On The Money — Fed minutes shed light on bank’s recession outlook

The Hill illustration, Madeline Monroe/AP photos

New minutes from the Federal Reserve’s last meeting paint the picture of a cautiously optimistic central bank. We’ll also look at Democratic divides over inflation and trouble for the railroad industry boosting inflation.

But first, a recap of Tuesday’s primaries.

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 saw strong economy facing inflation risks 

Federal Reserve officials saw the economy holding strong despite high inflation and rising threats to the global economic outlook before hiking interest rates earlier this month, according to minutes released by the central bank Wednesday.

During the May 3 and May 4 meeting of the Federal Open Market Committee (FOMC), the Fed panel responsible for setting interest rates and other monetary policy tools, officials voiced confidence in the resilience of the U.S. economy as the central bank ramps up its battle against inflation.Even so, Fed officials also saw several risks to the U.S. economy and the bank’s bid to bring inflation down without causing a recession looming on the horizon, according to minutes from the meeting.

The background: The FOMC capped off the May meeting with a 0.5 percentage point interest rate hike, twice the size of a typical increase, after raising its baseline interest rate range by 0.25 percentage points in March. The FOMC and Fed Chairman Jerome Powell, who spoke to reporters after the meeting, also said the Fed was likely to consider further 0.5 percentage point hikes at upcoming summits in June and July.

The minutes from the May meeting align largely with Powell’s message of cautious optimism in the strong but overheated economy and the bank’s ability to tame it.While Powell has warned the U.S economy could experience “pain” as borrowing costs rise, he and Fed officials believe a strong labor market and consumer spending can hold sturdy.

Sylvan breaks it down here.

TRADING BLOWS

Democrats divided on tariffs amid woes over inflation

Faced with mounting inflation and bad poll numbers, Democratic lawmakers are divided over whether to get rid of Trump-era tariffs on hundreds of billions of dollars in goods imported from China, which some Democrats think would lower costs for consumers.

Vulnerable Democratic senators from two key battleground states, Arizona and Nevada, are worried in particular that the administration may wind up slapping penalties on Chinese manufacturers of solar panels that have expanded their operations into Southeast Asia.

But tariffs on foreign imports are popular with labor unions and with voters in key presidential swing states such as Michigan, Ohio and Pennsylvania — states that could decide who controls the White House after the 2024 election.

The Hill’s Alexander Bolton has more here.

HIRE AND HIRE 

7 in 10 say it’s a good time to find a quality job: Gallup

Most Americans feel it is a good time to find a quality job, a new Gallup poll finds, despite high inflation and some fears of a potential recession in the near future.

Seventy-one percent of Americans in a Gallup poll released Wednesday said they believe it is a good time to find a quality job. That’s near the 21-year high of 74 percent that Gallup recorded last October.The percentage of U.S. adults who said it was a good time to find a quality job dropped significantly at the start of the COVID-19 pandemic, from 68 percent in January 2020 to 22 percent in April 2020, but it has since recovered and remained above 70 percent since last August.

The U.S. unemployment rate currently stands at 3.6 percent and has remained below 5 percent since last September.

The background: While the job market and consumer spending have remained strong over the start of 2022, high inflation has taken a toll on household budgets and voters’ views on President Biden’s handling of the economy.

The Hill’s Jared Gans fills us in here.

TROUBLE ON THE TRACKS

Freight railroad slowdowns under microscope amid supply crunch

Freight railroads are failing to keep pace with consumer demand, putting additional strain on the nation’s supply chains that have been plagued by trucker shortages and congested ports, among other challenges.

Trade groups representing energy and agricultural producers say that rail service disruptions are delaying shipments of raw materials and driving up prices that consumers pay for food, gas and other products.

They chiefly blame railroads for understaffing their operations. Over the last six years, the leading freight carriers laid off 45,000 employees, or nearly 30 percent of their combined workforce, according to the Surface Transportation Board. Most of the layoffs came before the pandemic, which ushered in a huge demand for shipped items.

The National Grain and Feed Association testified before the board that service disruptions cost the grain industry more than $100 million due to lost revenues and additional freight expenses in the first quarter of 2022.The American Fuel and Petrochemical Manufacturers said that service disruptions and lack of competition in the railroad industry contribute to rising gas prices, stating that transportation and distribution costs account for 11 percent of the cost consumers pay.

Karl has more here.

Good to Know

Tuesday’s devastating mass shooting is thrusting the National Rifle Association’s (NRA) annual meeting in Houston, Texas, this weekend into the spotlight.

The pro-gun lobbying group’s convention, located roughly 300 miles from the Uvalde, Texas, elementary school where at least 19 children were shot and killed, is set to feature remarks from Texas Gov. Greg Abbott (R), Sen. Ted Cruz (R-Texas) and former President Trump on Friday.

Here’s what else we have our eye on: 

Hyundai has recalled 239,000 vehicles nationwide out of concern that certain seat belt pretensioners could explode and send metal fragments throughout the vehicle.More than a dozen global companies in the oil and gas industry are uniting for the first time to promote cyber resilience amid growing cyber threats.

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. 

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