wednesday that Vice Premier Liu He would “exchange views” on trade with the U.S. delegation, which will include Treasury Secretary Steven Mnuchin, Commerce Secretary Wilbur Ross, Trade Representative Robert Lighthizer, White House economic adviser Larry Kudlow and trade and manufacturing adviser Peter Navarro, according to Reuters.

Chinese foreign ministry spokeswoman Hua Chunying said in a news conference on Wednesday that she expected the talks to be constructive if the U.S. acted in good faith.

 

Alarmed by foreign deals, lawmakers eye new review powers: Lawmakers are pushing to bolster the power of a secretive federal panel that monitors foreign investments for national security risks.

The House and Senate are close to acting on a bipartisan proposal that would expand the kinds of business deals that can be blocked or impeded by the Committee on Foreign Investment in the United States (CFIUS), an interagency committee led by the Treasury secretary. 

The Trump administration has endorsed the bill, which would expand the jurisdiction of CFIUS and add layers of national security analysis to the panel’s reviews.

Republicans and Democrats wary of China’s economic ambitions and trade practices have cheered those moves.

But some lawmakers and businesses are fretting about an expansion of CFIUS’s power and influence. They fear the bill being considered in Congress could put unnecessary restraints on foreign investment and allow CFIUS to stray from its mandate. I explain why here.

 

Rubio: Tax law is positive but could have done even more for workers: Sen. Marco Rubio (R-Fla.) on Wednesday elaborated on his thoughts about the GOP tax law, after comments he made about the corporate tax cut frustrated some conservatives.

Rubio, who voted for the tax law in December, recently told The Economist that there’s “no evidence” that the corporate tax cut has massively benefited workers. The remarks disappointed some on the right who have been touting the law’s benefits ahead of the midterm elections and excited Democrats who have been railing against the law.

In an op-ed for National Review published Wednesday, Rubio said the GOP tax law helps Americans but could have been even more beneficial for working families.

“An updated framework for supply-side tax cuts would apply President Ronald Reagan’s great aphorism: Trust, but verify,” he wrote for the right-leaning news outlet. “We need an internationally competitive corporate tax rate, but the gains from corporate tax cuts should be geared to benefit Americans as much as possible.” The Hill’s Naomi Jagoda has more. 

MARKET CHECK: Stocks took moderate losses today as the Fed reaffirmed its plans to continue with gradual interest rate hikes. The Dow Jones Industrial Average and S&P 500 each dropped 0.72 percent, while the Nasdaq fell 0.42 percent.

 

GOOD TO KNOW

• The Securities and Exchange Commission (SEC) on Wednesday launched a searchable database of individuals who’ve been targeted by the federal watchdog for breaking trading laws.
• The Defense Department is ordering retail stores on military bases to stop selling products made by Chinese telecom firms Huawei and ZTE, citing security concerns.
• Surging demand at U.S. factories is leading to system-wide bottlenecks that are weighing on business and potentially the broader economy, according to Bloomberg.
• Cities denied by Amazon in its search for a home for its new headquarters are taking the company’s advice on how to improve, according to The Wall Street Journal.
• Over the past 48 hours, key figures in the GOP have uttered head-scratching statements about the tax-cuts bill that will be millstones for those Republicans fighting for their political lives in the midterm elections.
• Shares of social media company Snap plummeted by as much as 20 percent Wednesday following disappointing earnings, and as Wall Street still sees room on the downside, according to CNBC.
• Bloomberg News is rolling out a paywall for its website.
• Brazil accused the U.S. of breaking off negotiations over Trump’s steel and aluminum tariffs last week, seeming to contradict the White House version of events, according to The New York Times.
  

 

ODDS AND ENDS

• Thousands of artifacts stolen from Iraq and smuggled out of the country have been returned to the Iraqi government, the Justice Department announced Wednesday. The return of the artifacts comes after arts-and-crafts chain Hobby Lobby agreed to forfeit the artifacts as well as $3 million in civil penalties over the company’s role in the smuggling scheme.
• Before he was President Trump’s personal lawyer, Michael Cohen worked as a personal injury lawyer reportedly covering clients who allegedly staged car accidents in order to sue for large sums of money.
• Cambridge Analytica, the political consulting firm at the center of the data scandal that has engulfed Facebook, announced Wednesday that it is shutting down.
• President Trump has asked a federal court to dismiss a lawsuit alleging that he violated the Constitution by collecting profits from his luxury hotel.
• Hillary Clinton says being a capitalist probably hurt her with Democratic voters in 2016.