With inflation rates staying at an all-time high for the past three months and giving no indication of abating, the Federal Reserve might consider raising rates further at the present clip through September. States, meanwhile, chipped in with multiple relief measures, proposing a slew of measures including stimulus checks, gas cards, transit cards, tax rebates, and waiver of state gas and grocery taxes for the year.
Federal Reserve Bank President Jerome Powell and other policymakers have already indicated that they expect to follow last month’s half-point interest rate hike with a couple more in June and July.
The Cleveland Fed Reserve President Loretta Mester said that if she doesn’t see compelling evidence that she would be compelled add a 50 basis-point vote in that meeting too. Though there is no reason the Fed has to make that decision yet, she continues, though she has found no signs to indicate that inflation is on the decline.
On Thursday, Federal Reserve Vice Chair Lael Brainard signaled along similar lines, saying she was not supportive of a pause in rate hikes in September.
Mester said that the risks of a recession are high, and it is not only because of the hike in rates. The slowdown in the world economy amid the European war and the continuing shutdown due to COVID-19 in China have hit demands there and also messed up the supply chain.
The process of bringing interest rates up has already helped temper demands and tighten financial conditions. Mester said that other positive things are expected on the supply side and believes that there is a good chance that the Fed Reserve will be able to slow the economy without creating other problems.
State Make Use Of Direct Federal Flexible Funding To States
The COVID-19 pandemic had an unprecedented state fiscal situation. Responding to this crisis, states increased spending on health and put a brake on economic activity, consequently halting state revenues. Fearing the inevitable catastrophic economic consequences, the federal administrations stepped in and passed multiple stimulus packages. A couple of them directly benefitted states and provided flexible funding to them.
The Coronavirus Aid, Relief, and Economic Security (CARES), the first of the stimulus checks initiated by the federal administration included $150B in flexible and direct funding to states local, and tribal administrations, collectively the Coronavirus Relief Fund (CRF). But the states had a deadline to expend this fund.
The American Rescue Plan Act, enacted a year later by Congress and signed by President Joe Biden, was the biggest ever stimulus check package, leading to the $350B Coronavirus State and Local Fiscal Recovery Fund. This helped states, counties, cities, and tribal governments. These bodies are obligated to obligate the State Fiscal Recovery Fund by end of 2024 and spend it by 2026, failing which the fund will revert to the Federal Reserve.
These federal stimulus check packages were instrumental in the pandemic response by the states. The CRF and SFRF emergency funding packages infused financial resources into the state governments and helped them recover and respond to the pandemic.
Without this federal stimulus, the economic fallout during and beyond the pandemic may have left many states with depleted reserves and drastic budget cuts.
States Move In As Washington Drags Feet On A Fourth Stimulus Check
The federal stimulus negotiations have degenerated into a political game of one-upmanship between
Responding to continual inaction by Capitol Hill, more and more states have implemented their relief programs to help people out of the record inflation level that has been stated in place for the past 3 months. It ranges from direct stimulus checks to gas and transit cards, tax rebates, and tax holidays by states for gasoline and essential items.
Homeowner Assistance Fund (HAF) To Be Give By Us Treasury Department
Homeowners across the US will get financial relief under the Homeowner Assistance Fund initiated by the US treasury department.
The purpose of the fund is to stave off mortgage defaults and delinquencies, foreclosures, and loss of home energy or other utility services. The fund will also prevent the displacement of homeowners who experience financial hardship after January 21, 2020, according to the website of the Treasure Department.
The funds will prioritize homeowners who faced the maximum hardship. It will use several both national and local indicators of income to maximize the impact.
The open HAF programs are currently applicable in 40 states while 5 others – Iowa, Oregon, Colorado, Montana, and Washington – and also Washington D.C. have initiated pilot programs. Only North Dakota, Delaware, and Utah are currently not accepting applications. But residents have been advised to keep track of updates.
State Stimulus Checks Expected In June
Residents of Maine and New Mexico are eligible to receive stimulus checks as these states have taken legislative measures in light of the record inflation figures.
In Maine, the initial round of $850 stimulus checks has started going out this month to residents who have filed their income tax returns for 2021. The last date for filing has been set at October 31, 2022, and Maine will continue issuing more stimulus checks on a rolling basis as it receives more income tax returns.
To be eligible individuals cannot be claimed as a dependent on another filer’s returns. They must also have a federal adjusted gross income below $100,000 for individual filers, $200,000 for married couples who file jointly, and $150,000 for heads of households.
An estimated 858,000 residents stand to receive the stimulus check with a total expense layout of $729.3M.
New Mexico stimulus checks are also expected in June and could come in the form of tax rebates. The stimulus support measures have been approved by the legislature earlier this year and will provide refund payments of $250 for individual filers and double that for married couples filing jointly. Another identical payment of the same amount will go out in August.
Tax filers in New Mexico do not have to apply separately for the rebates. All residents of the state who have filed their income tax returns by May 31 will automatically receive the stimulus checks.
Other states that are considering similar stimulus check measures for their residents include Minnesota, Kansas, Colorado, and Pennsylvania. California’s Governor Gavin Newsom has already initiated legislative measures to facilitate gas and transit cards for residents. The gas cards, valued at $400 each, will be issued to vehicle owners. Families can claim a maximum of two cards. For those not owning any vehicle, a transit card is in the offing.