On The Money — Slower rate hikes may yield little relief for households

The Federal Reserve has started a new chapter in its fight against inflation, but it may not be any less painful. We’ll also look at the federal government cracking down on alleged pump-and-dump schemes and a spending breakthrough. 

But first, find out why former Speaker John Boehner (R-Ohio) was crying at the Capitol today.

Welcome to On The Money, your nightly guide to everything affecting your bills, bank account and bottom line. For The Hill, we’re Sylvan Lane, Aris Folley and Karl Evers-Hillstrom. Subscribe here or in the box below.

Fed slows rate hikes; early signs of easing inflation

The Federal Reserve on Wednesday issued its smallest interest rate hike since June as the central bank attempts to curb high inflation without derailing a surprisingly resilient economy. 

• The Federal Open Market Committee (FOMC), the panel of Fed officials responsible for monetary policy, bumped up the bank’s baseline interest range by 0.5 percentage points Wednesday to a span of 4.25 to 4.5 percent.
  
• All 12 voting members of the FOMC approved the hike. 

WHAT IT MEANS: After issuing four straight rate hikes of 0.75 percentage points earlier in the year, the Fed’s less aggressive Wednesday increase marks a turning point in its battle with high inflation.

• Even so, U.S. households will still see rates on mortgages, auto loans and credit cards rise well into next year. And Fed leaders are on track to keep interest rates high until inflation is finally quashed for good.
  
• Fed officials do not expect to begin cutting interest rates again until 2024, according to the latest projections. 

“We’ve taken forceful actions to tighten the stance of monetary policy. We’ve covered a lot of ground and the full effects of our rapid tightening so far are yet to be felt. Even so, we have more work to do,” said Fed Chair Jerome Powell at a press conference following the announcement. 

Sylvan has it all here. 

GLOOMIER OUTLOOK: Fed officials also appear to be losing faith in their ability to curb inflation without a blow to the U.S. economy. 

The FOMC’s median estimate of the December 2023 unemployment rate was 4.6 percent, up from a September estimate of 4.4 percent and much higher than the November 2022 jobless rate of 3.7 percent. 

Fed officials also projected gross domestic product growth of just 0.5 percent for 2023, which would keep the U.S. barely out of a retraction. 

LEADING THE DAY

Social media influencers charged with securities fraud

The U.S. government has charged eight social media influencers with securities fraud, alleging they used Twitter and messaging app Discord to manipulate exchange-traded stocks as part of a $100 million fraud scheme.  

The Securities and Exchange Commission (SEC) said in a release that seven of those charged promoted themselves as successful traders and gained hundreds of thousands of followers on Twitter and in stock trading chatrooms on Discord since January 2020.

• They allegedly bought certain stocks and encouraged their followers to do the same by indicating that they were buying, holding or adding to their stock positions.
  
• But an SEC complaint states that when share prices or trading volumes rose in the promoted stocks, they regularly sold their shares without disclosing their plans to drop their securities. 

“As our complaint states, the defendants used social media to amass a large following of novice investors and then took advantage of their followers by repeatedly feeding them a steady diet of misinformation, which resulted in fraudulent profits of approximately $100 million,” said Joseph Sansone, chief of the SEC Enforcement Division’s Market Abuse Unit.  

The Hill’s Jared Gans has more here. 

OMNIBUS BREAKTHROUGH

Lawmakers reach deal on framework for spending bill

Lawmakers have struck a much-anticipated deal on a framework for an omnibus package to fund the government for fiscal 2023. 

Senate Appropriations Committee Chairman Patrick Leahy (D-Vt.) on Tuesday night said negotiators had “reached a bipartisan, bicameral framework that should allow us to finish an omnibus appropriations bill that can pass the House and Senate and be signed into law by the President.” 

Leahy said he reached the deal with Senate Appropriations Committee Vice Chairman Richard Shelby (R-Ala.) and House Appropriations Committee Chairwoman Rosa DeLauro (D-Conn.). 

The Hill’s Julia Mueller and Al Weaver have the details here. 

TAX BATTLES

IRS funding, child tax credit will be top issues in 2023 

Divided government is likely to make for a slower year on tax policy in 2023 as a GOP House that wants to go after the IRS runs into a Democratic administration and Senate that has very different ideas on taxes.  

After two years of tax policy being at the center of major legislative vehicles, the focus in the next year may turn to how the IRS uses $80 billion in new funding from the Inflation Reduction Act.  

The bulk of the IRS’s new funding will be distributed over the next decade and involve training thousands of new workers to perform more complicated audits.  

More quickly, funding will be used to hire additional staff to pick up the phone and answer questions for individuals and businesses as well as grind through a backlog of millions of tax returns.  

The Hill’s Tobias Burns tells us more about the road ahead here.

Good to Know

An actor from “The O.C.” is speaking out against cryptocurrency — testifying at a Senate Banking Committee hearing focused on the collapse of FTX. 

Ben McKenzie told lawmakers on Wednesday that the estimated 40 million Americans who invested in cryptocurrency “have been sold a bill of goods.” 

Other items we’re keeping an eye on: 

• Here are five ways inflation has shaped the nation’s economy — and will affect the year to come.
  
• China’s ambassador to the World Trade Organization called the U.S. a “destroyer to the multilateral trading system” during a closed-door meeting with trade officials on Wednesday.
  
• Amid a housing market plagued by high mortgage rates, inflation woes and recession fears, housing prices in the U.S. are expected to fall next year, though the market isn’t likely to see a jump in buyers as a result.  

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.