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    U.S. inflation is likely ‘far stickier’ and could last a decade, Bill Smead says

    Inflation in the U.S. is likely to be “far stickier” and could last a decade, according to Bill Smead, chief investment officer at Smead Capital Management.
    Wall Street is gearing up for news on key inflation data later Tuesday as the Labor Department will release its January consumer price index.

    U.S. inflation is likely to be “far stickier” and could last a decade, according to Bill Smead, chief investment officer at Smead Capital Management.
    Wall Street is gearing up for key inflation data later Tuesday, when the Labor Department releases its January consumer price index. It is a widely followed inflation gauge that measures the cost for dozens of goods and services spanning the economy.

    “The enthusiasm … right now is the hope that we’ll get a friendly Fed out of a soft landing, and we do not believe that is going to be the case,” Smead told CNBC’s “Streets Sign Asia.”
    “We think the inflation is going to be far stickier and longer lasting — in fact, a decade because in the United States, we have incredibly favorable demographics.”
    Earlier in February, the Federal Reserve raised its benchmark interest rate by a quarter percentage point and gave little indication it is nearing the end of this hiking cycle. 

    Controlling inflation

    Smead underlined the Fed will find it tough to tame inflation despite the recent rate hikes.   
    “We have 92 million people between 22 and 42, and they’re all going to spend their money on necessities the next 10 years, whether the stock markets are good or bad,” said Smead.

    “They’re just going to be living their life. The economy should be pretty good and the Fed’s going to have a hard time controlling inflation,” he added.

    Stock picks and investing trends from CNBC Pro:

    For now, investors seem to be betting on a solid CPI print on Tuesday that shows inflation is cooling and that a pause or pivot in Fed rate hikes may be near.
    On the flip side, analysts warned, a miss will likely indicate that the Fed will hike interest rates even more.
    Economists are expecting that CPI will show a 0.4% increase in January, which would translate into 6.2% annual growth, according to Dow Jones. Excluding food and energy, so-called core CPI is projected to rise 0.3% and 5.5%, respectively.
    Stock futures ticked lower Tuesday morning as investors looked ahead to the inflation data.
    Futures tied to the Dow Jones Industrial Average slipped 25 points, or 0.07%. Meanwhile, S&P 500 futures dropped marginally, and Nasdaq-100 futures declined 0.12%
    — CNBC’s Jeff Cox contributed to this report

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    Inflation report due Tuesday has the potential to deliver some bad news

    All market eyes Tuesday will be on the release of the Labor Department’s consumer price index, a widely followed inflation gauge.
    Economists are expecting that the CPI will show a 0.4% increase in January, which would translate into 6.2% annual growth. However, there’s some indication the number could be even higher.
    The Federal Reserve is determined to keep fighting inflation, so the report could harden their position.

    Prices are displayed in a grocery store on February 01, 2023 in New York City.
    Leonardo Munoz | Corbis News | Getty Images

    Just as Federal Reserve officials have grown optimistic that inflation is cooling, news could come countering that narrative.
    All market eyes Tuesday will be on the release of the Labor Department’s consumer price index, a widely followed inflation gauge that measures the costs for dozens of goods and services spanning the economy.

    The CPI was trending lower as 2022 came to close. But it looks like 2023 will show that inflation was strong — perhaps even stronger than Wall Street expectations.
    “We’ve gotten surprises on the soft side for the last three months. It wouldn’t be at all surprising if we get surprise on the hot side in January,” said Mark Zandi, chief economist at Moody’s Analytics.
    Economists are expecting that CPI will show a 0.4% increase in January, which would translate into 6.2% annual growth, according to Dow Jones. Excluding food and energy, so-called core CPI is projected to rise 0.3% and 5.5%, respectively.
    However, there’s some indication the number could be even higher.
    The Cleveland Fed’s “Nowcast” tracker of CPI components is pointing toward inflation growth of 0.65% on a monthly basis and 6.5% year over year. On the core, the outlook is for 0.46% and 5.6%.

    The Fed model is based on what its authors say are fewer variables than the CPI report while utilizing more real-time data rather than the backward-looking numbers often found in government reports. Over time, the Cleveland Fed says its methodology outperforms other high-profile forecasters.

    Impact on interest rates

    If the reading is hotter than expected, there are potential important investing implications.
    Fed policymakers are watching the CPI and a host of other data points for clues on whether a series of eight interest rate increases is having the desired effect of cooling inflation that hit a 41-year high last summer. If it turns out that monetary tightening isn’t working, it could force the Fed into a more aggressive posture.
    Zandi said, however, that it’s dangerous to make too much of individual reports.
    “We shouldn’t get fixated too much on any month-to-month movements,” he said. “Generally, looking through month-to-month volatility we should see continued decline in year-over-year growth.”
    Indeed, the CPI peaked out around 9% in June 2022 on an annual basis but has been on the decline since, falling to 6.4% in December.
    But food prices have been stubborn, still up more than 10% from a year ago in December. Gasoline prices also have reversed course, with prices at the pump up about 30 cents a gallon in January, according to AAA.
    Even the initially reported 0.1% decline in the headline CPI for December has been revised up, and is now showing a gain of 0.1%, according to revisions released Friday.

    “When you’ve had a string of lower-than-expected numbers, can that continue? I don’t know,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.
    Boockvar said he doesn’t expect the January report to have a lot of influence on the Fed one way or the other.
    “Let’s just say the headline number is 6%. Is that really going to move the needle for the Fed?” he said. “The Fed seems intent on raising another 50 basis points, and there’s clearly going to be a lot more evidence needed for them to change that. One number is certainly not going to do that.”
    Markets currently expect the Fed to raise its benchmark interest rate two more times from its current target range of 4.5%-4.75%. That would translate to another half a percentage point, or 50 basis points. Market pricing also indicates that Fed will stop at a “terminal rate” of 5.18%.

    Changes in the CPI report

    There are other issues that could cast a cloud over the report, as the Bureau of Labor Statistics is changing the way it’s compiling the report.
    One significant alteration is that it is now weighting prices on a one-year comparison rather than the two-year duration it had previously used.
    That has resulted in a change in how much influence the various components will have — the weighting for both food and energy prices, for instance, will have an incrementally smaller influence on the headline CPI number, while housing will have a slightly heavier weighting.
    In addition, shelter will have a heavier influence, going from about a 33% weight to 34.4%. The BLS also will give heavier price weighting to unattached rental properties, as opposed to apartments.
    The change in weightings are done to reflect consumer spending patterns so the CPI provides a more accurate cost-of-living picture.

    Correction: Economists polled by Dow Jones predict the core CPI will rise by 5.5% on an annual basis. An earlier version misstated the figure.

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    Here’s where the jobs will be during the rolling recessions

    “Rolling recessions” has become a popular term these days for what the U.S. has faced since a slowdown that started in early 2022.
    Housing, manufacturing and finance all have shown signs of contraction, though the economy broadly has escaped the recession definition.
    Some of the best places for workers to find jobs this year will include accommodation, oil and gas, hospice and health care, according to LinkedIn data.
    Tougher sectors will be government administration, education and consumer services.

    A Now Hiring sign is seen inside a WholeFoods store in New York City.
    Adam Jeffery | CNBC

    Recession-like conditions rolling through the U.S. economy are likely to cause more ripples through an otherwise strong jobs market.
    “Rolling recessions” has become a popular term these days for what the U.S. has faced since a slowdown that started in early 2022. The term connotes that while the economy may not meet an official recession definition, there will be sectors that will feel very much like they are in contraction.

    That will be true as well for the jobs market, which overall has been strong but has seen weakness in sectors that could intensify this year, according to data from popular networking site LinkedIn.
    Economists there, in fact, have identified multiple sectors that will show varying degrees of tightness this year.
    “Labor markets remain tighter compared to pre-pandemic levels,” said Rand Ghayad, head of economics and global labor markets at LinkedIn. “They’re still resilient. They’re still stronger than what we’ve seen in the pre-pandemic period, but they’ve been slowing down gradually and will likely continue to slow down over the next few months.”
    Various dominoes already have fallen during the rolling-recession period.
    Housing entered a sharp downturn last year, and the widely followed manufacturing indexes have been pointing to contraction for several months. In addition, the most recent senior loan officer survey from the Federal Reserve noted significantly tighter credit conditions, indicating a slowdown is hitting the financial sector.

    Other sectors could follow as economists broadly expect that the U.S. will see — at best — slow to moderate growth this year.
    LinkedIn data, which comes from job postings and other data from the site’s more than 900 million members worldwide, is markedly different from government data in an interesting way.
    Whereas the more widely following data from Bureau of Labor Statistics finds an extremely tight labor market, with nearly two open jobs for every available worker, LinkedIn’s “labor market tightness” metric has shown about a 1-to-1 ratio that even looks to be loosening a bit more.
    The implications are important.
    The Federal Reserve has cited the historic tightness of the labor market as motivation for its series of interest rate hikes aimed at taming inflation. If the market trends are unfolding the way LinkedIn data indicates, it could provide impetus for the central bank to ease up on its own tightening measures.
    “Everything depends on what the Fed will be doing over the next couple of months,” Ghayad said.

    Where the jobs will be

    For job seekers, the phrase “rolling recessions” means that it will be easier to get employment in some industries, while others will be tougher.
    LinkedIn identifies certain industries as having slack, meaning that employers are having an easier time filling jobs and don’t need to use as many enticements to find workers. Those industries are government administration, education and consumer services, where applicants outnumber job openings.
    Moderately tight markets include, tech, entertainment, information and media, professional services, retail estate, retail and financial services. In these industries, job applicants are having an easier time finding opportunities while employers are having to step up recruitment efforts.
    Extremely tight labor markets include accommodation, oil and gas, hospice and health care. LinkedIn says that in those fields “employers cannot fill vacancies fast enough.”
    Though hospitality consistently has been the leader in expanding payrolls, the industry is still about 5.5 million below its pre-pandemic level, according to BLS data. That is true even though hotels, restaurants, bars and the like have collectively raised hourly wages by about 23%.
    “This industry is actually still looking to hire a lot of people. It’s the tightest industry in the United States,” Ghayad said. “There’s a lot of demand. They’re looking for people. There’s a lot of shortages. They can’t find people so these industries, services, industries, accommodation and anything that has to do with food or entertainment are booming.”

    Recession fears loom

    From a business standpoint, Ghayad said there have been four industries that have been recession-proof: government, utilities, education and consumer services. He does not expect to see any significant slowdown in hiring there.
    Despite the seeming healthiness of the labor market, many economists think a broader recession is still ahead.
    A recession survey from The Wall Street Journal sees about a 61% chance of a contraction, and the New York Fed’s recession indicator, which tracks the spread between 10-year and 3-month Treasury yields as an indicator, is pointing toward a 57% chance of a recession in the next year. That’s the highest level since 1982.
    Still, Ghayad said he expects hiring to remain strong, even though LinkedIn posts mentioning words such as “layoffs,” “recession” and “open to work” have been on the rise in recent months.
    “We don’t expect sort of any potential downturn to significantly impact the labor markets,” he said. “We’re in a very good position right now. There’s some cooling, but … the labor market continues to be the brightest spot in the U.S. economy.”

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    When It’s Easy to Be a Landlord, No One Wants to Sell

    Locked in at historically low interest rates. Platforms that make managing rentals a breeze. Homeowners have little incentive to put a house on the market.I’m part of the problem.Selma Hepp was talking about the housing market: how house prices remain wildly expensive compared to where they were a few years ago, how the inventory of homes for sale is still low. As the chief economist for CoreLogic, a real estate data and consulting firm, Ms. Hepp’s day job is to predict the course of rent and home sales with the math of charts and data. But instead of hard numbers she was describing her weekend home search.Ms. Hepp lives in Los Angeles, where she and her partner rent an apartment in the Mid City neighborhood. They are looking to buy, and despite making a barrage of offers they keep getting outbid on homes in the area.Their problem has an obvious remedy: Ms. Hepp owns a house in Burbank that she rents to other tenants. She could sell if she wanted, and use the cash to spruce up the next bid. Asked why she doesn’t do this, Ms. Hepp answered: “Why would I?”The rental income more than covers the mortgage, she explained, which carries a 2.8 percent interest rate that despite the recent dip is still less than half current rates. Besides, she added, the homes she’s seen on the market are so unremarkable that it doesn’t seem worth walking away from a stream of income.“I’m part of the problem — and the solution,” she said. “I don’t want to give up my inventory until I see other inventory available.”After three years of rapid price increases during the pandemic, the housing market is experiencing what economists are calling “a correction.” Monthly sales have fallen. Construction activity has slowed, and home builders are offering steep discounts and other concessions to attract buyers.As mortgage rates edge down slightly from the 20-year high of late last year, homebuilders and real estate agents both report a thaw in sales and buyer interest. But economists like Ms. Hepp are still predicting a much slower year.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    U.S. Blacklists 6 Chinese Entities Involved in Spy Balloon Programs

    The action to cut off five Chinese companies and a research institute from American parts and technologies is part of the Biden administration’s response to the balloon it shot down last week.WASHINGTON — The Biden administration clamped down on Friday on sales of some U.S. technology to several Chinese aviation and technology companies, as part of its response to a Chinese spy balloon that traversed U.S. airspace last week.The Commerce Department added five Chinese companies and one research institute to its so-called entity list, which will prevent companies from selling them American parts and technologies without a special license. Officials said the six entities had supported Chinese military programs related to airships and balloons used for intelligence and reconnaissance.Alan Estevez, the under secretary of commerce for industry and security, said the action was a direct response to the Chinese government’s use of high-altitude balloons for surveillance.“Today’s action makes clear that entities that seek to harm U.S. national security and sovereignty will be cut off from accessing U.S. technologies,” he said.The restrictions mark the Biden administration’s first economic retaliation over the balloon, which the United States shot down last Saturday off the coast of South Carolina after it had floated across much of the country. The administration has mostly registered its anger through diplomatic channels, including the cancellation of a trip by the secretary of state to Beijing.Republicans have condemned the administration for not responding more forcefully, including by not shooting the balloon down before it moved out to sea. The White House said it was following the advice of the Pentagon, which feared the debris could hurt people on the ground.The Chinese government has tried to downplay the incident, arguing that the balloon was a civilian device for monitoring weather.The entities that the United States targeted Friday were Beijing Nanjiang Aerospace Technology Company, Dongguan Lingkong Remote Sensing Technology Company, Eagles Men Aviation Science and Technology Group Company, Guangzhou Tian-Hai-Xiang Aviation Technology Company, Shanxi Eagles Men Aviation Science and Technology Group Company and China Electronics Technology Group Corporation 48th Research Institute.The Commerce Department did not specify whether the companies and the institute had played a direct role in developing or operating the balloon that flew across the United States. But the Biden administration said earlier this week that it would consider taking action against any entities that had aided the balloon’s flight.The government has not yet publicized information about parties involved in the balloon’s manufacture or voyage. But it has said the machine was part of a global surveillance fleet directed by China’s military and was capable of collecting electronic communications.The United States has steadily ramped up its use of the entity list over the last few years, using it to cut off the flow of advanced technologies to rivals like China and Russia. In October, it added a crop of Chinese companies involved in advanced semiconductors to the list, arguing that such technologies were aiding the Chinese military.On Friday, the U.S. government shot down another unidentified object near Alaska. It was not immediately clear which country or company was responsible for it. More

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    What Recession? Some Economists See Chances of a Growth Rebound.

    The Federal Reserve has raised rates rapidly. But instead of cracking, some data point to an economy that’s thriving.Many economists and investors had a clear narrative coming into 2023: The Federal Reserve had spent months pushing borrowing costs rapidly higher in a bid to tame inflation, and those moves were expected to slow growth and the labor market so much that the economy would be at risk of plunging into a downturn.But the recession calls are now getting a rethink.Employers added more than half a million jobs in January, the housing market shows signs of stabilizing or even picking back up, and many Wall Street economists have marked down the odds of a downturn this year. After months of asking whether the Fed could pull off a soft landing in which the economy slows but does not plummet into a bruising recession, analysts are raising the possibility that it will not land at all — that growth will simply hold up.Not every data point looks sunny: Manufacturing remains glum, consumer spending has been cracking, and some analysts still think a mild recession this year remains likely. But there have been enough surprises pointing to continued momentum that Fed officials themselves seem to see a better chance that the nation will avoid a painful downturn. That resilience could even be a problem.While a gentle landing would be a welcome development, economists are beginning to ask whether growth and the job market will run too warm for inflation to slow as much as central bankers are hoping — eventually forcing the Fed to respond more aggressively.“They should be worried about how strong the U.S. labor market is,” said Ajay Rajadhyaksha, the global chairman of research at Barclays. “So far, the U.S. economy has proved unexpectedly resilient.”The Fed has lifted rates from near zero early last year to above 4.5 percent as of last week — the fastest series of policy adjustment in decades. Those higher borrowing costs have translated into pricier car loans and mortgages, and for a while they seemed to be clearly slowing the economy.But as the central bank has shifted toward a more moderate pace of rate moves — it slowed the speed of its increases first in December, then again this month — markets have relaxed. Rates on mortgages, for example, have come down slightly.That’s showing up in the economy. Mortgage applications have been bouncing around, but in general they have ticked back up. New home sales are now hovering around the same level as before the pandemic. Used car prices had been declining, but they have begun to rise at a wholesale level — which some economists see as a response to some returning demand for those vehicles.And while retail sales and other measures of household spending have been pulling back, according to recent data, several nascent forces could help to shore up consumer demand into 2023 — with potentially big implications for the Fed’s battle against inflation.Jerome H. Powell, the Fed chair, said some of the drag on inflation from goods could be “transitory,” meaning that it will fade away.Lexey Swall for The New York TimesSocial Security recipients just received a sizable cost-of-living adjustment in their first check of 2023, putting more money in the pockets of older Americans. More than a dozen states, including Virginia, California, New York and Massachusetts, sent tax rebates or stimulus checks late last year. And while Americans have been working their way through the excess savings that were amassed during the early pandemic, many still have some cushion left.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    President Biden Is Not Backing Off His Big-Government Agenda

    In his first appearance before a Republican House, the president renewed calls for large new economic programs and offered no concessions on federal spending.WASHINGTON — There were no economic pivots in President Biden’s first State of the Union address to a Republican House. He did not pare back his push to raise taxes on high earners or to spend big on new government programs. He offered no olive branches to conservatives who have accused him of running the country into crisis with government borrowing.It was a shift from Mr. Biden’s two most recent Democratic predecessors in the White House, who tacked toward a more conciliatory and limited-government approach to economic policy after losing at least one chamber of Congress. But on Tuesday night, Mr. Biden barreled ahead. The president renewed his calls for trillions of dollars of new federal programs, including for child care and community college, over the sometimes raucous objections of Republicans who have centered their fight with Mr. Biden on the issue of spending and debt. He did not name a single federal spending program he was willing to cut. He said he would work to reduce budget deficits, but by raising taxes on high earners and corporations, a position anathema to Republicans.The speech was not a blueprint to pass any of those proposals, which have little chance of becoming law during his first term.Instead, it was a defiant opening bid for a high-stakes clash over raising the nation’s borrowing limit. It was a no-quarter recommitment to a campaign theme aimed squarely at blue-collar voters in 2024 swing states, centered on expanding government in pursuit of what Mr. Biden calls “middle-out” economic policy.Aides say the choice to defy Republicans’ calls for Mr. Biden to change course on economic policy was deliberate, reflecting both the president’s deeply held convictions on policy and his belief that he has found a winning political message.It was also a bet that the economy, which has so far been a drag on Mr. Biden’s popularity, will ultimately prove to be a tailwind in his widely expected re-election campaign. Rapid price gains are beginning to ease, and jobs are plentiful, with the unemployment rate at its lowest point since 1969.Biden’s State of the Union AddressChallenging the G.O.P.: In the first State of the Union address of a new era of divided government, President Biden delivered a plea to Republicans for unity but vowed not to back off his economic agenda.State of Uncertainty: Mr. Biden used his speech to portray the United States as a country in recovery. But what he did not emphasize was that America also faces a lot of uncertainty in 2023.Foreign Policy: Mr. Biden spends his days confronting Russia and China. So it was especially striking that in his address, he chose to spend relatively little time on America’s global role.A Tense Exchange: Before the speech, Senator Mitt Romney admonished Representative George Santos, a fellow Republican, telling him he “shouldn’t have been there.”To that end, Mr. Biden spent much of the speech proclaiming that the American economy is faring better on his watch than his critics — or even many of his voters — concede. He dived into details about laws he has signed to invest in water pipes, semiconductor factories, electric vehicles and more, while promising those plans would bring high-paying jobs to workers without college degrees. He promised consumer-friendly crackdowns on credit card fees, social media companies and more. On Wednesday, Mr. Biden was headed to Wisconsin to promote his economic legislation, while his cabinet secretaries fanned out across the country to do the same.“We’re building an economy where no one’s left behind,” Mr. Biden said in his speech. “Jobs are coming back, pride is coming back, because choices we made in the last several years. You know, this is, in my view, a blue-collar blueprint to rebuild America and make a real difference in your lives at home.”“Here’s my message to all of you out there,” he added later. “I have your back.”Mr. Biden’s approach underscored how he has not regarded the Republican House takeover as a rebuke of his policies..css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.It defied the example set by Mr. Biden’s Democratic predecessors after they lost House control in their first midterms. President Bill Clinton promised a new era of smaller government in 1995. President Barack Obama vowed in 2011 “to take responsibility for our deficit” and proposed what he called “painful cuts” to domestic spending.Mr. Biden offered no apology for his policies. He cast himself as more fiscally responsible than his immediate predecessor, former President Donald J. Trump, in claiming credit for a $1.7 trillion decline in the federal budget deficit last year. That improvement was largely the product of expiring pandemic aid programs, but Mr. Biden suggested he would take steps to keep winnowing the shortfall between what the government spent and what it earned through taxes and other revenue. He said his next budget, which will be released on March 9, would further reduce deficits by $2 trillion over a decade.In a sharp contrast with Republicans, he called for raising taxes on corporations and the wealthy as a way to show a commitment to deficit reduction in spite of his spending plans. His proposals included an expanded tax on stock buybacks and what would effectively be a sort of wealth tax on billionaires.He baited Republicans on a pair of politically cherished programs, Social Security and Medicare, drawing sustained jeers when he said some of his opponents wanted to sunset the programs. While hundreds of Republican lawmakers have signed on to plans to reduce spending on the safety net by raising retirement ages and other reductions in future benefits, Mr. Biden’s “sunset” accusation rests on the possible effects of a plan to reauthorize spending programs every five years, advanced by Senator Rick Scott of Florida, which has gained little traction among party leaders.Republicans called the speech a departure from Mr. Biden’s previous calls for unity and a disconnect on major economic issues.“While the president is busy taking a premature and undeserved victory lap, lauding legislation that Democrats passed on a party-line basis, families in West Virginia and America are struggling at every turn because many of the policies and priorities of this administration have made the American dream harder to attain,” Senator Shelley Moore Capito, Republican of West Virginia, said in a release after the address.Mr. Biden’s allies cheered. The president “delivered a bold blueprint for an economy that, at long last, puts working people first,” Liz Shuler, the president of the powerful A.F.L.-C.I.O. labor organization, said in a news release on Tuesday evening.Mr. Biden fashions himself a congressional deal maker, and on Tuesday, he outlined a handful of smaller-scale initiatives on other issues, like curbing the flow of fentanyl and regulating big tech, that might plausibly win bipartisan support in the new Congress. But the speech was not a recipe for economic compromise.The president re-upped calls for big new federal investments in child care and assistance for the elderly, community college, prekindergarten and health insurance. But he offered no plausible road to finishing the job, as he put it, on that long list of proposals, which he was unable to include in the wide array of economic legislation he signed in his first two years because of opposition from centrist Democrats in the Senate.What he did outline was a defiant negotiating posture, as he and Republican lawmakers battle over raising the $31.4 trillion federal borrowing limit, which the United States hit last month. That cap, which limits the government’s ability to borrow funds to pay for spending that Congress has already authorized, must be suspended or lifted later this year in order for the United States to continue paying its bills and avoid a financial crisis.Republicans are refusing to raise the limit unless Mr. Biden agrees to deep spending cuts. Mr. Biden has said he will refuse to bargain over the borrowing cap and on Tuesday night reminded Republicans that they had agreed to effectively increase the debt limit three times when Mr. Trump was president. Despite what both sides called a productive meeting at the White House last week between the president and Speaker Kevin McCarthy, Republican of California, Mr. Biden did not waver in that position on Tuesday.“We’re not going to be moved into being threatened to default on the debt,” Mr. Biden said.Mr. McCarthy, seated behind him, did not look pleased. More

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    As Biden Prepares to Tout Economy, Fed Chair Powell Takes a Cautious Tone

    The White House has embraced signs that the economy is strong. For the Fed, that strength could prolong its fight against inflation.WASHINGTON — Jerome H. Powell, the chair of the Federal Reserve, underscored that the central bank has more work to do when it comes to slowing the economy and that officials remain determined to wrestle rapid inflation under control, even if that means pushing rates higher than expected.Mr. Powell, speaking on Tuesday in a question-and-answer session at the Economic Club of Washington, D.C., called a recent slowdown in price increases “the very early stages of disinflation.” He added that the process of getting inflation back to normal was likely to be bumpy.“There has been an expectation that it will go away quickly and painlessly — and I don’t think that’s at all guaranteed; that’s not the base case,” Mr. Powell said. “The base case for me is that it will take some time, and we’ll have to do more rate increases, and then we’ll have to look around and see whether we’ve done enough.”The Fed chair’s comments came hours before President Biden delivered the annual State of the Union address, which offered a contrasting tone.Democrats are embracing a historically strong economy with super-low unemployment and rapid wage growth, cheering a report last week that showed employers added more than half a million jobs in January. But Fed officials have met the news with more caution. The central bank is supposed to foster both full employment and stable inflation, and policymakers have been concerned that the strength of today’s job market could make it harder for them to return wage and price increases to historically normal levels.Mr. Powell said that the Fed had not expected the jobs report to be so strong, and that the robustness reinforced why the process of lowering inflation “takes a significant period of time.”While he said it was good that the disinflation so far had not come at the expense of the labor market, he also underscored that further interest rate moves would be appropriate and that borrowing costs would need to remain high for some time. And he embraced how markets have adjusted in the wake of the strong hiring numbers: Investors had previously expected the Fed to stop adjusting policy very soon, but now see rate increases in both March and May.The biggest inflation challenge facing the Fed is in the services sector of the economy, which includes restaurants, travel and health care.Jim Wilson/The New York Times“We anticipate that ongoing rate increases will be appropriate,” Mr. Powell said. He said that in the wake of the jobs report, financial conditions were “more well aligned” with that view than they had been previously.To try to slow the economy and choke off inflation, policymakers raised interest rates from near zero early last year to more than 4.5 percent at their last meeting, the quickest pace of adjustment in decades. Higher borrowing costs weigh on demand by making it more expensive to fund big purchases or business expansions. That in turn tempers hiring and wage growth, with further cools the economy. Inflation F.A.Q.Card 1 of 5What is inflation? More