Evelyn Reynolds

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    At the Front Lines of the Inflation Fight, Uncertainty Reigns

    Central bankers and economists gathered this week and, amid concerns about persistent inflation, wondered about all the things they still don’t know.When prices started to take off in multiple countries around the world about two years ago, the word most often associated with inflation was “transitory.” Today, the word is “persistence.”That was uttered repeatedly at the 10th annual conference of the European Central Bank this week in Sintra, Portugal.“It’s been surprising that inflation has been this persistent,” Jerome H. Powell, the chair of the Federal Reserve, said.“We have to be as persistent as inflation is persistent,” Christine Lagarde, the president of the European Central Bank, said.The latest inflation data in Britain “showed clear signs of persistence,” Andrew Bailey, the governor of the Bank of England, said.Policymakers from around the world gathered alongside academics and analysts to discuss monetary policy as they try to force inflation down. Collectively, they sent a single message: Interest rates will be high for awhile.Even though inflation is slowing, domestic price pressures remain strong in the United States and Europe. On Friday, data showed the inflation in the eurozone slowed to 5.5 percent, but core inflation, a measure of domestic price increases, rose. The challenge for policymakers is how to meet their targets of 2 percent inflation, without overdoing it and pushing their economies into recessions.It’s hard to judge when a turning point has been reached and policymakers have done enough, said Clare Lombardelli, the chief economist at the Organization for Economic Cooperation and Development and former chief economic adviser in the British Treasury. “We don’t yet know. We’re still seeing core inflation rising.” The tone of the conference was set on Monday night by Gita Gopinath, the first deputy managing director of the International Monetary Fund. In her speech, she said there was an “uncomfortable truth” that policymakers needed to hear. “Inflation is taking too long to get back to target.”Gita Gopinath, of the International Monetary Fund, said inflation was “taking too long” to come back down.Elizabeth Frantz/ReutersAnd so, she said, interest rates should be at levels that restrict the economy until core inflation is on a downward path. But Ms. Gopinath had another unsettling message to share: The world will probably face more shocks, more frequently.“There is a substantial risk that the more volatile supply shocks of the pandemic era will persist,” she said. Countries cutting global supply chains to shift production home or to existing trade partners would raise production costs. And they would be more vulnerable to future shocks because their concentrated production would give them less flexibility.The conversations in Sintra kept coming back to all the things economists don’t know, and the list was long: Inflation expectations are hard to decipher; energy markets are opaque; the speed that monetary policy affects the economy seems to be slowing; and there’s little guidance on how people and companies will react to large successive economic shocks.There were also plenty of mea culpas about the inaccuracy of past inflation forecasts.“Our understanding of inflation expectations is not a precise one,” Mr. Powell said. “The longer inflation remains high, the more risk there is that inflation will become entrenched in the economy. So the passage of time is not our friend here.”Meanwhile, there are signs that the impact of high interest rates will take longer to be felt in the economy than they used to. In Britain, the vast majority of mortgages have rates that are fixed for short periods and so reset every two or five years. A decade ago, it was more common to have mortgages that fluctuated with interest rates, so homeowners felt the impact of higher interest rates instantly. Because of this change, “history isn’t going to be a great guide,” Mr. Bailey said.Another poor guide has been prices in energy markets. The price of wholesale energy has been the driving force behind headline inflation rates, but rapid price changes have helped make inflation forecasts inaccurate. A panel session on energy markets reinforced economists’ concerns about how inadequately informed they are on something that is heavily influencing inflation, because of a lack of transparency in the industry. A chart on the mega-profits of commodity-trading houses last year left many in the room wide-eyed.A shopping district in central London. “Our understanding of inflation expectations is not a precise one,” said Jerome H. Powell, the chair of the Federal Reserve.Sam Bush for The New York TimesEconomists have been writing new economic models, trying to respond quickly to the fact that central banks have consistently underestimated inflation. But to some extent the damage has already been done, and among some policymakers there is a growing lack of trust in the forecasts. The fact that central bankers in the eurozone have agreed to be “data dependent” — making policy decisions based on the data available at each meeting, and not take predetermined actions — shows that “we don’t trust models enough now to base our decision, at least mostly, on the models,” said Pierre Wunsch, a member of the E.C.B.’s Governing Council and the head of Belgium’s central bank. “And that’s because we have been surprised for a year and a half.”Given all that central bankers do not know, the dominant mood at the conference was the need for a tough stance on inflation, with higher interest rates for longer. But not everyone agreed.Some argued that past rate increases would be enough to bring down inflation, and further increases would inflict unnecessary pain on businesses and households. But central bankers might feel compelled to act more aggressively to ward off attacks on their reputation and credibility, a vocal minority argued.“The odds are that they have already done too much,” said Erik Nielsen, an economist at UniCredit, said of the European Central Bank. This is probably happening because of the diminishing faith in forecasts, he said, which is putting the focus on past inflation data.“That’s like driving a car and somebody painted your front screen so you can’t look forward,” he said. “You can only look through the back window to see what inflation was last month. That probably ends with you in the ditch.” More

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    Affirmative Action Ruling May Upend Diversity Hiring Policies, Too

    The Supreme Court decision on college admissions could lead companies to alter recruitment and promotion practices to pre-empt legal challenges.As a legal matter, the Supreme Court’s rejection of race-conscious admissions in higher education does not in itself impede employers from pursuing diversity in the workplace.That, at least, is the conclusion of lawyers, diversity experts and political activists across the spectrum — from conservatives who say robust affirmative action programs are already illegal to liberals who argue that they are on firm legal ground.But many experts argue that as a practical matter, the ruling will discourage corporations from putting in place ambitious diversity policies in hiring and promotion — or prompt them to rein in existing policies — by encouraging lawsuits under the existing legal standard.After the decision on Thursday affecting college admissions, law firms encouraged companies to review their diversity policies.“I do worry about corporate counsels who see their main job as keeping organizations from getting sued — I do worry about hyper-compliance,” said Alvin B. Tillery Jr., director of the Center for the Study of Diversity and Democracy at Northwestern University, who advises employers on diversity policies.Programs to foster the hiring and promotion of African Americans and other minority workers have been prominent in corporate America in recent years, especially in the reckoning over race after the 2020 murder of George Floyd by a Minneapolis police officer.Even before the ruling in the college cases, corporations were feeling legal pressure over their diversity efforts. Over the past two years, a lawyer representing a free-market group has sent letters to American Airlines, McDonald’s and many other corporations demanding that they undo hiring policies that the group says are illegal.The free-market group, the National Center for Public Policy Research, acknowledged that the outcome on Thursday did not bear directly on its fight against affirmative-action in corporate America. “Today’s decision is not relevant; it dealt with a special carve-out for education,” said Scott Shepard, a fellow at the center.Mr. Shepard claimed victory nonetheless, arguing that the ruling would help deter employers who might be tempted overstep the law. “It couldn’t be clearer after the decision that fudging it at the edges” is not allowed, he said.(American Airlines and McDonald’s did not respond to requests for comment about their hiring and promotion policies.)Charlotte A. Burrows, who was designated chair of the Equal Employment Opportunity Commission by President Biden, was also quick to declare that nothing had changed. She said the decision “does not address employer efforts to foster diverse and inclusive work forces or to engage the talents of all qualified workers, regardless of their background.”Some companies in the cross hairs of conservative groups underscored the point. “Novartis’s D.E.I. programs are narrowly tailored, fair, equitable and comply with existing law,” the drugmaker said in a statement, referring to diversity, equity and inclusion. Novartis, too, has received a letter from a lawyer representing Mr. Shepard’s group, demanding that it change its policy on hiring law firms.The Supreme Court’s ruling on affirmative action was largely silent on employment-related questions.Kenny Holston/The New York TimesBeyond government contractors, affirmative action policies in the private sector are largely voluntary and governed by state and federal civil rights law. These laws prohibit employers from basing hiring or promotion decisions on a characteristic like race or gender, whether in favor of a candidate or against.The exception, said Jason Schwartz, a partner at the law firm Gibson Dunn, is that companies can take race into account if members of a racial minority were previously excluded from a job category — say, an investment bank recruiting Black bankers after it excluded Black people from such jobs for decades. In some cases, employers can also take into account the historical exclusion of a minority group from an industry — like Black and Latino people in the software industry.In principle, the logic of the Supreme Court’s ruling on college admissions could threaten some of these programs, like those intended to address industrywide discrimination. But even here, the legal case may be a stretch because the way employers typically make decisions about hiring and promotion differs from the way colleges make admissions decisions.“What seems to bother the court is that the admissions programs at issue treated race as a plus without regard to the individual student,” Pauline Kim, a professor at Washington University in St. Louis who specializes in employment law, said in an email. But “employment decisions are more often individualized decisions,” focusing on the fit between a candidate and a job, she said.The more meaningful effect of the court’s decision is likely to be greater pressure on policies that were already on questionable legal ground. Those could include leadership acceleration programs or internship programs that are open only to members of underrepresented minority groups.Many companies may also find themselves vulnerable over policies that comply with civil rights law on paper but violate it in practice, said Mike Delikat, a partner at Orrick who specializes in employment law. For example, a company’s policy may encourage recruiters to seek a more diverse pool of candidates, from which hiring decisions are made without regard to race. But if recruiters carry out the policy in a way that effectively creates a racial quota, he said, that is illegal.“The devil is in the details,” Mr. Delikat said. “Were they interpreting that to mean, ‘Come back with 25 percent of the internship class that has to be from an underrepresented group, and if not you get dinged as a bad recruiter’?”The college admissions cases before the Supreme Court were largely silent on these employment-related questions. Nonetheless, Mr. Delikat said, his firm has been counseling clients ever since the court agreed to hear the cases that they should ensure that their policies are airtight because an increase in litigation is likely.That is partly because of the growing attack from the political right on corporate policies aimed at diversity in hiring and other social and environmental goals.Gov. Ron DeSantis of Florida has signed legislation to limit diversity training in the workplace.Haiyun Jiang for The New York TimesGov. Ron DeSantis of Florida, who is seeking the 2024 Republican presidential nomination, has deplored “the woke mind virus” and proclaimed Florida “the state where woke goes to die.” The state has enacted legislation to limit diversity training in the workplace and has restricted state pension funds from basing investments on “woke environmental, social and corporate governance” considerations.Conservative legal groups have also mobilized on this front. A group run by Stephen Miller, a White House adviser in the Trump administration, contended in letters to the Equal Employment Opportunity Commission that the diversity and inclusion policies of several large companies were illegal and asked the commission to investigate. (Mr. Miller’s group did not respond to a request for comment about those cases.)The National Center for Public Policy Research, which is challenging corporate diversity policies, has sued Starbucks directors and officers after they refused to undo the company’s diversity and inclusion policies in response to a letter demanding that they do so. (Starbucks did not respond to a request for comment for this article, but its directors told the group that it was “not in the best interest of Starbucks to accept the demand and retract the policies.”)Mr. Shepard, the fellow at the center, said more lawsuits were “reasonably likely” if other companies did not accede to demands to rein in their diversity and inclusion policies.One modest way to do so, said David Lopez, a former general counsel for the Equal Employment Opportunity Commission, is to design policies that are race neutral but nonetheless likely to promote diversity — such as giving weight to whether a candidate has overcome significant obstacles.Mr. Lopez noted that, in the Supreme Court’s majority opinion, Chief Justice John G. Roberts Jr. argued that a university could take into account the effect on a candidate of having overcome racial discrimination, as long as the school didn’t consider the candidate’s race per se.But Dr. Tillery of Northwestern said making such changes to business diversity programs could be an overreaction to the ruling. While the federal Civil Rights Act of 1964 generally precludes basing individual hiring and promotion decisions explicitly on race, it allows employers to remove obstacles that prevent companies from having a more diverse work force. Examples include training managers and recruiters to ensure that they aren’t unconsciously discriminating against racial minorities, or advertising jobs on certain campuses to increase the universe of potential applicants.In the end, companies appear to face a greater threat of litigation over discrimination against members of minority groups than from litigation over discrimination against white people. According to the Equal Employment Opportunity Commission, there were about 2,350 charges of that latter form of discrimination in employment in 2021, among about 21,000 race-based charges overall.“There’s an inherent interest in picking your poison,” Dr. Tillery said. “Is it a lawsuit from Stephen Miller’s right-wing group that doesn’t live in the real world? Or is it a lawsuit from someone who says you’re discriminating against your work force and can tweet about how sexist or racist you are?”He added, “I’ll take the Stephen Miller poison any day.”J. Edward Moreno More

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    LGBTQ small business owners struggle to find financing

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    Pixelcatchers | E+ | Getty Images

    It’s not an easy time to be a small business in search of financing. For LGBTQ owners, the struggle has been even harder.
    LGBTQ-owned businesses reported more rejections than non-LGBTQ businesses that applied for funding, according to a 2022 report from Movement Advancement Project, a nonprofit think tank that focuses on equality and opportunity, and the Center for LGBTQ Economic Advancement & Research (CLEAR).

    With the tightening of lending standards, they could be at even more risk of falling behind, said Spencer Watson, president and executive director of CLEAR.
    “The tighter economic conditions, the higher interest rates, the collapse of these smaller community banks and the resulting constriction of lending is certainly more detrimental for the LGBTQ community than non-LGBTQ community,” Watson said.
    Concerns about the economy and lending conditions aren’t only on the minds of LGTBQ entrepreneurs. Overall, small business owners are skeptical about their future business conditions, said Holly Wade, executive director of the National Federation of Independent Business’ Research Center.
    “The small business economy is being hindered by inflation, supply chain disruptions, and labor shortages,” she said. “While financing isn’t a top problem for small businesses, owners have expressed concerns about the health of the banking system for their business purposes in light of the banking turbulence in March.”
    Yet, data show that when it comes to financing, LGTBQ small business owners are being left behind. In 2021, 46% of LGBTQ-owned businesses said they didn’t receive any of the financing they had applied to in 2021, according to the MAP/CLEAR report. In comparison, 35% of non-LGBTQ businesses that applied for funding were rejected, the report found. Much of the funding sought was through the Covid relief programs offered, Watson said.

    “Those businesses were frequently smaller in size and they were also frequently younger and they had smaller revenues,” Watson explained. “They were struggling with those additional pressures because they were already in a weaker financial position to start with.”
    Watson said there are similar themes emerging in the analysis of the 2022 Federal Reserve’s small business credit survey, which hasn’t been fully released yet.
    While LGBTQ small business owners are very optimistic, they are also still more likely to report more kinds of financial challenges than non-LGBTQ businesses. Some six in 10 reported difficulties affording operating expenses over the last year, according to Watson, who prefers a gender-neutral pronoun. Most of the businesses are owned by people who identify as LGBTQ but their businesses aren’t necessarily oriented towards or servicing the LGBTQ community, they said.

    Gavin Escolar
    Courtesy: Gavin Escolar

    Gavin Escolar, owner of The Chaga Company in San Francisco, is one of those small business owners that has had troubling finding financing. The 47-year-old gay man started his business, which makes products from chaga mushrooms, in 2018 by using his savings and credit cards. While he hasn’t been rejected for any loans he’s applied for, he has been only offered high-interest bridge loans from lenders to hold him over until a lower-interest small business loan becomes available, he said.
    “They’re like, ‘oh yeah, you’re pretty much approved for this particular SBA loan, but it’s going to take like around six months for you to get it. But we have this other loan that you can bridge right now, that is 29.75%,’ or whatever exuberant cost,” Escolar said.
    Right now he’s using loans from Square and PayPal and is hoping to figure out his next step so that he can pay down his credit card debt, buy inventory and do marketing. Escolar feels like the community needs more education on how to get the right financing.
    “I’m only getting the higher [interest loans] because I feel like I don’t have established business credit,” Escolar said. “I’m fluctuating between my business credit and my personal credit. I don’t even know where to start on how to build a business credit.”

    Forging her own path

    Sarah Scala
    Source: Sarah Scala

    For 43-year-old Sarah Scala, going into debt wasn’t an option when she started her business, Sarah Scala Consulting. The Massachusetts company is an LGBT-certified business enterprise that provides leadership development, public speaking and leadership coaching.
    Scala wanted to stay debt free, so she used her own savings and looked for opportunities elsewhere. Other than a Paycheck Protection Program loan during the Covid-19 pandemic, her only other external source of funding has been two grants from the Massachusetts Growth Capital Corporation. Those grants have helped her with digital marketing and capital expenses.
    “There’s a number of wonderful associations that are really helpful if people are looking for support around funding,” said Scala, who operates the business out of her home.
    One is SCORE, a network of volunteer business mentors, which Scala is involved with. She also has a strong partnership with the Massachusetts LGBT Chamber of Commerce, which can help open doors, she said.

    Discrimination at play

    Anti-LGBTQ bias and discrimination against LGBTQ small-businesses can arise during the loan process in a number of places, Watson said.
    “If the lender discerns the applicants’ LGBTQ identity, they may choose to deny that loan or charge the applicant a higher cost for the credit they are approved for,” they explained. “This is particularly the case for highly visible members of the LGBTQ community — such as transgender or nonconforming gender presentations.”
    It can also show up in other ways, like if a creditor doesn’t understand the business’s market opportunity, like not seeing the benefit or market need for an LGBTQ-serving establishment, Watson said.
    Businesses oriented explicitly toward individuals of sexual minorities and that create sex-positive spaces are also frequently excused because Small Business Administration guidelines forbid loans for businesses of a “prurient sexual nature,” they said.
    However, Watson cheered the recent rule from the Consumer Financial Protection Bureau that increases transparency in small business lending and includes demographic information, allowing small businesses to identify as women-, minority-, or LGBTQ-owned.
    “Implementing that data collection would be an incredible boon to combating discrimination in the private lending market for small businesses,” they said.
    The success of these businesses matter — not only for the owners but for the community at large, Watson said.
    “There is a need for more small businesses owned by all types of marginalized communities so that those entrepreneurs can support themselves, their fellow community members, and create more inclusive spaces that are authentically by and for those communities,” they said. More

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    Key Fed inflation measure shows prices rose just 0.3% in May

    Inflation pressures eased slightly in May as consumer spending slowed considerably, according to a Commerce Department report released Friday.
    The personal consumption expenditures price index, a number closely watched by the Federal Reserve, increased 0.3% for the month when excluding food and energy, a number that was in line with the Dow Jones estimate. So-called core PCE increased 4.6% from a year ago, 0.1 percentage point less than expected.

    In April, the index rose 0.4% for the month and 4.7% from a year ago.
    When including the volatile food and energy components, inflation was considerably softer — up just 0.1% on the month and 3.8% from a year ago. Those were down respectively from the 0.4% and 4.3% increases reported for April.
    While inflation pulled back a bit, spending rose just 0.1% for the month, below the 0.2% estimate and a sharp drop from the 0.6% increase in April. That deceleration came even though personal income accelerated 0.4%, ahead of the 0.3% estimate.
    Though Friday’s data showed inflation moving gradually in the right direction, it is still well above the Fed’s 2% longer-term target. Central bank Chairman Jerome Powell said this week that level isn’t likely to be achieved for a few years yet.
    At their meeting earlier in June, Fed officials indicated they expect at least two more quarter-point interest rate hikes before the end of the year. Even Atlanta Fed President Raphael Bostic, who is not in favor of further increases, said Thursday he doesn’t see any cuts coming either this year or in 2024.

    Traders are pricing in about an 87% chance that the Fed approves a quarter-point increase at the July meeting, odds that were little changed following Friday’s data release, according to CME Group calculations.
    This is breaking news. Please check back here for updates. More

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    Key Inflation Gauge Cooled in May, Welcome News for Federal Reserve

    The Federal Reserve is monitoring “core” price increases for a hint at how inflation will develop. A slowdown in May is likely to come as a welcome development.The Federal Reserve’s preferred inflation measure climbed more slowly than economists had expected in the year through May after stripping out food and fuel prices — an encouraging sign that price increases are gradually moderating.Although inflation has been cooling notably on an overall basis in recent months, Fed officials have been closely tracking the “core” inflation measure that cuts out grocery and gas costs, which they think offers a better signal of how price increases might shape up in the months and years to come. It has been stuck at an elevated level and slowing down only gradually, a source of concern for policymakers who have spent more than a year raising interest rates in a bid to tame price increases.The May data broke with that trend, at least a little. Prices climbed 4.6 percent over the past year, excluding food and fuel. That compared with 4.7 percent in the previous month, which economists had expected would repeat itself. Core inflation is down from a 5.4 percent peak, but it remains well above the Fed’s 2 percent inflation goal.Progress in wrestling overall inflation has been swifter. The Personal Consumption Expenditures index measure that includes food and gas climbed 3.8 percent in the year through May, in line with economists’ forecasts. That measure peaked at about 7 percent last summer.More moderate overall inflation is taking some pressure off consumers: Cheaper tanks of gas and less rapid price increases in the grocery aisle are helping paychecks to go further. But for officials at the Fed, signs that inflation remains stubborn under the surface have been a reason to worry. Officials believe that they need to wrestle core price increases lower to make sure that the economy’s future is one of modest and steady price increases.To do that, Fed policymakers have been raising interest rates. Making it more expensive to get a home loan or expand a business restricts the economy’s momentum. By slowing growth and cooling demand, the moves are meant to make it harder for corporations to increase their prices without losing customers.Policymakers skipped a rate increase at their June meeting after 10 straight moves, but they have signaled that they expect to lift rates beyond their current level of just above 5 percent — perhaps to 5.5 percent by the end of the year. Investors have been betting on only one more move this year, but they increasingly see two rate moves as a possibility.Jerome H. Powell, the Fed chair, emphasized this week at an event in Madrid that the outlook for how much more rates might move this year is uncertain.“We’ve all seen inflation be, over and over again, shown to be more persistent and stronger than expected,” Mr. Powell said. “At some point that may change. And I think we have to be ready to follow the data and be a little patient as we let this unfold.” More

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    GDP Data Shows US Economic Growth Rate of 2% in Q1

    The NewsThe United States economy grew faster early this year than previously believed.Gross domestic product, adjusted for inflation, expanded at an annual rate of 2 percent in the first three months of the year, the Commerce Department said Thursday. That was a significant upward revision from the 1.1 percent growth rate in preliminary data released in April. (An earlier revision, released last month, showed a slightly stronger rate of 1.3 percent.)An alternative measure of growth, based on income rather than production, painted a different picture, showing that the economy contracted for the second quarter in a row. That measure was also revised upward from the prior estimate.The report underscored the surprising resilience of the country’s economic recovery, which has remained steady despite high inflation, rapidly rising interest rates and persistent predictions of a recession from many forecasters on Wall Street.The new data is cause for “genuine optimism,” wrote Gregory Daco, chief economist at EY, the consulting firm previously known as Ernst & Young, in a note to clients. “This is leading many to rightly question whether the long-forecast recession is truly inevitable.”Consumers are powering the recovery through their spending, which increased at a 4.2 percent rate in the first quarter, up from a 1 percent rate in late 2022 and faster than the 3.7 percent rate initially reported in April. That spending, fueled by a strong job market and rising wages, helped offset declines in other sectors of the economy like business investment and housing.Consumers are powering the recovery through their spending, which increased at 4.2 percent rate in the first quarter.Jim Wilson/The New York TimesWhat It Means: Complications for the Fed.The continued strength of the consumer economy poses a conundrum for policymakers at the Federal Reserve, who have been raising interest rates in an effort to curb inflation without causing a recession.On the one hand, data from the first quarter provides some signs of success: Economic growth has slowed but not stalled, even as inflation has cooled significantly since the middle of last year.But many forecasters, both inside and outside the central bank, are skeptical that inflation will continue to ease as long as consumers are willing to open their wallets — meaning policymakers are likely to take further steps to rein in growth. At their meeting this month, Fed officials left interest rates unchanged for the first time in more than a year, but they have signaled they are likely to resume rate increases in July.The Fed chair, Jerome H. Powell, at a conference in Madrid on Thursday, noted that inflation had repeatedly defied forecasts of a slowdown.“We’ve all seen inflation be — over and over again — shown to be more persistent and stronger than we expected,” he said.What’s Next: Data on income and spending.Mr. Powell and his colleagues will get more up-to-date evidence on their progress on Friday, when the Commerce Department releases data on personal income, spending and inflation from May.Jeanna Smialek More

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    Opposition Grows to U.S. Imports of ‘Laundered’ Russian Oil

    Human rights groups and Ukrainian officials want the United States to stop buying Russian crude oil that has been refined into other products in third countries like IndiaUkrainian officials and human rights groups are asking the United States to close what they describe as a loophole that allows Russian crude oil that has been refined in other countries to be shipped to the United States.The Biden administration issued a ban in March last year on purchasing crude oil and other petroleum products directly from Russia, immediately after the Kremlin’s invasion of Ukraine. The European Union, which was heavily dependent on Russia for supplies of energy, banned Russian crude in December and then petroleum products in February.But both the United States and the European Union continue to buy Russian oil that has been refined in other countries into gasoline, fuel oil and other products. Countries like Turkey, the United Arab Emirates, Singapore, China and particularly India are snapping up Russian oil, which must now be sold at a reduced price under a cap imposed by the United States and Europe. These nations — which have been described as “laundromat” countries by environmental and human rights groups — then refine the oil and send it to other markets.This activity is legal: Once Russian crude oil has been “substantially transformed” by being refined in another country, it legally ceases to be Russian. The same standards have long applied to oil from other nations that are under sanctions, like Iran and Venezuela.Still, opposition to this sort of trade is growing.Oleg Ustenko, an economic adviser to the Ukrainian president, said such U.S. purchases meant “that we are indirectly supporting this insurrection, which is just not acceptable.”“I don’t know how it sounds in English, but in Ukrainian I’m calling this strategy as a cockroach strategy, meaning they are trying to find all possible loopholes, as a cockroach trying to crawl through these holes into your apartment,” he said of Russia’s oil trade. “And what you need to do, you need to close all these holes.”It’s difficult to estimate how much refined petroleum the United States is importing that originally came from Russia. But a report released Thursday by Global Witness, a London-based organization that advocates environmental and human rights, suggested that the volume was small but not insignificant.Take India, one of the biggest participants in this activity. The United States imported roughly 152 million barrels of refined petroleum products in the first five months of this year, with about 8 percent coming from India.More than 80 percent of refined oil that the United States imports from India came from a single port: Sikka, in Gujarat Province, which is home to the Jamnagar Refinery, the world’s largest refinery, according to calculations by Global Witness. And in the first five months of the year, the group estimated, 35 percent of the crude oil arriving at the port was of Russian origin.To block these flows, Global Witness proposes banning all imports from refineries that buy Russian crude oil. The group sent members to Washington last week to lobby members of Congress on the move, including in the committees overseeing energy and support for Ukraine.“Banning oil from refineries running on Russia crude is a common-sense decision for the U.S.,” said Lela Stanley, senior investigator at Global Witness.Mr. Ustenko and Ms. Stanley said such a ban was unlikely to have much impact on U.S. gas prices. But Tom Kloza, global head of energy analysis at the Oil Price Information Service, which tracks wholesale and retail prices of oil, said he believed it would have some effect.“If you remove a number of countries as potential sources for gasoline and diesel, there’s an impact in the U.S. and an impact in Europe,” he said.Mr. Kloza said that the Biden administration might be reluctant to take any step that would raise gas prices with an election approaching — and that such a ban could also prove difficult to police. He pointed to the example of Saudi Arabia, which last year had started importing Russian diesel, while also exporting more diesel from Saudi refineries to other countries.“There’s lots of ways to get around the Russian boycott,” he said.It also remains to be seen what such a ban would mean for the U.S. relationship with India, which the Biden administration regards as a key strategic partner. The Jamnagar Refinery is owned by Reliance Industry, which is in turn controlled by Mukesh Ambani, an Indian businessman. Mr. Ambani is a close partner to the Indian prime minister, Narendra Modi, and was a guest at the state dinner that the White House threw for Mr. Modi last week. More

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    First-quarter economic growth was actually 2%, up from 1.3% first reported in major GDP revision

    David Leal installs a tailpipe on a vehicle at Muffler Pros on April 12, 2023 in Hollywood, Florida.
    Joe Raedle | Getty Images

    The U.S. economy showed much stronger-than-expected growth in the first quarter than previously thought, according to a big upward revision Thursday from the Commerce Department.
    Gross domestic product increased at a 2% annualized pace for the January-through-March period, up from the previous estimate of 1.3% and ahead of the 1.4% Dow Jones consensus forecast. This was the third and final estimate for Q1 GDP. The growth rate was 2.6% in the fourth quarter.

    The upward revision helps undercut widespread expectations that the U.S. is heading toward a recession.
    According to a summary from the department’s Bureau of Economic Analysis, the change came in large part because both consumer expenditures and exports were stronger than previously thought.
    Consumer spending, as gauged by personal consumption expenditures, rose 4.2%, the highest quarterly pace since the second quarter of 2021. At the same time, exports rose 7.8% after falling 3.7% in the fourth quarter of 2022.
    There also was some good news on the inflation front.
    Core PCE prices, which exclude food and energy, rose 4.9% in the period, a downward revision of 0.1 percentage point. The all-times price index increased 3.8%, unchanged from the last estimate.

    Federal Reserve policymakers most closely watch core PCE as an inflation indicator. Through a series of rate increases, the Fed is trying to get inflation back down to 2%.
    The rate hikes are targeted at slowing down an economy that in the summer of 2022 was generating inflation at the highest level since the early 1980s.
    One specific focus for the Fed has been the labor market. There currently are about 1.7 open positions for every available worker, and the tightness has resulted in a push higher for wages which generally have not kept pace with inflation.
    A separate report Thursday from the Labor Department pointed showed that initial jobless claims fell to 239,000 for the week ended June 24. That was a decline of 26,000 from the previous week and well below the estimate for 264,000. More