The Hill illustration, Madeline Monroe, Greg Nash/iStock

The Federal Reserve is raising interest rates across the economy—and quickly—as it struggles to get ahead of inflation. We’ll also look at a Senate showdown on credit card swipe fees, backlash to the SEC’s climate disclosure proposal and a boom in shipping profits. 

But first, building momentum behind a big cannabis bill in Congress. 

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. Someone forward you this newsletter? Subscribe here.

Fed hikes interest rates by half-percentage point 

The Federal Reserve raised its baseline interest rate range Wednesday by two times the size of a usual rate hike as the central bank sprints to get ahead of rising inflation. 

  • The Federal Open Market Committee (FOMC), the panel of Fed officials in charge of monetary policy, boosted interest rates by 0.5 percentage points to a target range of 0.75 to 1 percent.  
  • The bank has not raised interest rates by more than 0.25 percentage points at a single FOMC meeting since May 2000. 

“Inflation is much too high and we understand the hardship it is causing. And we’re moving expeditiously to bring it back down,” Fed Chair Jerome Powell said during a Wednesday press conference. “We have both the tools we need and the resolve that it will take to restore price stability on behalf of American families and businesses.” 

What it means for you: Fed officials are hoping to bring inflation down by reducing consumer and business spending through higher interest rates. As households and businesses face higher borrowing costs, they could be less willing to spend money on goods and services.  

  • Interest rates for mortgages, automobile loans and other longer-terms loans were already rising in anticipation of the Fed’s decision.  
  • Rates on credit cards, short-term credit products and loans with adjustable interest rates — which lenders often tie to the Fed’s baseline interest rate range — are set to rise immediately. 

The risks: While Fed officials are aiming to slow the economy enough to reduce inflation without stopping growth altogether, a growing number of economists fear the bank may be unable to stop prices from rising without causing a recession. 

Powell told reporters Wednesday that while the Fed has “a path” to raising interest rates quickly enough to curb inflation while preserving a strong economy, serious obstacles could throw the bank off course.  

Sylvan explains why here

FIGHTING FEES 

Senators grill Visa, Mastercard execs over swipe fees 

Senators on Wednesday scrutinized Visa and Mastercard for raising swipe fees on merchants, costs that they say will be passed down to consumers amid surging inflation.  

Senate Judiciary Committee Chairman Dick Durbin (D-Ill.), a longtime critic of the credit card giants, called for new rules to inject competition into the credit card industry and prevent “unreasonable” fees during a hearing in which Visa and Mastercard executives answered questions about the swipe fees.  

“The credit and debit card systems are not competitive marketplaces,” Durbin said. “It’s a sweetheart deal for the dominant networks, for the biggest banks and for certain cardholders who have ritzy rewards programs, but the average small business and the consumer, they pay the price.”  

  • On April 22, Visa and Mastercard changed their interchange fees, which are tacked onto every credit card transaction to compensate issuing banks and pay for consumer rewards and anti-fraud measures.   
  • The changes amount to a $475 million annual fee hike for merchants, according to an estimate from payments consultancy CMSPI.  
  • The National Retail Federation estimates that the average American family pays over $700 a year on price hikes to cover swipe fees, a figure that will rise due to soaring inflation, as the fees typically take 1 to 3 percent of each transaction. 

Durbin suggested several measures to regulate the industry, such as requiring companies to show consumers how much of their money is spent on swipe fees, prohibiting exclusivity deals that block banks from issuing more than one kind of credit card and preventing fees “from being jacked up to unreasonable levels.”  

Karl has more here

CLIMATE CHANGE 

Oversight Republicans target SEC climate disclosure proposal 

Republicans on the House Oversight and Reform Committee are targeting the Securities and Exchange Commission’s (SEC) proposed rule that would make companies disclose information about their contributions to climate change. 

In a Wednesday letter that was first obtained by The Hill, the panel’s 19 Republicans requested a briefing and documents on the proposal. 

  • They also called the proposed rule “an overly broad expansion of the SEC’s authority” and said it “contravenes the mission of the agency.” 
  • The lawmakers asked for the committee’s communications relating to the proposal, as well as any communications with the White House National Economic Counsel and outside groups that may have occurred.  
  • As members of the minority party, Republicans are limited in their oversight powers, but the issues they home in on now may provide insight as to what they will pursue if they retake the majority next year. 

The Hill’s Rachel Frazin has more here

TIGHT SHIP 

Five largest shipping companies see profits increase by over $40B in 2021 

The top five shipping companies saw their profits increase by over $40 billion in 2021, according to a new analysis. 

The report conducted by the progressive watchdog group Accountable.US found that the five largest companies — Hapag-Lloyd, Maersk, COSCO Shipping, Evergreen Marine and Orient Overseas Container Line (OOCL) — saw their profits surge by triple-digit percentages following increased rates in the 2021 fiscal year. The companies’ collective profits now exceed $64.25 billion. 

  • The report found that all five companies benefited from higher rates in achieving their 2021 profits. The other four companies saw their profits jump by at least 600 percent as a result of the increased rates. 
  • The Accountable.US analysis comes as shipping giants have received backlash from U.S. businesses for ballooning profit jumps as a result of high prices caused by port congestion. U.S. exporters have claimed that the companies are piling them with unfair fees for failing to return cargo containers to ships due to intense congestion at ports. 

Check out more here from The Hill’s Natalie Prieb. 

Good to Know

Less than a third of Americans believe it is a good time to buy a house as the country grapples with nagging supply chain issues and high inflation, according to a new poll. 

A Gallup poll released on Wednesday found that 30 percent of respondents believe it is a good time to buy a house, compared to 69 percent who believe it is a bad time to make that investment — a record low for the poll, which has been conducted since 1978. 

Here’s what else we have our eye on: 

  • Lyft’s stock plunged after the company shared its first-quarter earnings report Tuesday and told investors costs would remain up as it invests more in incentives to attract drivers. 
  • The Defense Department will temporarily stop burning toxic “forever chemicals” until it formally issues a guidance for how to dispose of the substances, according to a new memo. 
  • Vice President Harris will meet with a collection of labor groups at the White House on Thursday, including representatives from the Amazon Labor Union (ALU) and Starbucks Workers United. 
  • Elon Musk said on Tuesday that Twitter could start charging a “slight cost” for government and commercial users in comments that come just over a week since he reached a deal to buy the social media platform. 

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. 

VIEW FULL VERSION HERE

Tags Dick Durbin Jerome Powell

The Hill has removed its comment section, as there are many other forums for readers to participate in the conversation. We invite you to join the discussion on Facebook and Twitter.

See all Hill.TV See all Video

Most Popular

Load more

Video

See all Video