By Joyce Yu
Philadelphia, PA–House Republican leaders began to roll out the long-waited tax bill Thursday that contains sweeping changes for business and individual tax rates, including a measure to cut the corporate tax rate to 20%.
The highly expected bill, however, was not well received by people across the industries as it would, for instance, cap the mortgage-interest deduction on new home sales at $500,000, half of the current cap of $1 million for couples filing jointly, according to a memo written by the House Ways and Means Committee. A Bloomberg report quoted the National Association of Realtors, which has been wary of the tax plan, saying the memo “appears to confirm many of our biggest concerns.”
Thursday is also a big day for the Fed as President Trump will announce his pick to lead the Federal Reserve in the afternoon. Two sources told CNN that Trump is likely to nominate Jerome Powell who has been a Fed governor since 2012 and previously served as Treasury official under President George H.W. Bush.
Powell is seen by investors as a continuity candidate and has generally backed current chair Janet Yellen’s cautious approach to withdrawing stimulus. The incoming chairman will replace Yellen when her term expires in February.
Greg Valliere, chief global strategist at Horizon Investments, said Yellen would leave the Fed with a solid track record. “She’ll go out on top, widely praised for engineering an economic recovery and presiding over a historic stock market rally,” he told the CNN.
The succession question overshadowed the Fed’s policy statement Wednesday, where it subtly upgraded its assessment of the economy and reinforced expectations of a December interest-rate hike. The Bank of England, on the other hand, announced to hike its key rate on Thursday from a record low of 0.25% to 0.5%, a shift that economists widely expected. Despite the fact that U.K. interest rates remain at very low levels even after the hike, many analysts fear the move may yet be premature as hiking rates and putting consumers under more pressure could cause economic growth to slow further.
“It has been a long 10 years since the base rate last went up, so today represents the first time many U.K. borrowers will have ever experienced an increase in their mortgage payments,” said Simon Gammon of Knight Frank Finance.
While UK’s unemployment has been continuing to fall, a sharp drop in the value of the pound has hurt consumers by making imported goods more expensive. Wages have also been squeezed and the housing market has slowed. The Bank of England said in a statement that it expects inflation to peak above 3% in November before diminishing over the next year.
“The bank is on a tightrope, it wants to dampen down inflation and consumer borrowing without knocking out the U.K. consumer,” said Ian Stewart, chief economist at Deloitte.
