On The Money: Fed raises rates, signals two more hikes | Senate panel to grill Ross on Trump tariffs | Bank regulator fails to find industry-wide fraud after Wells Fargo | Comcast makes big bid for 21st Century Fox | Kudlow out of the hospital

On The Money: Fed raises rates, signals two more hikes | Senate panel to grill Ross on Trump tariffs | Bank regulator fails to find industry-wide fraud after Wells Fargo | Comcast makes big bid for 21st Century Fox | Kudlow out of the hospital
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Happy Wednesday and welcome back to On The Money, which is working on its cult-like following. I'm Sylvan Lane, and here's your nightly guide to everything affecting your bills, bank account and bottom line.

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THE BIG DEAL: The Federal Reserve on Wednesday raised interest rates 0.25 points as the bank aims to prevent a tight labor market from driving inflation to unsustainable levels.

The central bank raised the federal funds rate to a 1.75–2 percent target range, the second increase under Fed Chairman Jerome Powell.

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The Fed was widely expected to raise interest rates Wednesday amid strong economic data. It's the second rate hike under Powell, a Republican appointed to lead the Fed by President TrumpDonald John TrumpTrump says he doesn't want to use 'adversary' to describe Russia Comey urges Americans to vote for Democrats in midterms Roby wins Alabama GOP runoff, overcoming blowback from Trump criticism MORE.

Powell faces a tricky balancing act as the Fed attempts to bring interest rates toward historical averages. The central bank is aiming to keep record-low unemployment and a glut of federal spending from pushing inflation beyond the Fed's 2 percent target.

I'll tell you more about how difficult it is right here.

 

In a nutshell:

  • The 3.8 percent jobless rate is close to the lowest level ever seen in the U.S. There are more job openings than workers seeking employment in the country for the first time in recorded history, and recent inflation data shows prices inching through the Fed's ideal threshold.
  • Growth is also expected to stay close to almost 3 percent of gross domestic product (GDP) through the year, and Fed officials are eager to prevent the economy from overheating.
  • Even so, raising rates too quickly could increase unemployment, which is well below what the Fed considers sustainable. That could prevent vulnerable Americans and pockets of the country still struggling from reaping the benefits of a strong economy.

 

What comes next: The next meeting of the Federal Open Markets Committee, which sets Fed interest rates starts July 31, but it's rare for the Fed to hike rates in two consecutive gatherings.

A majority of Fed officials are now projecting two more rate hikes this year, which would likely come in September and December.

 

What about trade woes? While the national economy appears to be on solid ground for 2018, the Fed must also consider how growing international trade disputes could slow U.S. growth.

Whiplash trade tensions have also stifled business investment and long-term planning as the U.S., Canada and Mexico struggle to renegotiate the North American Free Trade Agreement.

Powell said that the Fed's business contacts have expressed worries about the impact of trade tensions, but that it isn't moved economic data.

"Concerns about changes in trade policies are rising, I think it's fair to say." Powell said. "We really don't see it the numbers. It's just not there, so I would put it down more as a risk."

 

ON TAP FOR TOMORROW

  • Senate Banking Committee: Comptroller of the Currency Joseph Otting testifies on the agency's work, 10 a.m.
  • House Small Business Committee: Hearing on "Shrinking the Skills Gap: Solutions to the Small Business Workforce Shortage," 10 a.m.

 

LEADING THE DAY

Regulator says post-Wells Fargo review did not find industry-wide fraud: A top U.S. bank regulator on Wednesday said his agency did not find widespread openings of unauthorized accounts at major U.S. banks in a review spurred by Wells Fargo's fraudulent sales practices.

Comptroller of the Currency Joseph Otting told lawmakers Wednesday he found no "pervasive or systemic issues" at the largest U.S. banks after reviewing roughly 500 million savings, checking, credit and insurance accounts and policies.

Otting, a former bank executive, said the Office of the Comptroller of the Currency (OCC) found roughly 20,000 accounts with compliance issues out of the hundreds of millions analyzed. Of those problematic accounts, Otting said that less than half were unauthorized.

Otting said that OCC has issued about 250 orders to banks highlighting account opening compliance issues they need to address, but did not identify which banks were reprimanded.

"We're asking banks to improve their policies, procedures and control around their account openings," Otting said in testimony before the House Financial Services Committee.

I've got more on his first appearance before the House here.

 

Otting stuns Dems with racial discrimination comments: Otting also faced questions about the OCC's plans to overhaul the Community Reinvestment Act (CRA) that spurred tense exchanges over his views on racial discrimination.

The OCC is working on an overhaul of the CRA, a 1970s law meant to tackle widespread racial discrimination in lending, by adapting its standards to modern banking innovations and trends.

Otting appeared to upset several Democratic members of the committee when he said he had not personally observed racial discrimination in banking, but believes those who told him they've seen it.

Rep. Mike Capuano (D-Mass.), who asked Otting if he'd witnessed racism, pushed him to say whether he believes it exists in the financial services industry. Otting would only say that he hadn't seen evidence of it himself, but doesn't doubt those who've seen discriminatory actions.

Rep. Emanuel Cleaver (D-Mo.), a former chairman of the Congressional Black Caucus, said Otting's answer was "stupefying" and questioned his commitment to fighting racism in banking.

Otting said he had prioritized minority outreach throughout his banking career and insisted his former colleagues could attest to his constant presence in minority communities.

 

Senate panel announces hearing on Trump tariffs: Members of the Senate Finance Committee will soon get a chance to grill Commerce Secretary Wilbur Ross on the Trump administration's recent tariff decisions.

Sen. Orrin HatchOrrin Grant HatchOn The Money: Fed chief lays out risks of trade war | Senate floats new Russia sanctions amid Trump backlash | House passes bill to boost business investment Hatch threatens legislative action to rein in Trump tariffs GOP lambasts Trump over performance in Helsinki MORE (R-Utah), the chairman of the committee, said on Wednesday that Ross will testify before the panel on June 20 to dig into the steel and aluminum tariffs, as well as floated penalties on imported autos.

Hatch added that the hearing will give Ross the chance to discuss the effects of the tariffs, which have sparked bipartisan backlash on Capitol Hill. The hearing with Ross comes even as GOP lawmakers have shown little interest in passing legislation that would rein in Trump's tariff abilities.

The Hill's Jordain Carney tells us why here.

 

MARKET CHECK--Stocks fall after Fed signals more hikes: Marketwatch: "U.S. stock benchmarks ended near session lows Wednesday as the Federal Reserve completed its second increase to benchmark interest rates in 2018, as expected, but signaled a slightly more aggressive plan to tighten monetary policy this year than had previously been projected.

"The rate increase also had the effect of narrowing a closely watched gap between rates of two-year and 10-year Treasury notes, which has recently been one of a strong predictor of recessions."

 

FINANCE IN FOCUS: Fifty-five years have passed since the Equal Pay Act became law, but the federal government may still be paying women billions less than men for the same work. The Hill's Niv Elis explains why the federal government could be underpaying women by a collective $2.5 billion.

 

GOOD TO KNOW

  • A coalition of 13 unions and the Federal Workers Alliance (FWA) filed a lawsuit Wednesday challenging three executive orders President Trump issued last month to make it easier to fire federal employees.
  • Comcast is making a $65 billion all-cash bid for much of 21st Century Fox's assets, setting up a potential bidding war with Disney over the company's entertainment offerings.
  • Former Federal Reserve Chairman Alan Greenspan said Wednesday that he rejects the Trump administration's claims that foreign countries are taking advantage of the U.S. on trade issues.
  • Larry Kudlow, President Trump's top economic adviser, was discharged on Wednesday morning from Walter Reed National Military Medical Center after receiving treatment for a heart attack, according to the White House. 
  • Todd Zywicki, a law professor at George Mason University's Antonin Scalia School of Law, has emerged as a top candidate to run the Consumer Financial Protection Bureau, according to the National Law Journal.
  • Foreign banks are pushing Federal Reserve to relax capital rules, according to the Financial Times.
  • Op-ed: Rachelle Sampson, a visiting professor at Georgetown's McDonough School of Business, writes for The Hill on what Buffett and Dimon get right and wrong on finance.

 

ODDS AND ENDS