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    Apple Reaches Deal With Investors to Audit Its Labor Practices

    The tech giant will assess its compliance with its official human rights policy, according to a federal filing.Apple will conduct an assessment of its U.S. labor practices under an agreement with a coalition of investors that includes five New York City pension funds.The assessment will focus on whether Apple is complying with its official human rights policy as it relates to “workers’ freedom of association and collective bargaining rights in the United States,” the company said in a filing last week with the Securities and Exchange Commission.The audit comes amid complaints by federal regulators and employees that the company has repeatedly violated workers’ labor rights as they have sought to unionize over the past year. Apple has denied the accusations.“There’s a big apparent gap between Apple’s stated human rights policies regarding worker organizing, and its practices,” said Brad Lander, the New York City comptroller, who helped initiate the discussion with Apple on behalf of the city’s public worker pension funds.As part of its agreement with the coalition of investors, which also includes other pension funds for unionized workers, Apple agreed to hire a third-party firm to conduct the assessment, the coalition said in a letter to the company’s chairman on Tuesday.Labor Organizing and Union DrivesN.Y.C. Nurses’ Strike: Nurses at Montefiore Medical Center in the Bronx and Mount Sinai in Manhattan ended a three-day strike after the hospitals agreed to add staffing and improve working conditions.Amazon: A federal labor official rejected the company’s attempt to overturn a union victory at a warehouse on Staten Island, removing a key obstacle to contract negotiations between the union and the company.A Union Win: Organized labor claimed a big victory on Jan. 3, gaining a foothold among about 300 employees at a video game maker owned by Microsoft.Electric Vehicles: In a milestone for the sector, employees at an E.V. battery plant in Ohio voted to join the United Automobile Workers union, citing pay and safety issues as key reasons.The letter also laid out recommendations for the assessment, which include hiring a firm that has expertise in labor rights and that does not advise companies on how to avoid unionization. It recommended that the firm be “as independent as practicable.”Apple’s federal filing did not refer explicitly to a third party, and the company declined to comment further.Members of the investor coalition controlled about $7 billion worth of Apple stock as of last week, out of a market capitalization of more than $2 trillion. In its financial filing announcing the assessment, Apple offered few details, saying that it would conduct the assessment by the end of the year and that it would publish a report related to the assessment.Last year, workers voted to unionize at two Apple stores — in Townson, Md., and Oklahoma City — and workers at two other stores filed petitions to hold union election before withdrawing them.Many workers involved in union organizing at the company said they enjoyed their jobs and praised their employer, citing benefits like health care and stock grants and the satisfaction of working with Apple products. But they said they hoped that unionizing would help them win better pay, more input into scheduling and more transparency when it comes to obtaining job assignments and promotions.In May, Apple announced that it was raising its minimum hourly starting wage to $22 from $20, a step that some workers interpreted as an effort to undermine their organizing campaigns.Workers have also filed charges accusing Apple of labor law violations in at least six stores, including charges that the company illegally monitored them, prohibited union fliers in a break room, interrogated them about their organizing, threatened them for organizing and that it stated that unionizing would be futile.The Communications Workers of America, the union representing Apple workers in Oklahoma City, has also filed a charge accusing Apple of setting up an illegal company union at a store in Columbus, Ohio — one created and controlled by management with the aim of stifling support for an independent union.The National Labor Relations Board has issued formal complaints in two of the cases, involving stores in Atlanta and New York.Apple has said that “we strongly disagree” with the claims brought before the labor board and that it looks forward to defending itself. The company has emphasized that “regular, open, honest, and direct communication with our team members is a key part of Apple’s collaborative culture.”The investor coalition that pushed for the labor assessment argues that Apple’s response to the union campaigns is at odds with its human rights policy because that policy commits it to respect the International Labor Organization’s Declaration on Fundamental Principles and Rights at Work, which includes “freedom of association and the effective recognition of the right to collective bargaining.”Mr. Lander, the New York comptroller, said that the coalition initially reached out to Apple’s board last spring to discuss the company’s posture toward the union organizing, but that it did not get a substantive response.The coalition then filed a shareholder proposal in September urging Apple to hire an outside firm to assess whether the company was following through on its stated commitment to labor rights. The company responded late last year and the two sides worked out an agreement in return for the coalition withdrawing its proposal, according to Mr. Lander.A coalition of some of the same investors, including the New York pension funds, has filed a similar proposal at Starbucks, where workers have voted to unionize at more than 250 company-owned stores since late 2021. Like Apple, Starbucks has cited its commitment to the International Labor Organization standards like freedom of association and the right to take part in collective bargaining.But Starbucks has consistently opposed its employees’ attempts to unionize, and Starbucks has not engaged with the coalition of investors to work out an agreement. Jonas Kron, chief advocacy officer of Trillium Asset Management, one of the investors pushing proposals at both companies, said he expected the Starbucks proposal to go to a vote of the company’s shareholders. The company declined to comment.The federal labor board has issued a few dozen formal complaints against Starbucks for violations including retaliating against workers involved in organizing and discriminating against unionized workers when introducing new benefits; the company has denied breaking labor laws. More

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    As China reopens and data surprises, economists are starting to get less gloomy

    Barclays on Friday raised its global growth forecast to 2.2% in 2023, up 0.5 percentage points from its last estimate in mid-November.
    Berenberg also upgraded its euro zone forecast in light of recent news flow, particularly falling gas prices, a consumer confidence recovery and a modest improvement in business expectations.
    TS Lombard on Friday lifted its euro area growth forecast from -0.6% to -0.1% for 2023.

    The European Central Bank is expected to continue raising rates aggressively in the short-term as the euro zone economy proves more resilient than anticipated.
    Haussmann Visuals | Moment | Getty Images

    After China’s reopening and a deluge of positive data surprises in recent weeks, economists are upgrading their previously gloomy outlooks for the global economy.
    Data releases last week showed signs of inflation slowing and less severe downturns in activity, prompting Barclays on Friday to raise its global growth forecast to 2.2% in 2023, up 0.5 percentage points from its last estimate in mid-November.

    “This is largely driven by the 1.0pp increase in our China growth prediction to 4.8% from last week, but also reflects a 0.7pp increase for the euro area (to -0.1%, largely on a much better Germany) forecasts, and, to lesser extent, upgrades of 0.2pp for the US (to 0.6%), Japan (to 1.0%) and the UK (-0.7%),” said Barclays Head of Economic Research Christian Keller.
    “The U.S. would still experience a recession, as we predict slightly negative growth in three quarters (Q2 -Q4 2023), but it would be quite shallow, as annual 2023 GDP growth would now remain positive.”

    U.S. December CPI edged down 0.1% month-on-month to notch 6.5% annually, in line with expectations and mostly driven by falling energy prices and slowing food price increases.
    However, Keller suggested a more important gauge of how the U.S. economy is faring, and how the Federal Reserve’s monetary policy tightening might unfold, was the December Atlanta Fed Wage tracker. 
    The estimate last week supported the previous week’s average hourly earnings (AHE) data in indicating a sharp deceleration of wage pressures, declining by a full percentage point to 5.5% year-on-year.

    Philadelphia Fed President Patrick Harker, a new voting member of the Federal Open Market Committee, said last week that 25 basis point interest rate hikes would be appropriate moving forward. A similar tone was struck by Boston Fed President Susan Collins and San Francisco Fed President Mary Daly.
    The central bank has been raising rates aggressively to rein in inflation while hoping to engineer a soft landing for the U.S. economy. In line with market pricing, Barclays believes the balance on the FOMC has now shifted toward 25 basis point increments from February’s meeting onward.
    Where the British bank differs from market pricing is in its expectations for the terminal rate. Barclays projects the FOMC will lift the Fed funds rate to 5.25% at its May meeting before ending the hiking cycle, exceeding current market pricing for a peak of just below 5%, as policymakers wait to see more evidence of slowing labor demand and wage pressures.

    Barclays suggested that sticky core inflation in the euro area will keep the European Central Bank on track to deliver its two telegraphed 50 basis point hikes in February and March before ending its tightening cycle at a deposit rate of 3%, while continuing to tighten its balance sheet.
    Inflation has proven more persistent in the U.K., where the labor market also remains tight, energy bills are set to increase in April and widespread industrial action is exerting upward pressure on wage growth, prompting economists to warn of potential second round inflationary effects. 
    Barclays’ updated outlook pencils in a further 25 basis point hike from the Bank of England in May after 50 basis points in February and 25 in March, taking the terminal rate to 4.5%.
    Shallower recessions in Europe and the UK
    Surprisingly strong activity data in the euro zone and the U.K. last week may offer further headroom for central banks to raise rates and bring inflation back to Earth.
    “This week’s better-than-expected GDP data for Germany and the U.K. — the epicenters of growth pessimism — add further evidence that the economic fallout has been less severe than the much more uncertain energy situation suggested a few months ago,” Keller said.
    “Although varying by country, the generally large fiscal support packages in Europe and the UK to deal with elevated energy prices must also have contributed, as have healthy labour market conditions and, on average, robust household savings.”
    Berenberg also upgraded its euro zone forecast in light of recent news flow, particularly falling gas prices, a consumer confidence recovery and a modest improvement in business expectations.
    On Friday, the German federal statistics office showed that Europe’s largest economy stagnated in the fourth quarter of 2022 rather than contracting, and Berenberg Chief Economist Holger Schmieding said its apparent resilience has two major implications for the outlook across the 20-member common currency bloc.

    “As Germany is more exposed to gas risks than the euro zone as a whole, it suggests that the euro zone likely did not fare (much) worse than Germany late last year and may thus have avoided a significant contraction in Q4 GDP,” Schmieding said.
    “Judging by the ongoing recovery in business and consumer confidence, it seems unlikely that Q1 2023 will be much worse than Q4 2022.”
    Instead of a cumulative real GDP decline of 0.9% in the fourth quarter of 2022 and first quarter of 2023, Berenberg now forecasts only a 0.3% decline over the period.
    “With less lost ground to make up for, the pace of the rebound in 2H 2023 and early 2024 after a likely stabilisation in Q2 2023 will also be a bit less steep (0.3% qoq in Q4 2023, 0.4% qoq in Q1 and 0.5% qoq in Q2 2024 instead of 0.4%, 0.5% and 0.6% qoq, respectively),” Schmieding added.
    Berenberg therefore raised its calls for the annual average change to real GDP in 2023 from a 0.2% shrinkage to 0.3% growth.

    The German investment bank also upped its 2023 U.K. forecast from a 1% contraction for the year to a 0.8% contraction, citing Brexit, the legacy of former prime minister Liz Truss’ disastrous economic policy and a tighter fiscal policy for the U.K.’s continued underperformance versus the euro zone.
    Positive economic surprises — particularly the 1% monthly increase in euro area industrial production in November — along with unseasonably mild temperatures, which have eased energy demand, and a fast reopening in China also led TS Lombard on Friday to lift its euro area growth forecast from -0.6% to -0.1% for 2023.
    While consensus forecasts are moving toward outright positive growth as worst-case scenarios for the euro zone are priced out, TS Lombard Senior Economist Davide Oneglia said an “L-shaped recovery” is still the most likely scenario for 2023, rather than a full rebound.
    “This is the result of three major factors: 1) cumulated ECB tightening (and the spillovers from global monetary tightening) will start to show its full effect on the real economy in the coming quarters; 2) the US economy is poised to lose altitude further; and 3) China is reopening into a weak economy, in which pro-growth policy drivers will end up mostly favouring a revival in the domestic consumer services with limited benefits for EA capital goods exports,” Oneglia said.

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    After a Burst of New Businesses, a Cooling Economy Intrudes

    The pandemic has brought a boom in entrepreneurship, but higher interest rates, a chill in venture capital and fears of recession now pose obstacles.An unexpected result of the pandemic era has been a surge in entrepreneurial activity. Since 2020, applications to start new businesses have skyrocketed, reversing a decades-long slump.The reasons for the boom are manifold. Millions of people were suddenly laid off, giving them the time, and inclination, to start new businesses. Personal savings jumped, buoyed partly by a frothy stock market and government stimulus payments, providing would-be entrepreneurs with the means to fulfill their visions. Rock-bottom interest rates made money cheap and widely available.But the ebullient economic environment that helped foster this entrepreneurial spirit has given way to high inflation, rising interest rates and dwindling savings. That has left these nascent businesses to navigate challenging financial crosscurrents — and a possible recession — at a moment when they are at their most fragile. Even under normal conditions, roughly half of new businesses fail within five years.“Young businesses are inherently vulnerable,” said John Haltiwanger, an economist at the University of Maryland who studies entrepreneurship. “They’re likely to fail, and they are especially likely to fail in a recession.”In 2021, Americans filed applications to start 5.4 million new businesses, according to data from the Census Bureau. That was on top of the 4.4 million applications filed in 2020, which had been the highest by far in the more than 15 years the government had been keeping track. (Filings last year through November were running ahead of 2020 but behind 2021; figures for December will be released this week.)Data on actual business formation will not become available for several years, so it is not possible yet to measure the effects of the cooling economy on new ventures. Whether these new businesses pull through could have broad implications for the health and dynamism of the overall economy.“Innovation drives gains in productivity,” said John Dearie, president of the Center for American Entrepreneurship, an advocacy organization. “And innovation comes disproportionately from new businesses.”Jennifer Sutton started a juice and wellness bar in Park City, Utah. She is worried about the prospect of a recession and how it would affect the tourism that supports her business.Kim Raff for The New York TimesBut he cautioned that the Federal Reserve’s monetary policy — intended to tamp down the fastest price increases in decades — is “ramping up the headwinds facing entrepreneurs to gale force by crushing demand and by increasing the price of money.”In interviews, entrepreneurs expressed a mix of resolve and resignation about the months ahead. Some said they had learned lessons from the pandemic’s upheaval about how to endure financial adversity that they believed had recession-proofed their business models. Others were cleareyed about needing outside funding that they feared would no longer arrive.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    U.S. Will Hit Debt Limit on Thursday, Yellen Tells Congress

    The Treasury Department expects to begin taking “extraordinary measures” to continue paying the government’s obligations before what is expected to be a big fight to raise the borrowing cap.WASHINGTON — Treasury Secretary Janet L. Yellen warned on Friday that she would have to begin employing “extraordinary measures” on Thursday to continue paying the nation’s bills if lawmakers did not act to raise the statutory debt limit and that her powers to delay a default could be exhausted by early June.Ms. Yellen’s letter to Congress was the first sign that resistance by House Republicans to lifting the borrowing cap could put the U.S. economy at risk and signals the beginning of an intense fight in Washington this year over spending and deficits.“Failure to meet the government’s obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans and global financial stability,” Ms. Yellen wrote.Ms. Yellen said on Friday that considerable uncertainty surrounded how long she could use measures to delay a default. She said she would begin suspending new investments in the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund and suspending reinvestment of the Government Securities Investment Fund of the Federal Employees Retirement System Thrift Savings Plan this month to avoid breaching the debt limit.The letter is the beginning of what is expected to be a protracted and potentially damaging economic fight. Republicans, who assumed control of the House last week, have insisted that any increase to the debt limit be accompanied by significant spending curbs, most likely including cuts to both the military and domestic issues.Speaker Kevin McCarthy has cited reducing the national debt — which topped $31 trillion last year and has increased during both Republican and Democratic administrations, including about a 40 percent increase under former President Donald J. Trump — as a central focus of his party’s agenda.“The American people are the ones that’s demanding the cut in spending,” Representative Jason Smith, a Missouri Republican and the chairman of the powerful House Ways and Means Committee, said Friday on Fox News. “We have to have fiscal reforms moving forward. We cannot just give an unlimited credit card.”Understand the U.S. Debt CeilingCard 1 of 4What is the debt ceiling? More

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    Consumer prices fell 0.1% in December, in line with expectations from economists

    The consumer price index fell 0.1% in December, meeting expectations, for the biggest drop since April 2020.
    Excluding food and energy, core CPI rose 0.3%, also in line with estimates.
    On an annual basis, headline CPI rose 6.5% while core increased 5.7%.
    The biggest reason for the easing in inflation came from a sharp drop in gasoline prices, which are now lower on a year-over-year basis.

    Inflation closed out 2022 in a modest retreat, with consumer prices in December posting their biggest monthly decline since early in the pandemic, the Labor Department reported Thursday.
    The consumer price index, which measures the cost of a broad basket of goods and services, fell 0.1% for the month, in line with the Dow Jones estimate. That equated to the largest month-over-month decrease since April 2020, as much of the country was in lockdown to combat Covid.

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    Even with the decline, headline CPI rose 6.5% from a year ago, highlighting the persistent burden that the rising cost of living has placed on U.S. households. However, that was the smallest annual increase since October 2021.
    Excluding volatile food and energy prices, so-called core CPI rose 0.3%, also meeting expectations. Core was up 5.7% from a year ago, once again in line.

    A steep drop in gasoline was responsible for most of the monthly decline. Prices at the pump tumbled 9.4% for the month and are now down 1.5% from a year ago after surging past $5 a gallon in mid-2022.
    Fuel oil slid 16.6% for the month, also contributing to a total 4.5% decline in the energy index.
    Food prices increased 0.3% in December while shelter also saw another sharp gain up 0.8% for the month and now 7.5% higher from a year ago. Shelter accounts for about one-third of the total CPI index.

    Used vehicle prices, also an important initial driver of inflation, were off 2.5% for the month and are now down 8.8% year over year. Medical care services increased 0.1% after dropping for two straight months, while apparel prices rose 0.5% and transportation services were up 0.2% and are still 14.6% higher from a year ago. However, airline fares fell 3.1% for the month though are still up 28.5% from a year ago.
    Markets reacted little following the news, with stocks slightly lower at the open and Treasury yields also down across most durations.
    Both annual increases remain well above the Federal Reserve’s 2% target, but have been consistently moving lower.
    “Inflation is quickly moderating. Obviously, it’s still painfully high, but it’s quickly moving in the right direction,” said Mark Zandi, chief economist at Moody’s Analytics. “I see nothing but good news in the report except for the top-line number: 6.5% is way too high.”
    CPI is the most closely watched inflation gauge as it takes into account moves in everything from a gallon of gas to a dozen eggs and the cost of airline tickets.
    The Federal Reserve prefers a different gauge that adjusts for changes in consumer behavior. However, the central bank takes in a broad array of information when measuring inflation, with CPI being part of the puzzle.
    There was some indication in the data that consumer are shifting behavior. Along with that came a note of caution in that the December decline was largely fed by a a drop in gas prices that may not be sustainable given market dynamics and consumer demand.
    “We know that we won’t get the same kind of support from gasoline prices. So don’t expect the next report to look as good as this one,” said Simona Mocuta, chief economist at State Street Global Advisors. “But the trend is favorable.”
    Markets are watching the Fed’s moves closely as officials battle against inflation that at its peak was the highest in 41 years. Supply chain bottlenecks, the war in Ukraine, and trillions in fiscal and monetary stimulus helped contribute to surging prices that spanned across most areas of the economy.
    Policymakers are weighing how much further they need to go with interest rate hikes used to slow the economy and tame inflation. The Fed so far has raised its benchmark borrowing rate 4.25 percentage points to its highest level in 15 years. Officials have indicated the rate is likely to exceed 5% before they can step back to see the impact of the policy tightening.
    Following the CPI report, market pricing pointed toward an increased probability that the Fed would approve a 0.25 percentage point rate increase on Feb. 1. That would represent another step down for the central bank after it approved four consecutive 0.75 percentage point hikes last year before slowing down to a 0.5-point increase in December.

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    Time for the Fed to declare victory on inflation? Not yet

    December’s monthly decline in the consumer price index gets the Fed a step closer to beating inflation.
    Dean Baker, senior economist at the Center for Economic and Policy Research, insisted that it’s “Time for the Fed to declare victory and stop rate hikes!”
    Other economists, though, think it’s unlikely the Fed will signal an easing in policy.

    A man pumps gas at a gas station in the Brooklyn borough of New York, the United States, Dec. 13, 2022.
    Michael Nagle | Xinhua News Agency | Getty Images

    December’s monthly decline in the consumer price index gets the Federal Reserve a step closer to beating inflation, though they’re highly unlikely to signal an easing of policy anytime soon.
    The key inflation gauge fell 0.1% for the month, in line with market expectations and was the biggest drop since April 2020.

    Though the CPI for all items is still 6.5% ahead of where it was a year ago, the arc has been steadily lower — from its peak at around a 9% annual rate in June 2022 — amid a sharp drop in gas prices and some serious interest rate increases from the Fed.
    The question now is how much more evidence policymakers will need to see before they take their foot off the brake.
    “If they’re doing a forecast, which is what they should be doing, it strongly argues that their rate increases should be coming to an end soon,” said Mark Zandi, chief economist at Moody’s Analytics. “There’s nothing not to like about this report. Inflation is going to come [down] here.”
    Dean Baker, senior economist at the Center for Economic and Policy Research, was even more emphatic. In a tweet, Baker insisted that it’s “Time for the Fed to declare victory and stop rate hikes!” He cited a three-month decline in services inflation less shelter costs as evidence that inflation is on the run.
    But considering how aggressive central bankers have been since initiating rate hikes back in March 2022, and how cautious they’ve been about viewing isolated data points as part of a broader trend, the likelihood of taking the win now seems remote.

    After all, both headline and core (ex-food and energy) inflation — up 0.3% for the month and 5.7% on the year — are still way ahead of the Fed’s 2% target. Chair Jerome Powell has said recently that the services less shelter component of inflation is a key consideration as rent costs are likely to ebb later this year.
    But he and his colleagues also have emphasized the importance of keeping their guard up and have said they see more danger from easing than in continuing to push hard, even if it means grinding the economy to a near halt.

    ‘Goldilocks’ on the horizon?

    What the central bank has going for it now is a robust labor market that has withstood higher rates. But that’s a blessing and a curse, as wages have continued rising and threaten to send inflation higher.
    “If you can engineer a decline in inflation without crushing the jobs market, that’s the ‘Goldilocks’ soft landing,” said Randy Frederick, managing director of trading and derivatives for Charles Schwab. “That’s kind of what we’ve seen with the data we got last week and with inflation today.”
    December’s nonfarm payrolls report showed a solid 223,000 increase in jobs and an annual decline in average hourly earnings growth to 4.7%. Frederick expects the Fed when it next meets Jan. 31-Feb. 1 to note the data but not to commit to a switch in policy.

    “They’ll acknowledge that the data has been improving, which it has. But I don’t think they want to tip their hand on what’s going to happen in six weeks,” Frederick said, referring to the following Federal Open Market Committee meeting March 15-16.
    Markets are pricing in a near certainty — 93.2% as of midday Thursday — that the FOMC again will step down the level of its increase, to 0.25 percentage point on Feb. 1, according to CME Group. The expectation is for another quarter point in March, then a pause before the committee knocks as much as a half a percentage point off the fed funds rate before year-end.
    Philadelphia Fed President Patrick Harker said Thursday he favors the Fed stepping down to quarter-point increments and then pausing. His fellow policymakers have stated firmly that they don’t see any rate cuts ahead in 2023.
    But the market is trading otherwise.
    The hike following the March meeting will give the FOMC time to ponder the impact of all the increases, which will be nine in all, totaling 4.75 percentage points, if market pricing is correct.
    What’s not expected is any premature signaling of a victory over inflation.
    “I don’t think they are close to declaring victory,” said Simona Mocuta, chief economist at State Street Global Advisors. “They will be very cautious in verbalizing that even though they might downshift to [a quarter-point hike], which acknowledges the improvement in the data. But I would not expect the tone and language that comes out of the committee to shift dramatically for quite some time. They are taking the view of better to be safe than sorry again.”

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    Fed President Backs Slowdown as Support Mounts for Smaller Rate Move

    Susan M. Collins, president of the Federal Reserve Bank of Boston, said she was leaning toward a quarter-point move at the central bank’s Feb. 1 meeting.Susan M. Collins, the president of the Federal Reserve Bank of Boston, said she was leaning toward a quarter-point interest rate increase at the central bank’s next meeting — a slowdown that would signal a return to a normal pace of monetary policy adjustment after a year in which officials took rapid action to slow the economy and contain inflation.Fed policymakers raised interest rates to a range of 4.25 to 4.5 percent in 2022 from near zero, an aggressive path that included four consecutive three-quarter point adjustments. Officials slowed down with a half-point rate move in December, and a few of the Fed’s regional presidents have in recent days suggested that an even smaller adjustment could be possible when the Fed releases its next decision on Feb. 1.Ms. Collins added her voice to that chorus — but even more declaratively, making it clear that she would at this point support slowing to rate adjustments of 25 basis points, or a quarter point. Changing policy more gradually would give the central bank more time to see how its actions affect the economy and whether they were working to contain rapid inflation.“I think 25 or 50 would be reasonable; I’d lean at this stage to 25, but it’s very data-dependent,” Ms. Collins said in an interview with The New York Times on Wednesday. “Adjusting slowly gives more time to assess the incoming data before we make each decision, as we get close to where we’re going to hold. Smaller changes give us more flexibility.”Ms. Collins is one of the Fed’s 12 regional bank presidents and among its 19 policymakers. She does not have a formal vote on rate changes this year, but she will join in deliberations as the decision is made.Ms. Collins said she favored raising interest rates to just above 5 percent this year, potentially in three quarter-point moves in February, March and May.“If we’ve gone to slower, more judicious rate increases, it could take us three rate increases to get there — and then holding through the end of 2023, that still seems like a reasonable outlook to me,” she said.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Why Hitting the Debt Ceiling Would Be Very Bad for the U.S. Economy

    If Congress fails to increase the government’s borrowing limit in time, the result would be a shock to the economy and financial markets.WASHINGTON — The new Republican majority in the House of Representatives has Washington and Wall Street bracing for a revival of brinkmanship over the nation’s statutory debt limit, raising fears that the fragile U.S. economy could be rattled by a calamitous self-inflicted wound.For years, Republicans have sought to tie spending cuts or other concessions from Democrats to their votes to lift the borrowing cap, even if it means eroding the world’s faith that the United States will always pay its bills. Now, back in control of a chamber of Congress, Republicans are poised once again to leverage the debt limit to make fiscal demands of President Biden.The fight over the debt limit is renewing debates about what the actual consequences would be if the United States were unable to borrow money to pay its bills, including what it owes to the bondholders who own U.S. Treasury debt and essentially provide a line of credit to the government.Some Republicans argue that the ramifications of breaching the debt limit and defaulting are overblown. Democrats and the White House — along with a variety of economists and forecasters — warn of dire scenarios that include a shutdown of basic government functions, a hobbled public health system and a deep and painful financial crisis.Speaker Kevin McCarthy signaled this week that he and his fellow Republicans would seek to use the debt limit standoff to enact spending cuts and reduce the national debt. He said that lawmakers likely have until summertime to find a solution before the United States runs out of cash, a threshold that is known as “X-date.”“One of the greatest threats we have to this nation is our debt,” Mr. McCarthy said on Fox News on Tuesday evening, adding, “We don’t want to just have this runaway spending.”Speaker Kevin McCarthy signaled this week that he and his fellow Republicans will seek to use the debt limit standoff to enact spending cuts and reduce the national debt.Kenny Holston/The New York TimesMr. Biden has repeatedly said he will refuse to negotiate over the debt limit, and that Congress must vote to raise it with no strings attached.That has introduced the very real likelihood of a debt limit breach. “Fiscal deadlines will pose a greater risk this year than they have for a decade,” Goldman Sachs economists wrote in a note.Here’s a look at what the debt limit is and why it matters.What is the debt limit?The debt limit is a cap on the total amount of money that the federal government is authorized to borrow to fulfill its financial obligations. Because the United States runs budget deficits — meaning it spends more than it brings in through taxes and other revenue — it must borrow huge sums of money to pay its bills. That includes funding for social safety net programs, interest on the national debt and salaries for troops. While the debt ceiling debate often elicits calls by lawmakers to cut back on government spending, lifting the debt limit does not authorize any new spending and in fact simply allows the United States to finance existing obligations. In other words, it allows the government to pay the bills it has already incurred.Understand the U.S. Debt CeilingCard 1 of 4What is the debt ceiling? More