June 29, 2022

Fed Set to Lift Rates as ‘Soft-ish Landing’ Becomes a Harder Sell

It’s not just Wall Street that is increasingly glum. Consumer confidence fell to its lowest level on record in preliminary data from the University of Michigan survey, and expectations of higher unemployment in a New York Fed survey have been picking up.

Even if the Fed is also becoming more uncertain about its chances of setting the economy down gently, Mr. Powell may not say that. Coming from a top central bank official, a prediction that the economy is headed for tough times might become a self-fulfilling prophesy, shattering already fragile confidence.

“They went from soft to soft-ish — I don’t think there’s another term they can use to say ‘not a complete disaster,’” Ms. Misra said. “I think the markets are calling their bluff, that they won’t be able to achieve it.”

A recession would spell trouble for the White House. President Biden has been sure to emphasize that the Fed is independent and that he will respect its ability to do what it deems necessary to bring inflation under control, even as his approval ratings crack and as the economy heads toward a potentially tough transition period.

“The Federal Reserve has a primary responsibility to control inflation,” Mr. Biden wrote in a recent opinion column. He added that “past presidents have sought to influence its decisions inappropriately during periods of elevated inflation. I won’t do this.”

Even so, some have argued that the central bank should not be the only game in town when it comes to controlling inflation, given the pain its policies inflict. Skanda Amarnath, executive director of the employment advocacy group Employ America, argued that the White House should be taking more aggressive actions to improve gas supply, for instance, to try to offset inflationary pressures.

Article source: https://www.nytimes.com/2022/06/14/business/economy/federal-reserve-rates-economy.html

Fed Set to Lift Rates as ‘Soft-ish Landing’ to Slow Inflation

It’s not just Wall Street that is increasingly glum. Consumer confidence fell to its lowest level on record in preliminary data from the University of Michigan survey, and expectations of higher unemployment in a New York Fed survey have been picking up.

Even if the Fed is also becoming more uncertain about its chances of setting the economy down gently, Mr. Powell may not say that. Coming from a top central bank official, a prediction that the economy is headed for tough times might become a self-fulfilling prophesy, shattering already fragile confidence.

“They went from soft to soft-ish — I don’t think there’s another term they can use to say ‘not a complete disaster,’” Ms. Misra said. “I think the markets are calling their bluff, that they won’t be able to achieve it.”

A recession would spell trouble for the White House. President Biden has been sure to emphasize that the Fed is independent and that he will respect its ability to do what it deems necessary to bring inflation under control, even as his approval ratings crack and as the economy heads toward a potentially tough transition period.

“The Federal Reserve has a primary responsibility to control inflation,” Mr. Biden wrote in a recent opinion column. He added that “past presidents have sought to influence its decisions inappropriately during periods of elevated inflation. I won’t do this.”

Even so, some have argued that the central bank should not be the only game in town when it comes to controlling inflation, given the pain its policies inflict. Skanda Amarnath, executive director of the employment advocacy group Employ America, argued that the White House should be taking more aggressive actions to improve gas supply, for instance, to try to offset inflationary pressures.

Article source: https://www.nytimes.com/2022/06/14/business/economy/federal-reserve-rates-economy.html

Microsoft Pledges Neutrality in Union Campaigns at Activision

In early March, the union signed a letter asking federal regulators to scrutinize the acquisition. “The potential takeover by Microsoft threatens to further undermine workers’ rights and suppress wages,” the letter said.

Microsoft has since tried to strike a conciliatory tone. It said it would not stop Activision from voluntarily recognizing the union before a formal election, which Activision did not do. After the Raven Q.A. workers voted in late May to form the first union at a major North American game publisher, Phil Spencer, the head of gaming at Microsoft, told employees that he would recognize the Raven union once the deal between the two companies closed, the gaming news site Kotaku reported, citing a video of an employee town hall.

Activision said on Friday that it was starting contract negotiations with the newly unionized Raven workers. “We decided to take this important step forward with our 27 represented employees and C.W.A. to explore their ideas and insights for how we might better serve our employees, players and other stakeholders,” Bobby Kotick, the company’s chief executive, said in a statement.

In a blog post this month that appeared to foreshadow the deal, Mr. Smith announced a set of principles to guide Microsoft’s response to labor organizing, an indication that it was taking a more open approach across the company’s businesses.

He wrote that he had observed Microsoft’s successful “collaborative experiences with works councils and unions” while working in Europe and said that in the United States the company would pursue “collaborative approaches that will make it simpler, rather than more difficult, for our employees to make informed decisions and to exercise their legal right to choose whether to form or join a union.”

In the interview, Mr. Smith called the neutrality agreement “our first opportunity to put those principles into practice.”

Article source: https://www.nytimes.com/2022/06/13/business/economy/microsoft-activision-union.html

Inflation in the United States: What You Need to Know

Policymakers are also particularly attuned to the so-called core inflation measure, which strips out food and fuel prices. While groceries and gas make up a big part of household budgets, they also jump around in price in response to changes in global supply. As a result, they don’t give as clear a read on the underlying inflationary pressures in the economy — the ones the Fed believes it can do something about.

“I’m going to be looking to see a consistent string of decelerating monthly prints on core inflation before I’m going to feel more confident that we’re getting to the kind of inflation trajectory that’s going to get us back to our 2 percent goal,” Lael Brainard, the vice chair of the Fed and one of its key public messengers, said during a CNBC interview last week.

How long prices will continue to climb rapidly is anyone’s guess: Inflation has confounded experts repeatedly since the pandemic took hold in 2020. But based on the drivers behind today’s hot prices, a few outcomes appear likely.

For one, quick inflation seems unlikely to go away entirely on its own. Wages are climbing much more rapidly than normal. That means unless companies suddenly get more efficient, they will probably try to continue to increase prices to cover their labor costs.

As a result, the Fed is raising interest rates to slow demand and tamp down wage and price growth. The central bank’s policy response means that the economy is almost surely headed for a slowdown. Already, higher borrowing costs have begun to cool off the housing market.

The question — and big uncertainty — is just how much Fed action will be needed to bring inflation under control. If America gets lucky and supply chain shortages ease, the Fed might be able to let the economy down gently, slowing the job market enough to temper wage growth without causing a recession.

Article source: https://www.nytimes.com/2022/06/11/business/economy/inflation-us-prices.html

Inflation Sped Up Again in May, Dashing Hopes for Relief

“The rental market feels very tight: Vacancies are very low, and because of that rents are raising at a strong clip,” said Igor Popov, the chief economist at Apartment List.

A few details in the new data could offer glimmers of hope for the Fed and the White House. Some goods prices that had been picking up last year amid shortages are now dropping: Audio and visual products like televisions, for instance, are getting cheaper again. And core inflation, the gauge without food and energy costs, moderated to 6 percent on an annual basis, from 6.2 percent the prior month.

But that deceleration came partly because the figures are now being measured against high readings last year: Inflation had popped in May 2021. That so-called base effect makes annual gains look lower even if prices are climbing steadily month to month.

Overall, the report was a discouraging one for policymakers, and it highlighted that they have their work cut out for them as consumer and business demand remains strong. While the White House has been instituting policies that might help families with inflation around the edges by improving supply or offsetting costs — like trying to clear up port backlogs, or releasing strategic petroleum reserves to mute gas price increases — the task of cooling down consumption falls almost entirely to the central bank.

So far, spending shows little sign of cracking. Even as vacation costs jump off the charts, for instance, travelers continue to book trips.

“The resilience of travel is really remarkable,” Anthony G. Capuano, the chief executive of Marriott International, said during a Tuesday event with analysts, later adding that the hotel company is seeing “extraordinary pricing power.”

Article source: https://www.nytimes.com/2022/06/10/business/economy/may-2022-cpi-inflation.html

An ‘Ugly’ Inflation Report Upended Hopes That Price Gains Would Ease

Republicans blamed the president, as they have for more than a year, for the increases, saying his 2021 economic rescue bill effectively overheated the economy. “The truth is that inflation did not just sneak up on the Biden White House,” Representative Jason Smith of Missouri, the top Republican on the Budget Committee, said on Friday. “The warning signs were there all along.”

Mr. Biden and his team have been trying to make a delicate pivot on the inflation issue, calling it his top economic priority and increasingly expressing sympathy for the households struggling to cope with rising prices. They have sought to reassure markets by leaning into a message of trust in the Fed to manage inflation with interest rate increases, while attempting to project a sense of urgency with actions that officials concede will have a small effect, at best, on broad prices — like an announcement this week that the administration was pausing tariffs on some imported solar panels.

Officials also continue to search for additional ways Mr. Biden might bring down the price of gasoline, which is largely dictated by global market forces and very difficult for presidents to influence in the short term to any large degree.

Article source: https://www.nytimes.com/2022/06/10/business/economy/inflation-report-price-gains-biden.html

Inflation soared again in May, fresh data showed.

The Fed’s attempt to temper inflation by slowing down the economy is contributing to an already sour economic mood. Consumer confidence has been sinking all year as households shoulder the burden of higher prices, and President Biden’s approval ratings have also suffered. Both Wall Street economists and small business owners increasingly worry that a recession is possible in the next year.

That glum attitude spells trouble for Mr. Biden and Democrats as November midterm elections approach. As climbing prices weigh on voters’ wallets and minds, policymakers across the administration have been clear that helping to return inflation to a more sustainable pace is their top priority, but that doing so mainly falls to the Fed.

Economists warn that wrestling inflation lower could be a slow and painful process. Production and shipping snarls tied to the pandemic have shown early signs of easing but remain pronounced, keeping products like cars and trucks in short supply. The war in Ukraine is elevating food and fuel prices, and its trajectory is unpredictable. And consumer demand remains strong, buoyed by savings amassed during the pandemic and wages that are rising quickly, albeit not enough to fully offset inflation.

“There does seem to be considerable resilience in consumer spending,” Matthew Luzzetti, chief U.S. economist at Deutsche Bank, said ahead of the report, explaining that he expects consumer prices to still be climbing at 7.3 percent over the year as of December.

Article source: https://www.nytimes.com/2022/06/10/business/economy/inflation-soared-again-in-may-fresh-data-showed.html

White House Struggles to Talk About Inflation, the ‘Problem From Hell’

But the president’s more political aides have tended to sharply minimize that the March 2021 package, known as the American Rescue Plan, helped to goose inflation, even as they have claimed credit for strong economic growth.

“Some have a curious obsession with exaggerating impact of the Rescue Plan while ignoring the degree high inflation is global,” Gene Sperling, a senior White House adviser overseeing the implementation of the stimulus package, wrote on Twitter last week, adding that the law “has had very marginal impact on inflation.”

Brian Deese, the director of the National Economic Council, acknowledged in an interview last week that there were some disagreements among White House economic officials when it came to how to talk about and respond to inflation, but he portrayed that as a positive — and as something that is not leading to any kind of dysfunction.

“If there wasn’t healthy disagreement, debate and people feeling comfortable bringing issues and ideas to the table, then I think we would be not serving the president and the public interest well,” he said.

He also pushed back on the idea that the administration was deeply divided on the March 2021 package’s aftereffects, saying in a separate emailed comment that “there is agreement across the administration that many factors contributed to inflation, and that inflation has been driven by elevated demand and constrained supply across the globe.”

How to portray the Biden administration’s stimulus spending is far from the only challenge the White House faces. As price increases last, Democrats have grappled with how to discuss their plans to combat them.

Article source: https://www.nytimes.com/2022/06/08/business/economy/inflation-biden-administration.html

Yellen Defends Pandemic Spending as Inflation Persists

Ms. Yellen did appear to veer away from the view of some Democrats that corporate greed and profiteering was a primary reason for rising prices.

Asked by Senator Charles E. Grassley, an Iowa Republican, about whether greed was to blame, Ms. Yellen demurred.

“I guess I see the bulk of inflation as reflecting supply and demand factors,” she said, sidestepping the issue of greed.

Throughout the last year, Ms. Yellen has largely been an ardent public defender of the Biden administration’s economic agenda. She has clashed publicly at times with critics such as Lawrence H. Summers, a former Treasury secretary, who warned that too much stimulus could overheat the economy.

For months, Ms. Yellen — and many other economists — talked about inflation as “transitory,” saying rising prices were the result of supply chain problems that would dissipate, and “base effects,” which were making the monthly numbers look worse in comparison with prices that were depressed during the early days of the pandemic.

By May of last year, Ms. Yellen appeared to acknowledge that the Biden administration’s spending proposals had the potential to overheat the economy. She noted at The Atlantic’s Future Economy Summit that the policies could spur growth and that the Fed might have to step in with “modest” interest rate increases if the economy revved up too much.

“It may be that interest rates will have to rise somewhat to make sure that our economy doesn’t overheat, even though the additional spending is relatively small relative to the size of the economy,” Ms. Yellen said.

Article source: https://www.nytimes.com/2022/06/07/us/politics/inflation-yellen.html

Biden to Pause New Solar Tariffs as White House Aims to Boost Adoption

Scott Lincicome, a trade policy expert at the Cato Institute, a libertarian think tank, said that the administration’s actions seemed to be “quite the stretch of the statute.”

The trade law provision that Mr. Biden invoked allows the president to “declare an emergency to exist by reason of a state of war, or otherwise,” and during such a state of emergency to import “food, clothing, and medical, surgical, and other supplies for use in emergency relief work” duty free.

He said critics of U.S. tariffs had long proposed a “public interest” test that would allow levies to be lifted to mitigate broader economic harm, but Congress had never approved such an action.

In a letter late last month, Senators Sherrod Brown of Ohio and Bob Casey of Pennsylvania, both Democrats, complained that solar importers had spent “millions of dollars on advertising and lobbying to urge political interference in the trade enforcement process.” Biden administration officials had previously said that the Commerce Department’s inquiry was immune to political interference, describing it as “quasi-judicial” and “apolitical.”

Solar tariffs have been a source of contention for decades, but they have taken on renewed importance in recent years as the consequences of climate change became more apparent. Chinese companies have expanded internationally, allowing them to continue to ship products to the United States, while American companies have struggled to compete.

The global solar industry’s dependence on China has complicated the Biden administration’s efforts to ban products linked with forced labor in Xinjiang, the northwest region where U.S. officials say Chinese authorities have detained more than one million Uyghurs and other minorities. Xinjiang is a major producer of polysilicon, the raw material for solar panels.

Solar importers complained that a ban last year on solar raw materials made with forced labor by Hoshine Silicon Industry temporarily halted billions of dollars of American projects, as companies struggled to produce documentation to customs officials to prove that neither they nor their suppliers were obtaining material from Hoshine.

Article source: https://www.nytimes.com/2022/06/06/business/economy/biden-solar-tariffs.html