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    Fed Chair’s Confidence in Slowing Inflation Is ‘Not as High’ as Before

    Jerome H. Powell, the Federal Reserve chair, said the central bank was poised to leave interest rates on hold after surprisingly stubborn inflation.Jerome H. Powell, the Federal Reserve chair, reiterated Tuesday that policymakers were poised to hold interest rates steady at a high level as they waited for evidence that inflation is slowing further.Fed officials entered 2024 expecting to make interest rate cuts, having lifted borrowing costs sharply to a more than two-decade high of 5.3 percent between 2022 and the middle of last year. But stubbornly rapid inflation in recent months has upended that plan.Central bankers have been clear that rate cuts this year are still possible, but they have also signaled that they are planning to leave interest rates on hold for now as they wait to make sure that inflation is genuinely coming under control.Speaking during a panel discussion in Amsterdam, Mr. Powell said officials had been surprised by recent inflation readings. The Consumer Price Index inflation measure, which is set for release on Wednesday, came down rapidly in 2023 but has gotten stuck above 3 percent this year. The Fed’s preferred measure, the Personal Consumption Expenditures index, is slightly cooler, but it, too, remains well above the Fed’s 2 percent inflation goal.“We did not expect this to be a smooth road, but these were higher than I think anybody expected,” Mr. Powell said on Tuesday of recent inflation readings. “What that has told us is that we will need to be patient and let restrictive policy do its work.”Mr. Powell said that he expected continued growth and a strong labor market in the months ahead, and that he believed inflation would begin to slow again.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Wholesale prices rose 0.5% in April, more than expected

    The producer price index, a measure of what producers receive for the goods they produce, increased 0.5% in April and was up 2.2% on a 12-month basis, the biggest gain in a year.
    Core PPI also increased 0.5% compared to the 0.2% Dow Jones estimate.
    Services prices boosted the wholesale inflation reading, rising 0.6% and accounting for about three-quarters of the headline gain.

    Wholesale prices jumped more than expected in April, putting up another potential roadblock to interest rate cuts anytime soon.
    The producer price index, a measure of what producers receive for the goods they produce, increased 0.5% for the month, higher than the 0.3% Dow Jones estimate, the Labor Department’s Bureau of Labor Statistics reported Tuesday. However, the March reading was revised from an initially reported 0.2% gain to a decline of 0.1%.

    Stripping out volatile food and energy prices, core PPI also increased 0.5% compared to the 0.2% Dow Jones estimate. Excluding trade services from that core group showed a 0.4% increase on the month and 3.1% on a 12-month basis, the highest level since April 2023.
    On a year-over-year basis, wholesale inflation rose 2.2%, also the highest in a year. Core PPI inflation was at 2.4%, the biggest annual move since August 2023. Both numbers were in line with estimates from Reuters.
    Stock market futures were around breakeven following the data while Treasury yields were mixed.
    “Sticky inflation looked downright stuck this morning after a much hotter-than-expected inflation reading. But with last month’s numbers revised lower, this report may not have been as much of an upside shock as it first appeared to be,” said Chris Larkin, managing director of trading and investing for E-Trade from Morgan Stanley.
    Services prices boosted the wholesale inflation reading, rising 0.6% and accounting for about three-quarters of the headline gain, while the final demand goods index increased 0.4%. The services increase was the biggest monthly gain since July 2023, the BLS reported.

    Portfolio management in turn helped drive the services costs, rising 3.9% on the month.
    Goods prices as measured by the PPI rose 0.4%, reversing a 0.2% decline, fed by a 2% increase in the energy index, which included a 5.4% surge in gasoline prices. The final demand index for food fell 0.7%.
    The latest inflation data comes with the Federal Reserve on extended hold regarding interest rates. Policymakers have said in recent days that they expect inflation to trend lower through the year but need more evidence that it is convincingly on the way back to the central bank’s 2% goal before cutting rates.
    Recent data points have not been encouraging.
    The consumer price index, the companion to the PPI that measures what consumers pay rather than that producers receive, has shown higher than expected gains through the first part of 2024, fueling fears that inflation is stickier than economists and policymakers had expected.
    Similarly, the Fed’s preferred measure, the Commerce Department’s personal consumption expenditures price index, also has been running hot and showing inflation running just shy of 3%.
    All of the various inflation measures are showing price pressures well ahead of the Fed’s target.
    In addition, various consumer surveys have shown expectations running hot. The New York Fed’s monthly survey released Monday showed the one-year inflation outlook at 3.3%, the highest since November, pushed in good part by expectations that housing-related costs will continue to increase. More

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    High Interest Rates Are Hitting Poorer Americans the Hardest

    The economy as a whole has proved resilient amid the highest rates in decades. But beneath the surface, many low- and moderate-income families are struggling.High interest rates haven’t crashed the financial system, set off a wave of bankruptcies or caused the recession that many economists feared.But for millions of low- and moderate-income families, high rates are taking a toll.More Americans are falling behind on payments on credit card and auto loans, even as many are taking on more debt than ever before. Monthly interest expenses have soared since the Federal Reserve began raising interest rates two years ago. For families already strained by high prices, dwindling savings and slowing wage growth, increased borrowing costs are pushing them closer to the financial edge.“It’s crazy,” said Ora Dorsey, a 43-year-old Army veteran in Clarksville, Tenn. “It does make it hard to get out of debt. It seems like you’re only paying the interest.”Ms. Dorsey has been working for years to chip away at the debts she accrued when a series of health issues left her temporarily out of work. Now she is juggling three jobs to try to pay off thousands of dollars in credit card balances and other debts. She is making progress, but high rates aren’t helping.“How am I supposed to retire?” she asked. “I’m not able to save, have that rainy-day fund, because I’m trying to take down the debt that I have.”Ms. Dorsey isn’t likely to get relief soon. Fed officials have indicated that they expect to keep interest rates at their current level, the highest in decades, for months. And while policymakers still say they are likely to cut rates eventually, assuming inflation slows down as expected, they could consider raising them further if prices begin rising faster again. The latest evidence will come on Wednesday when the Labor Department releases data showing whether inflation cooled in April, or remained uncomfortably hot for a fourth straight month.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    What Forecasters Say About Interest Rates (and Why They Disagree)

    Hopes for a steep drop in borrowing costs for consumers and businesses have been dashed. But some experts predict modest reductions in coming months.How soon is soon? Or exactly how much later is later?As the year started, there was a widespread view among economists and on Wall Street that the Federal Reserve would lower interest rates in the first half of the year. Maybe in March, maybe in May, but sooner rather than later.That long-awaited moment, two years after the Fed began ratcheting up rates to their highest level in decades, held the prospect of brightening consumer sentiment, increasing company valuations and improving corporate financing opportunities. It was called “the pivot party,” and everyone was invited.But three months of hotter-than-expected inflation data followed. Financial markets then projected that the Fed would lower rates once, near the end of the year, or not at all — based on a view that the central bank will see little merit in such a move as long as inflation remains a bit elevated and employment is growing.Interest rates for home and car loans tilted up again. And it seems the pivot party has been canceled. But some experts argue that it has only been postponed, leaving forecasters divided about what the rest of the year will bring.Camp 1: Inflation Is Coming Under ControlSome market analysts and bank economists are making the case that rate cuts are still on the table. The April jobs report, which implied a cooling labor market and softer wage growth, gave them some fodder.These analysts generally contend that current measures of inflation are overstated because of lagging indicators, reflecting cost pressures from over a year ago, that will ebb in summer. And they believe that while the diffuse process of stabilizing prices, formally called disinflation, may face setbacks (especially any oil shock), it is on track.After a wild ride, inflation has dropped back to lower levels, according to the Fed’s preferred measure.The annual percent change in the Personal Consumption Expenditures price index

    Source: U.S. Bureau of Economic Analysis By The New York TimesA measure of U.S. inflation that excludes an estimate of homeownership costs suggests that price increases are less rapid.The annual percentage change in the Consumer Price Index compared with the change in the Harmonized Index of Consumer Prices. H.I.C.P. is an inflation measure commonly used in other countries that excludes “owners’ equivalent rent,” an estimate of how much it may cost homeowners to rent a similar home.

    Source: Eurostat and Bureau of Labor StatisticsBy The New York TimesWe are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Inflation outlook rises, fueled by expected increases for housing costs, New York Fed survey shows

    The inflation outlook increased across the one- and five-year horizons as respondents expressed little confidence the Fed will reach its 2% goal soon, a New York Federal Reserve survey showed.
    Respondents to the central bank survey indicated they expect median home price growth of 3.3% over the next year, the highest reading since July 2022.
    College education costs are expected to increase by 9%, a 2.5 percentage point monthly surge.

    Consumers in April raised their expectations for price increases both in the near and longer term, fueled by higher inflation in home prices along with fuel and energy, according to a New York Federal Reserve survey released Monday.
    The central bank’s New York district reported in its monthly Survey of Consumer Expectations that the outlook increased across the one- and five-year horizons as respondents expressed little confidence the Fed will reach its 2% inflation goal anytime soon.

    On a one-year basis, the expectation increased to 3.3%, up 0.3 percentage point from March and the highest since November 2023. For the five-year outlook, the expectation rose to 2.8%, up 0.2 percentage point. However, at the three-year horizon, the outlook fell to 2.8%, down 0.1 percentage point.
    The results mirror the University of Michigan sentiment survey released Friday that showed the one-year outlook for May at 3.5%, also up 0.3 percentage point, while the five-year outlook nudged higher to 3.1%.

    CNBC news on inflation

    All of the readings are well ahead of the Fed’s 2% goal and reflective of the stubborn nature of inflation this year after a substantial disinflationary trend in 2023.
    Inflation pressures are expected to come from a wide variety of sources. However, expected increases in housing prices are particularly troublesome for policymakers who expected shelter costs to ease this year.
    Respondents to the survey indicated they expect median home price growth of 3.3% over the next year, up 0.3 percentage point from a level that had remained steady for seven months. That was also the highest reading since July 2022 and boosted by those with a high school degree or less, a lower-income cohort of particular worry to Fed officials during a period of surging inflation that took off in early 2022.

    Along with expected higher home costs, respondents see rents rising 9.1%, up 0.4 percentage point from the prior month.
    Fed officials at their most recent meeting again held the line on rates and said they need to see more compelling evidence that inflation is moving back to the 2% goal before cutting.
    Policymakers “continue to look for additional evidence that inflation is going to return to our 2% target, and until we have that I think it is appropriate to keep the policy rate in restrictive territory,” Fed Vice Chair Philip Jefferson said Monday.
    Consumers see medical care rising 8.7% over the next year, up 0.6 percentage point from the March survey. They expect food prices to increase 5.3% (up 0.2 percentage point from a month ago), gasoline to rise 4.8% (up 0.3 percentage point) and college education to climb by 9%, a 2.5 percentage point surge.
    Employment expectations in the survey were mixed, with unemployment seen rising though the perceived probability of losing one’s job declined. However, the mobility outlook decreased, with 50.9% expecting to find a job quickly after losing their current job, the lowest reading since April 2021.
    The survey comes two days ahead of the closely watched Labor Department report on the consumer price index, due to be released Wednesday. Economists surveyed by Dow Jones expect the all-items CPI to show a 3.4% increase for April from the prior year, down 0.1 percentage point from March. Core inflation, excluding food and energy, is projected to run at a 3.6% 12-month rate.

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    U.S. Awards $120 Million to Polar Semiconductor to Expand Chip Facility

    The grant is the latest federal award in a series stemming from the CHIPS and Science Act meant to ramp up domestic production of vital semiconductors.Federal officials will provide up to $120 million in grants to Polar Semiconductor to help the company expand its chip manufacturing facility in Minnesota, the Biden administration announced on Monday, the latest in a string of awards meant to strengthen the U.S. supply of semiconductors.Commerce Department officials said the grant would help Polar upgrade technology and double production capacity at its facility in Bloomington, Minn., within two years. The company produces chips that are critical for cars, defense systems and electrical grids, federal officials said.“We are making taxpayer dollars go as far as possible while crowding in private and state investment to create jobs, secure our supply chains and bolster manufacturing in Minnesota,” said Laurie Locascio, the under secretary of commerce for standards and technology.The funding stems from the bipartisan CHIPS and Science Act, which lawmakers passed in 2022 to ramp up the domestic production of commercial semiconductors, the tiny chips crucial for most electronics, including smartphones, computers, cars and weapons systems. The law gave the Commerce Department $39 billion to distribute to companies to incentivize the construction and expansion of new plants in the United States.Scaling up domestic chip production is a major component of President Biden’s economic policy agenda, which largely focuses on bolstering American manufacturing and bringing back jobs that have shifted overseas. Only about 10 percent of the world’s semiconductors are produced in the United States, down from about 37 percent in 1990.Biden administration officials have so far announced awards of more than $29 billion. Last month, the Commerce Department announced up to $6.1 billion in grants to Micron to help the chipmaker build plants in New York and Idaho. Other chipmakers — including Samsung, Taiwan Semiconductor Manufacturing Company and Intel — have received multibillion-dollar awards. GlobalFoundries, Microchip Technology and BAE Systems received the first three federal awards.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    U.S. to Announce New Tariffs on Chinese Electric Vehicles

    The administration could raise tariffs on electric vehicles from China to 100 percent in an attempt to protect American auto manufacturers.The Biden administration is set to announce new tariffs as high as 100 percent on Chinese electric vehicles and additional import taxes on other Chinese goods, including semiconductors, as early as next week, according to people familiar with the matter.The move comes amid growing concern within the administration that Mr. Biden’s efforts to jump-start domestic manufacturing of clean energy products could be undercut by China, which has been flooding global markets with cheap solar panels, batteries, electric vehicles and other products.The long-awaited tariffs are the result of a four-year review of the levies that President Donald J. Trump imposed on more than $300 billion of Chinese imports in 2018. Most of the Trump tariffs are expected to remain in place, but Mr. Biden plans to go beyond those by raising levies in areas that the president showered with subsidies in the 2022 Inflation Reduction Act.That includes Chinese electric vehicles, which currently face a 25 percent tariff. The administration is expected to raise that to as much as 100 percent in order to make it prohibitively expensive to buy a Chinese E.V.Mr. Biden has previously raised concerns about Chinese electric vehicles, saying that internet-connected Chinese cars and trucks posed risks to national security because their operating systems could send sensitive information to Beijing. He took steps earlier this year to try to block those vehicles from entering the United States.The president is looking to ratchet up pressure on China and demonstrate his willingness to protect American manufacturing ahead of his face-off against Mr. Trump in the November presidential election.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Consumer sentiment tumbles as inflation fears surge

    The University of Michigan Survey of Consumers sentiment index for May posted an initial reading of 67.4 for the month, down from 77.2 in April and well off the Dow Jones consensus call for 76. The move represented a one-month decline of 12.7%.
    The one-year inflation outlook jumped to 3.5%, up 0.3 percentage point from a month ago to the highest level since November 2023.

    Consumer sentiment slumped as inflation expectations rose, despite otherwise strong signals in the economy, according to a closely watched survey released Friday.
    The University of Michigan Survey of Consumers sentiment index for May posted an initial reading of 67.4 for the month, down from 77.2 in April and well off the Dow Jones consensus call for 76. The move represented a one-month decline of 12.7% but a year-over-year gain of 14.2%.

    Along with the downbeat sentiment measure, the outlook for inflation across the one- and five-year horizons increased.
    The one-year outlook jumped to 3.5%, up 0.3 percentage point from a month ago to the highest level since November.
    Also, the five-year outlook rose to 3.1%, an increase of just 0.1 percentage point but reversing a trend of lower readings in the past few months, also to the highest since November.
    “While consumers had been reserving judgment for the past few months, they now perceive negative developments on a number of dimensions,” said Joanne Hsu, the survey’s director. “They expressed worries that inflation, unemployment and interest rates may all be moving in an unfavorable direction in the year ahead.”
    Other indexes in the survey also posted substantial declines: The current conditions index fell to 68.8, down more than 10 points, while the expectations measure fell to 66.5, down 9.5 points. Both pointed to monthly drops of more than 12%, though they were higher from a year ago.

    The report comes despite the stock market riding a strong rally and gasoline prices nudging lower, though still at elevated levels. Most labor market signals remain solid, though jobless claims last week hit their highest level since late August.
    “All things considered, however, the magnitude of the slump in confidence is pretty big and it isn’t satisfactorily explained by” geopolitical factors or the mid-April stock market sell-off, wrote Paul Ashworth, chief North America economist at Capital Economics. “That leaves us wondering if we’re missing something more worrying going on with the consumer.”
    The inflation readings represent the biggest pitfall for policymakers as the Federal Reserve contemplates the near-term path of monetary policy.
    “Uncertainty about the inflation path could suppress consumer spending in the coming months. The Fed is walking a tightrope as they balance both mandates of price stability and growth,” said Jeffrey Roach, chief economist at LPL Financial. “Although it’s not our base case, we do see rising risks of stagflation, a concern the markets will have to deal with, in addition to the impacts from the presidential election.”
    At their meeting last week, Fed officials indicated they need “greater confidence” that inflation is moving “sustainably” back to their 2% goal before lowering interest rates. Policymakers consider expectations a key to taming inflation, and the outlook now from the Michigan survey has shown consecutive months of increases after falling considerably between November and March of this year.
    Market pricing is pointing to a strong expectation that the Fed will begin reducing its key borrowing rate in September after holding it at its highest level in more than 20 years since July 2023. However, the outlook has been in flux even with Fed Chair Jerome Powell indicating in his post-meeting news conference that it is unlikely the central bank’s next move would be a hike.
    The next important data point for inflation comes Wednesday when the Labor Department releases its consumer price index report for April. Most Wall Street economists expect the report to show a slight moderation in price pressures, though the widely followed CPI index has been running well ahead of the Fed’s target, at 3.5% annually in March.

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