Two of Sam Bankman-Fried’s top business partners — a co-founder of the cryptocurrency exchange FTX and the former CEO of the hedge fund Alameda Research — have pleaded guilty to fraud, a federal prosecutor in New York said Wednesday.

Former Alameda CEO Caroline Ellison and FTX co-founder Gary Wang are cooperating with prosecutors, the U.S. attorney for Southern New York said in a video statement.

Ellison and Wang were charged “in connection with their roles in the frauds that contributed to FTX’s collapse,” U.S. Attorney Damian Williams said.

A plea agreement for the criminal charges shows seven counts for Ellison, including wire fraud and conspiracy to commit securities fraud and money laundering. In Wang’s case, the plea agreement list four charges, including wire fraud and conspiracy counts.

Ilan Graff, an attorney for Wang, said in an email Wednesday: “Gary has accepted responsibility for his actions and takes seriously his obligations as a cooperating witness.”

Attorneys for Ellison did not immediately respond to a request for comment.

Civil fraud charges

On Wednesday, the Securities and Exchange Commission announced civil fraud charges against Ellison and Wang ‘for their roles in a multiyear scheme to defraud equity investors in FTX.’

They also face fraud charges from the Commodity Futures Trading Commission.

The SEC complaint alleges that Wang ‘created FTX’s software code that allowed Alameda to divert FTX customer funds’ and that Ellison used those funds for Alameda’s trading.

It also alleges that Ellison and Wang worked with Bankman-Fried to move hundreds of millions of dollars of FTX customer funds to Alameda after they realized the companies didn’t have enough assets to pay back customers.

The SEC alleged in its complaint that since around FTX’s founding in May 2019, some customer funds went immediately into Alameda accounts.

“Billions of dollars of FTX customer funds were so deposited into Alameda-controlled bank accounts,” the complaint reads.

The SEC said it had agreed to settlements with Wang and Ellison, which are subject to court approval.

Downfall of FTX

The barrage of criminal and civil charges against the two top executives has revealed new details about the downfall of FTX, including how customer assets freely moved from the crypto platform to Alameda, the privately held hedge fund Bankman-Fried co-founded.

Bankman-Fried, 30, a co-founder and the former CEO of FTX, is accused of misappropriating billions of dollars deposited into the huge cryptocurrency exchange, which collapsed last month.

Prosecutors have said it was a yearslong fraud that involved funneling money into Bankman-Fried’s private hedge fund.

Customers are estimated to have lost more than $8 billion, the acting director of the CFTC’s Enforcement Division has said.

Williams, the U.S. attorney, has said Bankman-Fried also made “tens of millions of dollars in illegal campaign contributions” to candidates and committees associated with both Republicans and Democrats.

He has been indicted on eight counts, including wire fraud, conspiracy, money laundering and violating campaign finance laws.

The SEC complaint alleges that fraudulent activity began early on.

“From the inception of FTX, Defendants and Bankman-Fried diverted FTX customer funds to Alameda, and continued to do so until FTX’s collapse in November 2022,” the SEC complaint says.

The SEC also alleges a complex scheme to trick both investors and customers into believing FTX had strict and advance risk mitigation.

“In truth, Bankman-Fried and Wang, with Ellison’s knowledge and consent, had exempted Alameda from the risk mitigation measures and had provided Alameda with significant special treatment on the FTX platform, including a virtually unlimited ‘line of credit’ funded by the platform’s customers,” the SEC wrote in its complaint. 

And while the complaint details Wang and Ellison’s involvement in the company’s alleged wrongdoing, “Bankman-Fried remained the ultimate decision-maker at Alameda” and FTX, the SEC complaint reads.

The CFTC complaint separately details allegations that Bankman-Fried hid trading liabilities from Alameda in a customer account on FTX ‘that Bankman-Fried would later refer to as ‘our Korean friend’s account’ and/or ‘the weird Korean account.”

‘As a result, it was no longer apparent on FTX’s ledgers that Alameda had an $8 billion negative balance on its FTX account,’ the complaint reads.

At one time, FTX was reportedly valued at $32 billion and seen as the face of the industry. The MIT-educated Bankman-Fried had been hailed as a kind of crypto genius.

Williams, the U.S. attorney, said in Wednesday night’s announcement that Bankman-Fried was in FBI custody and was being transported to the U.S. from the Bahamas, where he was arrested Dec. 12.

He agreed this week to be extradited and landed late Wednesday in Westchester County Airport in White Plains, New York, NBC New York reported.

Williams said Wednesday that the investigation is not over.

“If you participated in misconduct at FTX or Alameda, now is the time to get ahead of it,” he said. “We are moving quickly, and our patience is not eternal.” 

Sales of existing homes fell 7.7% in November compared with October, according to the National Association of Realtors.

The seasonally adjusted annualized pace was 4.09 million units. That is weaker than the 4.17 million units housing analysts had predicted, and it was a much deeper fall than usual monthly declines.

Sales were down 35.4% year over year, marking the tenth straight month of declines. That was the weakest pace since November 2010, with the exception of May 2020, when sales fell sharply, albeit briefly, during the early days of the Covid pandemic. In November 2010, the nation was mired in the great recession as well as a foreclosure crisis.

These counts are based on closings, so the contracts were likely signed in September and October, when mortgage rates last peaked before coming down slightly last month. Rates are now about one percentage point lower than they were at the end of October, but still a little more than twice what they were at the start of this year.

“In essence, the residential real estate market was frozen in November, resembling the sales activity seen during the Covid-19 economic lockdowns in 2020,” said Lawrence Yun, NAR’s chief economist. “The principal factor was the rapid increase in mortgage rates, which hurt housing affordability and reduced incentives for homeowners to list their homes. Plus, available housing inventory remains near historic lows.”

At the end of November, there were 1.14 million homes for sale, which is an increase of 2.7% from November of last year, but at the current sales pace it represents a still-low 3.3 month supply.

Low supply kept prices higher than a year ago, up 3.5% to a median sale price of $370,700, but those annual gains are shrinking fast, well off the double-digit gains seen earlier this year. It is still the highest November price the Realtors have ever recorded, and, at 129 straight months, it is the longest-running streak of year-over-year price gains since the realtors began tracking this in 1968. Roughly 23% of homes sold above the list price, due to tight supply.

“We have seen home prices come down from their summer peaks over the past five months. At the same time, we have also seen rent growth retreat for 10 consecutive months,” wrote George Ratiu, senior economist at Realtor.com in a release.

“However, the cost of real estate remains challenging for many households looking for a place to call home, especially as high inflation and still-elevated interest rates have been eroding purchasing power.”

Sales decreased in all regions but fell hardest in the West, where prices are the highest, down nearly 46% from a year ago.

Homes sat on the market longer in November, an average 24 days, up from 21 days in October and 18 days in November 2021. Despite the slower market, 61% of homes went under contract in less than a month.

With prices still high and mortgage rates hitting a cyclical peak, first-time buyers remained on the sidelines. They were responsible for 28% of sales in November, which was unchanged from October, and up slightly from 26% in November 2021. Historically first-time buyers make up about 40% of the market. A separate survey from the Realtors put the annual share at 26%, the lowest since they began tracking.

Sales fell across all price categories, but took the steepest dive in the luxury million-dollar-plus category, dropping 41% year-over-year. That sector had seen the biggest gain in the first years of the pandemic.

Mortgage rates have come off their recent highs, but it remains to be seen if it will be enough to offset higher prices.

“The market may be thawing since mortgage rates have fallen for five straight weeks,” Yun added. “The average monthly mortgage payment is now almost $200 less than it was several weeks ago when interest rates reached their peak for this year.”

Shares in electric vehicle maker Tesla sank to a new 52-week low on Tuesday, closing around $138 per share, or 8% lower for the day in an otherwise mixed day for stocks.

CEO Elon Musk tried to blame the sinking price partly on macroeconomic factors.

Long-time Tesla bull Ross Gerber wrote in a tweet, “Tesla stock price now reflects the value of having no CEO. Great job tesla BOD — Time for a shake up. $tsla.” Gerber has launched an informal campaign to have fellow shareholders vote to appoint him to Tesla’s board of directors.

Musk replied, in a tweet, “As bank savings account interest rates, which are guaranteed, start to approach stock market returns, which are not guaranteed, people will increasingly move their money out of stocks into cash, thus causing stocks to drop.”

But Tesla’s stock has dropped more than other larger automakers since Musk announced his plans to buy Twitter in Apr. 2022. Since that date, Tesla shares are down 59%, versus 26% for Ford and 12% for GM. The S&P 500 is down 14%.

The Tesla chief has a lot of distractions, as Gerber notes: Musk has been stirring controversy as the new owner and CEO of Twitter, the social media giant which he acquired in a leveraged buyout in late October, and is also the CEO of a major defense contractor, SpaceX.

Musk sold billions of dollars of his Tesla holdings to finance the Twitter deal, including a $3.6 billion sale earlier this month.

He told Twitter employees he sold Tesla shares to “save” their business while proceeding to cut more than half of staff at the company and rolling out a host of product and policy changes, some of which he later reversed.

While Musk has been focused on his new role as “Chief Twit” since late October, Tesla has been offering discounts and incentives to sell cars in China, where it operates a major factory in Shanghai; fighting to make its new factories in Austin, Texas, and Brandenburg, Germany, efficient; and facing persistent supply chain challenges endemic to the auto industry, along with soaring energy prices in Europe which may reduce the appeal of a battery electric vehicle for many drivers.

Those, among other challenges, led Mizuho Securities and Evercore ISI to reduce their Tesla price targets on Tuesday.

Mizuho Securities analysts wrote in a note, that “near-term, we see potential weakness in Tesla sales as macro headwinds and a weaker consumer could drive lower demand for higher-priced EVs.” The firm is still bullish Tesla long-term, citing the company’s new factories as a competitive advantage, and new electric vehicle tax credits on the horizon in the US which could “accelerate demand” domestically. In China, some EV credits are expiring as of the start of 2023. The firm has a price target of $285 and a buy rating on shares of Tesla.

A Vanderbilt University assistant professor, Joshua White, who formerly worked as an economist for the U.S. Securities and Exchange Commission, told CNBC, ″Only some of the drop in Tesla’s value can be blamed on interest rates. Twitter overhang is one important component. China is another huge component. We still don’t know if China will be open all the way, and we see there is supply and demand pressure here in light of the increase in covid cases, and disruptions.”

He also said Elon Musk may have lost shareholders’ trust when he said in April that he didn’t plan to sell more of his Tesla shares, but went ahead and sold billions of dollars’ more.

“He seems to sell equity in really large blocks, say ‘I’m done and I’m not selling anymore.’ But talk is cheap. He says that and then sells more shares. So the more you say that and investors think he’s probably not done? The less confident they will be that the price is going to bounce back.”

On Wednesday, Musk responded to a tweet suggesting he won’t “even entertain the idea that his behavior impacts the stock price.”

“Maybe so, in which case … buying opportunity!” Musk replied on Twitter. “I keep saying that Fed rate is insane, because data I’m seeing says we’re already in deflation. If True, then real rate of return of T-bills is roughly that of S&P500. Very smart investor I spoke to today said he’s shorting S&P…”

With inclement winter weather forecast for much of the country this week, New Hampshire resident Laurie Boswell said she can sleep easy because she sent her Californian daughter’s Christmas gift with time to spare during the busy shipping season.

“I did all my Christmas ordering early — we don’t like to miss,” said Boswell, 67, who is from Franconia, New Hampshire, but spoke Tuesday from midtown Manhattan in New York.

Present procrastinators, Boswell said, who shipped gifts to their loved ones this week may not be so lucky, however.

“Regardless of the storm, you could still be in trouble,” she said. “You don’t want any last-minute glitches that could ruin the holidays.”

Satish Jindel, the founder and president of ShipMatrix Inc., which tracks the shipping industry and its efficiency, said carriers like Amazon, FedEx, UPS and the U.S. Postal Service will be shipping on average a combined 100 million packages a day this week leading up to Christmas.

“That’s a lot of packages moving all across the country,” Jindel said.

He said about 70 million packages are shipped in a typical day in the fall.

Jindel said that this year during their busiest season, carriers face the additional obstacle of working around Mother Nature’s wrath.

A blast of arctic air from Canada is expected to bring “life-threatening” cold to parts of the U.S. in the lead-up to Christmas, weather forecasters have warned.

A strong arctic high-pressure system extending from western Canada to the northern Plains is expected to bring “very cold air” across the region while extending into parts of the Pacific Northwest this week, the National Weather Service said. As of Tuesday morning, 46 million people were under winter alerts stretching from the northern Plains into the Ohio Valley.

Wind chill warnings and watches have issued across 17 states from Washington to Texas.

Jindel said the country experienced similarly frigid conditions shortly before Christmas in 2013. Packages arrived late or not at all, he said.

That year, ice storms plunged homes and businesses from Michigan to Maine and Canada into darkness, causing tens of thousands to lose power.

“This is a reminder of what happened the final Christmas week of 2013,” Jindel said.

Shipping carriers, however, learned to monitor the weather and work around clusters of storms by sending packages to areas that were more hospitable to get to their final destinations, he said. 

Jindel expects packages to arrive this week by the date the carriers said they will.

He said, however, that the late gift-senders might have to pay a premium to get presents to their destinations.

“They can wait till Friday and order it express overnight, but then they’ll pay $70 or $80 for a gift that is worth $20,” Jindel said. “That is the price of procrastination.”

UPS, FedEx, Amazon and the Postal Service said in statements that their workers are ready.

“UPS has a team of full-time meteorologists who monitor the weather and help us create contingency plans as winter storms develop. Our drivers are trained to safely make deliveries, and if we cannot safely deliver to an area, we will resume service as soon as conditions permit,” the company said.

FedEx also said it has “contingency plans in place to help keep our team members safe and lessen any impact on service.” It encouraged customers to check for weather disruptions affecting service at its website.

Sam Stephenson, an Amazon spokesperson, said in a statement: ‘We’re closely monitoring reports of inclement weather across the U.S. Our delivery promises factor in forecasted weather and delivery dates are shown transparently at checkout. For customers making a last-minute purchase, look for an ‘arrive by Christmas’ message on the product page to ensure the item will make it under the tree by 12/24.”

The Postal Service said it plans for “various weather issues throughout the year.”  It also said its workers have the proper equipment to do their jobs safely.

While the three companies declined to share figures on how many packages are sent this week, the Postal Service said customer traffic begins increasing the week of Dec. 5, culminating the week of Dec. 12, which marks the “busiest mailing, shipping and delivery week of the season.”

Amazon has fulfilled hundreds of millions of orders this holiday season, the company said.

Veronika Bo, 29, of New York City, spoke Tuesday from a post office in the Hell’s Kitchen neighborhood of Manhattan.

Bo said she has shipped holiday gifts to friends and family all over the country, including California, Colorado and Florida.

She said she never worries whether her packages will arrive by Christmas.

“As long as it is postmarked before December 25, you’re fine,” Bo said. “That shows that you’re late, but you’re still thinking about them.”

As inflation wears on American consumers, a host of government and financial rules are changing to help fight rising prices that have reduced your spending power.

In many cases, the changes are intended to help people pay lower taxes and save more, too.

The 12-month inflation rate landed at 7.1% in November. That was down slightly from the 7.7% seen in October, but still near a four-decade high.

Starting in 2023, everything from Social Security benefits to state and local minimum wages are set to adjust — in most cases at rates not seen in a generation.

Some analysts and business leaders say they believe inflation has already peaked and that, even as prices rise, it will not be as severe as it was in the summer of 2022.

“Inflation continues to be a stubborn force globally, though we’ve started to see some moderating impacts in certain areas of our businesses compared to earlier in the year,” Abbott Laboratories CEO Robert Ford said Oct. 19, CNBC reported.

But that higher inflation has already been baked into many tax and wage figures that will change in 2023.

Social Security benefits

Social Security beneficiaries will see the largest annual cost-of-living adjustment (COLA) in a generation, with benefits increasing 8.7% beginning in January. Alongside an unusual, one-time decrease in the annual Medicare premium, fixed-income recipients may enjoy 100% of the COLA increase for 2023.

Income tax brackets

The IRS tax brackets corresponding to your marginal tax rates are also shifting upward — by 7% — thanks to inflation. In an October announcement, the IRS also said it would increase the standard deduction. That amount for married couples filing jointly for the 2023 tax year will rise to $27,700 — up $1,800 from the prior year. 

For single taxpayers and married individuals filing separately, the standard deduction is rising to $13,850, up $900; and for heads of households, the standard deduction will be $20,800, an increase of $1,400.

401(k) pre-tax contribution limits

The IRS is setting new, higher limits on how much employees and employers can contribute toward retirement plans. For 2023, individual employees will be able to contribute up to $22,500 to their 401(k) retirement accounts, up from $20,500 in 2022.

Combined with employer contributions, employees will see a total annual limit of $66,000 in 2023, up from $61,000 in 2022. 

Yields on savings, CD accounts and I-bonds

Yes, interest rates have gone up across the board, making things like mortgages, auto loans and credit cards more expensive. But many banks, especially those that are online-only, are also paying out more money through higher interest rates for high-yield savings and certificate of deposit accounts. Be aware though: Some banks may not automatically raise the interest rate on your existing savings account, but instead require customers to switch into higher yielding accounts from current ones, Bankrate.com warns.

Meanwhile, yields on inflation-protected bonds were offering a 6.89% interest rate as of December 2022.

Parts of the U.S. adjusting minimum wage

Minimum wage in some jurisdictions is tied to inflation and is set to experience annual cost-of-living adjustments in the coming year. California is the largest state that will see a cost-of-living adjustment next year, with the minimum wage rising to $15.50 for all establishments. California’s increase is limited by a statute that declares the minimum wage cannot increase by more than 3.5% each year.

Some large cities set to see minimum wage increases tied to the cost of living include Seattle, up $1.42, to $18.69; Denver, up $1.42, to $17.29; and and San Diego, up $1.30, to $16.30.

Workers’ expectations of salaries

Workers have also been adjusting their expectations of how their pay should change with inflation.

The lowest wage a survey of workers said they’d be willing to accept for a new job hit $72,873 in the most recent quarter, according to the New York Federal Reserve. That’s up from $68,954 in July 2021, though down slightly from $73,283 in March.

Amazon is extending its program that allows customers to send their delivery drivers a $5 tip, following unprecedented demand in the program’s initial rollout.

The program allows Amazon customers to use Alexa-enabled devices like Echo or Echo Show, and Amazon’s mobile app, to tip their most recent delivery driver. When a customer says, “Alexa, Thank My Driver” into the device, the driver will receive the $5.

Amazon initially launched the program Dec. 7, but ended it after one day after receiving more than one million thank-my-driver requests.

‘After extraordinary participation by the community, starting December 21, we are extending the ‘Alexa, Thank My Driver’ $5 appreciation program by an additional one million ‘thank yous’!’ the company said on its website. ‘Drivers will receive a notification of when the $5 promotion has ended.’

In a separate emailed statement, the company said it had already reached nearly five million thank-yous.

‘While customers can continue to pass along their gratitude every day through the Alexa feature, we are touched by the stories we’ve heard from customers and drivers alike on the positive impact of the celebratory promotion,’ it said.

The first round of the thank-a-driver program was launched on the same day the District of Columbia attorney general Karl Racine announced a new lawsuit against Amazon on accusations that the company diverted tips away from drivers.

“Workers in the District of Columbia and throughout our country are too often taken advantage of and not paid their hard-earned wages,” Racine said in a statement. “What’s more, consumers need to know where their tips are going. This suit is about providing workers the tips they are owed and telling consumers the truth. Amazon, one of the world’s wealthiest companies, certainly does not need to take tips that belong to workers. Amazon can and should do better.” 

Amazon previously settled with the Federal Trade Commission in 2021 for $61.7 million over the tip-theft allegations.

An Amazon spokesperson said in an email that there was no connection between the thank-a-driver program and the suit. Amazon previously told the Washington Post that the suit was without merit and that it had changed its model in 2019, and that D.C. drivers earn more than the District’s minimum wage.

The National Football League announced Thursday its Sunday Ticket subscription package would go to Google’s YouTube TV starting next season, marking the league’s second media rights deal with a streaming service.

YouTube TV will pay roughly $2 billion a year for the rights of the Sunday Ticket package, according to people familiar with the matter.

At the start of the 2023-24 season, Sunday Ticket will be available two ways: as an add-on package on YouTube TV and as a standalone a-la-carte option on YouTube Primetime Channels, which allows you to subscribe to individual streaming services and channels as well as watch movies. Pricing has yet to be announced.

“For a number of years we have been focused on increased digital distribution of our games and this partnership is yet another example of us looking towards the future and building the next generation of NFL fans,” NFL Commissioner Roger Goodell said in Thursday’s announcement.

DirecTV has had the rights to Sunday Ticket since its inception in 1994, paying $1.5 billion annually for them since the last renewal in 2014. It didn’t place a bid to keep its contract going. Still, the satellite-TV provider had been open to still offering the games for commercial establishments, such as bars and restaurants, similar to its agreement with Amazon for “Thursday Night Football,” according to people familiar with the matter.

The deal with YouTube TV does not include commercial rights, which could boost the value of the package, and the NFL is still sorting that out, according to one of the people.

A U.S.-only product, Sunday Ticket is the only way fans can watch live NFL Sunday afternoon games outside of their local markets on broadcast stations CBS and Fox.

It’s the last NFL package to land a media rights renewal. Last year, Paramount’s CBS, Fox and Comcast’s NBC agreed to pay more than $2 billion annually for 11-year packages, while Disney is paying about $2.7 billion per year for Monday Night Football, CNBC previously reported.

Amazon secured the rights to “Thursday Night Football,” making it the first streaming-only platform to air NFL games, paying about $1 billion per year.

The league had been in negotiations for some time to find a new owner for Sunday Ticket. Apple, Amazon, and Disney’s ESPN were among interested bidders for the package at one point or another, CNBC previously reported.

YouTube TV is an internet bundle of broadcast and cable networks that mirrors a traditional linear pay-TV operator. Its base plan costs $64.99 a month. In July, Google announced YouTube TV surpassed 5 million customers, including trial subscriptions.

YouTube Primetime Channels, which will be the a la carte option for Sunday Ticket, is a distribution platform similar to subscribing to networks and streaming services through Amazon’s Prime Channels.

To compare, Apple recently signed a 10-year deal for the rights to air Major League Soccer games. The tech giant recently announced the MLS Season Pass would launch in February, and would be available to fans on the Apple TV app for $14.99 a month per season. For subscribers of its streaming service, Apple TV+, which already pay $4.99 a month, they can sign up for $12.99 a month.

In recent months, YouTube TV emerged as a strong contender for the rights, given it could provide a lot of what the league was hoping to achieve with a new Sunday Ticket partner — a technology platform with a large balance sheet and global reach, and the ability to support bundled legacy TV.

NFL Commissioner Roger Goodell has said the league was pushing for Sunday Ticket to end up on a streaming service. “I think that’s best for consumers at this stage,” Goodell previously told CNBC.

For a time, it seemed Apple was close to attaining the rights. The company has been expanding its sports footprint for its Apple TV+ streaming service. It recently inked a 10-year deal with Major League Soccer that begins in 2023, and last year began airing Friday night Major League Baseball games.

However, discussions broke down due to existing restrictions around the Sunday Ticket rights, and Apple had wanted more flexibility with how to distribute the package, CNBC previously reported.

Amazon had also been considered another top contender, considering it already airs “Thursday Night Football” games and is a streaming-only platform.

While those contests primarily air on Prime, DirecTV distributes the games commercially, in bars, restaurants, hotels and retailers. The two reached a multi-year deal before the season started. DirecTV is interested in delivering Sunday Ticket games in a similar capacity, people familiar with the matter have said.

CORRECTION (Dec. 22, 2022, 11:10 a.m.): An earlier version of this article misstated the byline. This article was written by Lillian Rizzo, not Lisa Rizzolo.

In 2022, the Federal Reserve raised its key federal funds rate seven times — something it hasn’t done as aggressively since the 1980s.

The central bank hopes that by doing so, it can slow down the economy enough to moderate price growth.

But how does raising interest rates do that, exactly?

When you get a loan from a bank — for example, when you’re buying a house — an interest rate is attached to that loan. The interest rate is the price you pay to borrow the money.

Banks need to borrow money, too. Instead of borrowing directly from other banks, they look to the Federal Reserve — America’s central bank. Its primary role is to provide a safe and reliable financial system for the U.S. by maintaining deposit accounts for banks.

When banks need to borrow money, they look to other banks that have deposit accounts with the Fed that may be in a surplus.

And just as with any other loan, the banks are charged an interest rate for borrowing money. It is this percentage, known as the federal funds rate, that the Federal Reserve helps set with its interest rate announcements.

How the federal funds rate influences parts of the economy

But how could one interest rate have so much influence on the broader economy?

Banks pass on the cost of a higher federal funds rate to their customers when those customers want to access regular lending products.

The best example is the prime rate. This is the interest rate banks charge their most creditworthy borrowers, like large corporations. For several decades now, the rule of thumb has been that the prime rate is equivalent to the federal funds rate plus 3%. So, with the new federal funds target rate at between 4.25% and 4.5%, the new prime rate at the upper range would be at 7.5%. The percentage difference is supposed to cover the cost of processing a bank loan.

Changes in the prime rate, in turn, drive up the cost of borrowing for all other loan products, like real estate and vehicle purchases, as well as revolving debt such as credit cards. As of Thursday, mortgage rates are climbing above 6%.

As the theory goes, if it’s more expensive to borrow money or carry a balance on a credit card, consumers will spend less. When spending declines, demand will fall and, eventually, so will the price of everyday goods.

There is a risk, however. Economists warn the combination of higher borrowing costs, high inflation, and slower growth could tip the U.S. economy into a recession. So the onus is on the Federal Reserve to choose its moves carefully.

Does raising interest rates actually work?

Federal Reserve chairman Jerome Powell has said he is seeking to bring demand more in line with supply. But the global supply chain for a wide array of products has been severely constrained over the course of the pandemic, due in part to strict Covid-19 policies in China where many mass-produced goods are sourced.

The ongoing war in Ukraine has negatively affected the global food supply in addition to the crude oil and natural gas resources that Europe largely depends on.

So, there may only be so much the Federal Reserve can do with the tools it has available.

‘Goods inflation is a trade and geopolitics issue that’s controlled by government as a whole and not the Fed,’ said Derek Tang, an economist at LH Meyer Inc., a macroeconomic consulting group.

‘We’ll have to look to the White House and Congress to act on those issues, whether that means brokering deals with other countries to make sure we have better supply, or have more access to supply,’ Tang said.

America’s tax brackets are changing thanks to inflation.

That will be welcome news for many people whose salaries haven’t been keeping up with the highest price increases in four decades seen in 2022.

The announcement of the tax-bracket shifts came shortly after the Social Security Administration revealed the largest inflation adjustment for fixed-income beneficiaries in a generation.

Tax brackets move alongside the inflation rate, meaning the amount of tax you pay on your income gradually shifts in normal times. But the persistently high inflation consumers have faced in 2022 is anything but normal, so the tax brackets moved up to offset that. The good news is, if your wages didn’t rise enough, you’ll likely fall into a lower tax bracket in 2023.

Here’s how that translates in dollar amounts

The standard deduction for married couples filing jointly for the 2023 tax year rises to $27,700, up $1,800 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $13,850, up $900; and for heads of households, the standard deduction will be $20,800, up $1,400.

Meanwhile, the 12% tax bracket in 2023 will go to married couples filing jointly with incomes over $22,000 and individuals who earned more than $11,000. The 22% threshold will apply to married couples filing jointly with incomes over $89,450 and individuals with incomes over $44,725. That compares with the respective $83,550 and $41,775 thresholds in 2022 for the 22% threshold.

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The 24% threshold will apply to married couples filing jointly with incomes over $190,750, or individuals with incomes over $95,375. The 32% threshold will go to married couples filing jointly with incomes over $364,200, or individuals with incomes over $182,100. And the 35% threshold will apply to married couples filing jointly with incomes over $462,500, or individuals making more than $231,250.

The top threshold, 37%, will apply to married couples filing jointly with incomes over $693,750, or individuals making over $578,125.

The earned income tax credit, which benefits lower-income workers, will rise by approximately 7%, from $6,935 for the 2022 tax year to $7,430 in 2023. And the alternative minimum tax exemption amount for next year will be $81,200 ($126,500 for married couples filing jointly), an increase from $75,900 for individuals and $118,100 for married couples filing jointly for the 2022 tax year.

New legislation working its way through Congress could improve retirement security for U.S. workers. The plan is part of a government spending bill, and it includes a provision that would automatically enroll eligible employees into their company’s retirement plan.

The hallmark of the legislation, called the Secure Act 2.0, would see companies enrolling workers in a 401(k) retirement plan, deducting at least 3% — but no more than 10% — of an employee’s pretax earnings, which would be deposited into the 401(k) account. Employees could always opt out of the program.

The legislation would also allow employers to factor in employees who make student loan payments when considering 401(k) contributions.

And it would provide tax incentives for small businesses — the vast majority of firms in the U.S. — to begin offering 401(k) plans by increasing the tax write-offs available to those businesses for offering access to a retirement plan.

‘It will deliver billions in additional retirement savings and help to ease the insecurity and anxiety that workers and retirees are feeling about having enough savings to provide them with the income they need to sustain them through retirement years,’ said Paul Richman, chief government and political affairs officer at the Insured Retirement Institute, a trade group.

While many companies currently offer 401(k) plans, enrollment is not typically automatic. Just 51% of businesses that responded to a 2020 Society for Human Resource Management survey said they automatically enrolled new or existing employees into a 401(k)-type plan.

Meanwhile, an AARP survey this year found that nearly half of all workers in the U.S. do not have access to a retirement plan at work in the first place. That equates to roughly 57 million private sector workers between ages 18 and 64.

The issue is especially acute for part-time workers. The Secure Act 2.0 would lower the service requirement for these workers from three consecutive years to two, meaning they’d be automatically enrolled in their employer’s 401(k) retirement program once they have surpassed 500 hours of total service.

Workers who’ve experienced unstable employment or switched jobs would also have access to a centralized database run by the Labor Department to learn whether their employer might have automatically enrolled them in a 401(k) plan during their employment.

The legislation would also improve the lot of the 84% of American adults who say student loan payments have limited their ability to save for retirement, according to a 2019 study by the Massachusetts Institute of Technology’s AgeLab and the financial services organization TIAA. Under the new legislation, employers could consider a worker’s student loan payment to be the equivalent of a 401(k) contribution and match it accordingly.

For older workers ages 60 to 64 who were unable to contribute to 401(k)s earlier in their careers, the so-called catch-up contribution they can make to their current 401(k) plan would increase to $10,000.

Finally, the legislation offers a 100% tax credit to businesses with 50 employees or fewer for the cost of maintaining a 401(k) plan.

‘It’s a bill that helps all income levels and all different types of workers and retirees,’ Richman, of the Insured Retirement Institute, said.