A key measure of U.S. economic output grew more slowly in the first half of the year than previously believed, government data released Thursday showed.Conflicting SignalsRevisions brought two measures of output closer together, but it still isn’t clear whether the economy is shrinking or growing. More
Initial filings for unemployment claims fell last week to their lowest level in five months last week.
The drop to 193,000 was below the estimate of 215,000.
A separate report showed inflation running hotter than previously reported in the second quarter.
A person arranges groceries in El Progreso Market in the Mount Pleasant neighborhood of Washington, D.C., August 19, 2022.
Sarah Silbiger | Reuters
Initial filings for unemployment claims fell last week to their lowest level in five months, a sign that the labor market is strengthening even as the Federal Reserve is trying to slow things down.
Jobless claims for the week ended Sept. 24 totaled 193,000, a decrease of 16,000 from the previous week’s downwardly revised total and below the 215,000 Dow Jones estimate, according to a Labor Department report Thursday.
The drop in claims was the lowest level since April 23 and the first time claims fell below 200,000 since early May.
Continuing claims, which run a week behind, fell 29,000 to 1.347 million.
The strong labor numbers come amid Fed efforts to cool the economy and bring down inflation, which is running near its highest levels since the early 1980s. Central bank officials specifically have pointed to the tight labor market and its upward pressure on salaries as a target of the policy tightening.
Despite the efforts, there was more bad news Thursday for the Fed on the inflation front.
The personal consumption expenditures price index, a favorite inflation gauge for the Fed, showed a 7.3% year-over-year price gain in the second quarter, the Commerce Department reported in its final GDP estimate for the period. That was above the 7.1% reading in the prior two Q2 estimates and just off the 7.5% gain in the first quarter.
Excluding food and energy, core PCE inflation was 4.7%, 0.3 percentage point higher than the previous two estimates but below the 5.6% jump in Q1.
The Fed has raised interest rates five times in 2022 for a total of 3 percentage points, and officials have stressed the importance of continuing to hike until inflation comes down closer to the central bank’s 2% target.
“We have to do what we must do to get back to price stability, because we can’t have a healthy economy, we can’t have good labor markets over time, unless we get back to price stability,” Cleveland Fed President Loretta Mester told CNBC’s “Squawk Box” in an interview Thursday morning.
However, the Cleveland Fed’s own Inflation Nowcasting gauge shows little improvement on the inflation front in September even with a sharp decline in gas prices. The gauge is indicating an 8.2% increase in the headline consumer price index and a 6.6% increase in core prices, compared to respective readings of 8.3% and 6.3% in August.
The BEA’s final estimate for Q2 GDP was a decline of 0.6%, unchanged from the previous two estimates. That was the second straight quarter of negative GDP, meeting a commonly accepted definition of a recession.
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The International Monetary Fund is just one of the many voices that have criticized a plan to cut rates for high earners.WASHINGTON — A stunning rebuke from the International Monetary Fund this week underscored one of the biggest risks of the new British government’s plan to slash taxes on high earners: It could exacerbate rapid inflation and destabilize markets at a precarious economic moment.The alarm from economists, central bankers, investors and top U.S. officials centered on the likelihood that the tax cuts could stoke consumer demand by giving people more money to spend, pushing crushingly high prices even higher. That would put the British government in direct conflict with aggressive efforts of the central banks around the globe — and in the United Kingdom — that are raising interest rates in a bid to bring inflation under control.Many economists say British officials are also ignoring the lessons of the most recent bout of tax cuts — those engineered in the United States by former President Donald J. Trump. Empirical research on the early results of those cuts suggests that they mostly helped the economy by temporarily increasing consumer demand, an outcome that could prove particularly damaging in the high-inflation environment that Britain and much of the world are experiencing.Liz Truss, Britain’s new prime minister, has staked her fledgling government on a oversize, once-in-a-generation package of tax cuts and deregulation meant to energize the economy. It includes a cut in rates for the country’s lowest income tax bracket — and, in what was a surprise move, a five-percentage-point cut in the country’s top income tax rate, which applies to those earning more than 150,000 pounds, or about $164,000, a year.The International Monetary Fund responded to those proposals with the sort of pointed criticism it typically reserves for an emerging-market economy, not for the economy of one of the wealthiest nations in the world.“Given elevated inflation pressures in many countries, including the U.K., we do not recommend large and untargeted fiscal packages at this juncture, as it is important that fiscal policy does not work at cross purposes to monetary policy,” the I.M.F. said in a news release on Tuesday.The statement noted that the tax cuts would most likely increase economic inequality, and it urged the British government to “provide support that is more targeted and re-evaluate the tax measures, especially those that benefit high income earners.”More on Politics in BritainPrime Minister Liz Truss was chosen by a divided British Conservative Party to lead a country facing the gravest economic crisis in a generation.A Domestic Push: After a period of mourning for the death of Queen Elizabeth II, the new government led by Ms. Truss began to work in earnest, announcing several initiatives to address Britain’s economic and social problems.A Turn Toward Thatcherism: Ms. Truss bet on a heavy dose of tax cuts, deregulation and free-market economics to reignite growth. The negative reaction from financial markets underscored the extent of the gamble.Seizing the Moment: Accusing Ms. Truss of losing control of Britain’s economy, the leader of the opposition Labour Party, Keir Starmer, staked his claim as the guardian of sound fiscal policy.Energy Policies: The British government said it would freeze electric and gas bills for households and cut energy costs for companies in an effort to mitigate the effects of Russia’s restriction of gas supplies to Europe.Investors have also recoiled from the plan, sending British bond yields soaring — forcing the Bank of England to intervene to stabilize them — and causing the value of the pound to plummet.Ms. Truss is not the first conservative politician in recent years to come into office promising to slash taxes. Mr. Trump also campaigned on — and ultimately delivered — “massive tax cuts” in 2017, a package that only Republican lawmakers backed. Decades ago, President Ronald Reagan and Prime Minister Margaret Thatcher of Britain both pursued tax-cutting agendas that cemented their legacies in office.Ms. Truss has been cheered on by conservative champions of supply-side economics in the United States, including many of the chief backers of Mr. Trump’s tax cuts. Stephen Moore, who served as an outside economic adviser to the former president, praised Ms. Truss for her willingness “to challenge the reigning orthodoxy by sharply cutting taxes to boost growth,” calling the package “a gutsy and sound policy decision.”“By far the most important change is the reduction in the top income tax rate from 45 percent to 40 percent,” Mr. Moore wrote. “This will bring jobs, capital and businesses back to the U.K.”A host of critics, though, have lined up to denounce the tax package, warning it will provoke economic war with the Bank of England and risk a damaging combination of economic contraction and soaring prices, which could in turn hurt the global recovery.The impact of previous tax cuts, including those signed into law by Mr. Trump in 2017, provides fodder for those critiques.Much as Ms. Truss has proposed to do, Mr. Trump reduced tax rates for income earners across the spectrum, including those in the highest bracket. He also cut a variety of business tax rates — a contrast with the British plan, which cancels a planned increase in corporate taxes. Mr. Trump said his full package of cuts would jump-start economic activity by encouraging businesses to invest, hire and raise wages.Yet initial evidence, which includes studies from I.M.F. economists, suggests Mr. Trump’s cuts did not deliver the steep gains in investment and productivity that conservatives had promised. If such gains came to pass in Britain, they could help counter inflation there.Instead, the cuts increased consumer spending, an outcome that helped temporarily expand growth in the United States, the I.M.F. found, but which could be dangerous in a high-inflation environment.“The record through 2019 from the Trump tax cuts is not encouraging for the U.K.,” said William G. Gale, a co-director of the Urban-Brookings Tax Policy Center in Washington.Last year, Mr. Gale and a colleague, Claire Haldeman, published a study on the effects of Mr. Trump’s tax cuts up until the start of the pandemic recession. They looked for supply-side effects — whether the cuts increased investment incentives and other means of stimulating sustained economic growth — and found little evidence of such results.Instead, they found that the cuts did little to promote job growth or investment outside the oil and gas sector, which is highly correlated with the global price of fossil fuels. And they found that the cuts significantly reduced federal tax revenues, contrary to Republicans’ promises that the cuts would pay for themselves by inciting additional economic growth.Broader research suggests that Ms. Truss’s cuts for top earners are unlikely to drive significant gains in economic growth. In a recent study of decades of tax changes, Owen Zidar, an economist at Princeton, found that cuts for the top 10 percent of earners did little to prompt job gains.The hope that cuts in Britain’s top rate will supercharge the economy, Mr. Zidar said in an interview, “is completely at odds with the empirical record of the United States since 1950.”Mr. Gale, Mr. Zidar and other economists joined the I.M.F. in noting a particular challenge for the British tax cuts: the likelihood that they will be offset by interest rate increases from the Bank of England, as it seeks to bring down price growth.Other rounds of tax cuts, like those under Mr. Reagan, helped to increase growth by working in tandem with interest rate cuts taken by the Federal Reserve, according to economists who specialize in tax policy. In Britain’s case, the opposite appears to be true: The Bank of England has already been raising rates, and it appears ready to push them even higher to offset the effects of Ms. Truss’s policies. Those rate increases would negate a major goal of the tax cuts — to make it cheaper for companies to invest — by raising the costs of borrowing across the economy.Economists say faster rate increases also heighten the risk of recession in Britain.Supporters of the British tax cuts are already accusing the central bank of crippling them — much as Mr. Trump accused the Fed of undermining his tax cuts when it raised interest rates repeatedly after they were enacted.“It hasn’t helped that the Bank of England has launched a public campaign to sabotage the Truss agenda,” Mr. Moore wrote this week, echoing comments he made about the Fed in 2019.The actions of the British government could reverberate far beyond that country’s borders given the flows of international trade and the potential for a far-flung financial crisis. In recent days, President Biden has grown more concerned with the situation in Britain. On Wednesday, he met with members of his economic team to discuss developments in global financial markets, instructing them to brief him regularly on the situation.“We’re watching this very closely,” Jared Bernstein, a member of the White House’s Council of Economic Advisers, said on Wednesday at the Peterson Institute for International Economics. “The president’s being kept up on all the developments.”When asked about the cuts this week, the White House press secretary, Karine Jean-Pierre, said the administration would leave British policy to Ms. Truss’s government. But other administration officials have criticized the plan.Speaking at an event at the Brookings Institution on Wednesday, Gina Raimondo, the secretary of commerce, said Britain’s combination of cutting taxes and increasing spending would neither help the country fight inflation in the short term nor send it in the direction of long-term growth.“Investors, businesspeople want to see world leaders taking inflation very seriously, and it’s hard to see that out of this new government,” she said, adding, “We’re pursuing a different strategy.”Ana Swanson More
Britain’s pound coin — rimmed in nickel and brass with an embossed image of Queen Elizabeth II at the center — could always be counted on to be significantly more valuable than the dollar.Such boasting rights effectively came to an end this week when the value of the pound sank to its lowest recorded level: £1 = $1.03 after falling more than 20 percent this year.The nearly one-to-one parity between the currencies sounded the close of a chapter in Britain’s history nearly as much as the metronomic footfalls of the procession that carried the queen’s funeral bier up the pavement to Windsor Castle.“The queen’s death for many people brought to an end a long era of which the soft power in the United Kingdom” was paramount, said Ian Goldin, professor of globalization and development at the University of Oxford. “The pound’s demise to its lowest level is sort of indicative of this broader decline in multiple dimensions.”The immediate cause of the pound’s alarming fall on Monday was the announcement of a spending and tax plan by Britain’s new Conservative government, which promised steep tax cuts that primarily benefited the wealthiest individuals along with expensive measures to help blunt the painful rise in energy prices on consumers and businesses.The sense of crisis ramped up Wednesday when the Bank of England intervened, in a rare move, and warned of “material risk to U.K. financial stability” from the government’s plan. The central bank said it would start buying British government bonds “on whatever scale is necessary” to stem a sell-off in British debt.The Bank of England’s emergency action seemed at odds with its efforts that began months ago to try to slow the nearly 10 percent annual inflation rate, which has lifted the price of essentials like petrol and food to painful levels.Rising Inflation in BritainInflation Slows Slightly: Consumer prices are still rising at about the fastest pace in 40 years, despite a small drop to 9.9 percent in August.Interest Rates: On Sept. 22, the Bank of England raised its key rate by another half a percentage point, to 2.25 percent, as it tries to keep high inflation from becoming embedded in the nation’s economy.Energy Bills to Soar: Gas and electric charges for most British households are set to rise 80 percent this fall, further squeezing consumers and stoking inflation.Investor Worries: The financial markets have been grumbling with unease about Britain’s economic outlook. The government plan to freeze energy bills and cut taxes is not easing concerns.The swooning pound this week has carried an unmistakable political message, amounting to a no-confidence vote by the world’s financial community in the economic strategy proposed by Prime Minister Liz Truss and her chancellor of the Exchequer, Kwasi Kwarteng.To Mr. Goldin, the pound’s journey indicates a decline in economic and political influence that accelerated when Britain voted to leave the European Union in 2016. In many respects, Britain already has the worst performing economy, aside from Russia, of the 38-member Organization for Economic Cooperation and Development.“It’s just a question of time before it falls out of the top 10 economies in the world,” Mr. Goldin said. Britain ranks sixth, having been surpassed by India.Eswar Prasad, an economist at Cornell University, said this latest plunge had delivered a bracing blow to Britain’s standing. A series of “self-inflicted wounds,” including Brexit and the government’s latest spending plan, have accelerated the pound’s slide and further endangered London’s status as a global financial center.Dozens of currencies, including the euro, the Japanese yen and the Chinese renminbi, have slumped in recent weeks. Rising interest rates and a relatively bright economic outlook in the United States combined with turmoil in the global economy have made investments in dollars particularly appealing.But the revival by the Truss government of an extreme version of Thatcher and Reagan-era “trickle-down” economic policies elicited a brutal response.“The problem isn’t that the U.K. budget was inflationary,” wrote Dario Perkins, a managing director at TS Lombard, a research firm, on Twitter. “It’s that it was moronic.”To some, the pound’s journey indicates a decline in Britain’s economic and political influence.Suzie Howell for The New York TimesDuring the more than 1,000 years in which the pound sterling has reigned as Britain’s national currency, it has suffered its share of ups and downs. Its value in the modern era could never match the value of an actual pound of silver, which in the 10th century could buy 15 cows.Over the centuries, British leaders have often gone to extraordinary lengths to protect the pound’s value, viewing its strength as a sign of the country’s economic power and influence. King Henry I issued a decree in 1125 ordering that those who produced substandard currency “lose their right hand and be castrated.”In the 1960s, the Labour government under Harold Wilson so resisted devaluing the pound — then set at a fixed rate of $2.80, high enough to be holding back the British economy — that he ordered cabinet papers discussing the idea to be burned. In 1967, the government finally cut its value by 14 percent to $2.40.Other economic crises thrashed the pound. In the 1970s, when oil prices skyrocketed and Britain’s inflation rate topped 25 percent, the government was compelled to ask the International Monetary Fund for a $3.9 billion loan. In the mid-1980s, when high U.S. interest rates and a Reagan administration spending spree jacked up the dollar’s value, the pound fell to a then record low.The pound’s dominance has been waning since the end of World War II. Today, the global economy is experiencing a particularly tumultuous time as it recovers from the aftermath of the coronavirus pandemic, supply chain breakdowns, Russia’s invasion of Ukraine, an energy shortage and soaring inflation.As Richard Portes, an economics professor at London Business School, said, currency exchanges have enormous swings over time. The euro was worth 82 cents in its early days, he recalled, and people referred to it as a “toilet paper” currency. But by 2008, its value had doubled to $1.60.What might cause the pound to revive is not clear.The Truss government’s economic program has forcefully accelerated the pound’s slide — the latest in a series of what many economists consider egregious economic missteps that peaked with Brexit.Much depends on the Truss government.“The plunge in the pound is the result of policy choices, not some historical inevitability” said Ian Shepherdson, chief U.S. economist at Pantheon Macroeconomics. “Whether this is a new, grim era or just an unfortunate interlude depends on whether they reverse course or are kicked out at the next election.”As it happens, the Bank of England is preparing to issue new pound bank notes and coins featuring King Charles III, at the very moment that the pound has dropped to record lows.“The death of the queen and the fall of the pound do seem jointly to signify decisively the end of an era,” Mr. Prasad of Cornell said. “These two events could be considered markers in a long historical procession in the British economy and the pound sterling becoming far less important than they once were.” More
Tens of thousands gathered in the Czech capital for the second such protest in a month, spurred by an energy crisis and rising prices that are affecting countries across Europe.PRAGUE — Thousands of protesters flocked into Prague’s Wenceslas Square on Wednesday, demanding the resignation of the government of the Czech Republic as an energy crisis stoked popular unrest that will be closely watched in other European capitals.Despite a rain-soaked start, demonstrators hoisting Czech flags and chanting, “Shame! Shame!” turned out for the second time in a month to rally under the slogan “Czech Republic First.” They were a hodgepodge of figures with a broad range of causes, including Kremlin sympathizers and those who said they are fighting a “global elite.”But many at the protest were there to express their concern about soaring prices and energy costs as winter loomed, with the Czech Republic one of the first countries in Europe to face such large protests over the issues.Many protesters linked their economic woes to the European Union’s tough sanctions on Russia after its invasion of Ukraine — repeating a line propagated by the Kremlin, which is advancing the narrative that E.U. sanctions against Russia are to blame for inflation and other financial troubles on the continent.E.U. leaders counter that their sanctions against Russia are not causing energy prices to surge, but rather Russia’s weaponization of its gas supplies. Russia’s decision to cut the gas supply to E.U. countries in response to their support of Ukraine has sent already high electricity prices — caused by pandemic-era distortions — skyrocketing. And while individual E.U. countries might take some measures tailored to each’s particular energy mix at home, the most effective intervention to stop the spiraling electricity costs will come at the collective level, analysts say. E.U. energy ministers are meeting in Brussels on Friday to assess, and most likely finalize, a set of new policies that will aim to support households and businesses, and tax profits from energy firms. Many of the protesters in Prague linked their economic woes to the European Union’s tough sanctions on Russia’s invasion of Ukraine.Martin Divisek/EPA, via ShutterstockBut the E.U. efforts are viewed skeptically among protesters in Prague, the Czech capital, where some raised E.U. flags crossed with red Xs, while others raised the flags of the Czech Communist Party and far-right factions. The odd mix, spanning the extremes of the political spectrum, was spearheaded by Ladislav Vrabel, who brands himself as a populist leader seeking to force the resignation of the government and push for a deal with Russia for cheap gas.“It is the duty of the Czech government to ensure the security of its citizens and their economic stability,” he said before the protests. “Our government is bringing us to the edge of war and economic collapse.”The landlocked Czech Republic was particularly reliant on Russian gas and oil brought in through neighboring countries, even receiving E.U. exemptions from sanctions against Russia.Mr. Vrabel’s first protest, on Sept. 3, took the government by surprise when more than 70,000 people marched on Wenceslas Square, the iconic gathering point of the Czech capital where hundreds of thousands gathered in 1989 to oust the communist government. It appeared to be a surprise even to Mr. Vrabel himself — he initially registered the rally for 500 people, according to City Council records.“It has been a wake-up call, and I hope it has been a wake-up call for others across Europe,” said Tomas Pojar, an adviser to the Czech prime minister, Petr Fiala.Smaller protests have emerged in Germany, with thousands gathering in recent days in the eastern state of Mecklenburg-Vorpommern to demand that Berlin open the recently completed gas pipeline from Russia, Nord Stream 2. The pipeline was ruptured this week in what European officials said appeared to be a deliberate attack.Similar to the protests against coronavirus pandemic restrictions that hit Europe in 2021, the demonstrations in the Czech Republic and Germany are drawing an unlikely pairing of right- and left-wing groups, as well as anti-vaccine and fringe conspiracy figures. And similar to those pandemic protests, analysts worry that radical groups will try to use the rallies to make inroads into the broader population.After the first Czech protest this month, Prime Minister Petr Fiala’s government offered a price cap on electricity prices for citizens.Virginia Mayo/Associated PressMatthias Quent, a German expert on far-right extremism, said that some disgruntled citizens might believe the far-right groups’ protests were their only outlet.“They may think they have no other place to express their displeasure,” he said.The far right is having a resurgence across Europe. This week, the Brothers of Italy party won the largest share of votes in Italian elections. And in Sweden, a group founded by neo-Nazis and skinheads looks set to become the largest party in the next government.In Germany, the far-right Alternative for Germany, known by its German acronym AfD, has risen to about 15 percent in public polls and is planning protests in Berlin next month.“People are not even using heating yet — that is still to come,” said Mr. Quent. “And, nevertheless, the AfD already had a visible upswing. This is, indeed, the scenario I have feared.”In the Prague protest, many who joined bristled at the idea of being called fringe or far right.“It’s not only energy prices rising — grocery prices, too. I am raising my granddaughter, and I am worried,” said Miroslav Kusmirek, who came from a town 30 miles outside the capital to protest on a rainy afternoon. “I see companies now struggling and I worry; if the company that employs me collapses, so will I.”As he spoke, a speaker onstage from Germany’s AfD, Christine Anderson, was shouting to loud cheers, “You no longer live in a democracy!”For energy experts, the populist surge adds yet another knot in the tangle of problems Europe is grappling with. On top of Russia’s cutting gas, France’s nuclear plants have been at half capacity because of maintenance issues, and a severe drought has hampered Germany’s ability to import coal over the summer.Supporters of Giorgia Meloni’s Brother of Italy party celebrating the victory of the right-wing coalition in Rome on Monday.Gianni Cipriano for The New York TimesSimone Tagliapietra, an energy expert at Bruegel, a European research group, said that, in a worst-case scenario, some countries could find themselves facing a “vicious cycle” of popular discontent that pushes for populist responses that could stoke rivalries among European states. In that scenario, he said, countries could stop trading electricity.“If countries are to close down their energy borders, what you have is flaring political tensions between European countries,” he said. “That becomes very, very risky because we can really compromise European unity. Countries could start to fight about all other political issues.”Although that is still far from the current reality, he said, a false report suggesting that France might stop sending electricity to Italy sparked outrage among Italians and illustrated the sensitivity of the situation. “That’s just a preview of what could happen,” he said.In the wake of the first Czech protest this month, Prime Minister Fiala’s government offered a price cap on electricity prices for its citizens, but the protests on Wednesday show that it has yet to ease economic anxieties.Czech electricity trading prices have more than doubled compared with last year’s, according to some analysts. About 10 percent to 15 percent of households have been hit badly, according to research by the STEM Institute for Empirical Research in Prague, which advises the government. The middle class is also starting to feel the pinch, it said, with its disposable income falling by 50 percent compared with last year’s.Claudia Trantina, 27, was one such protester on Wednesday, driving an hour from her home city, Plzen, to protest in Prague. “I can’t provide my daughter with the things I had as a kid,” she said. “It’s not like I can’t pay the bills, but I can’t do things like take her to the zoo or restaurants.”What has confused analysts is that anxieties are at a higher level than during the recession in 2008, when economic indicators were worse, said Nikola Horejs, the STEM research director.“The mood is tense, but this mood is much worse than the actual situation, which is something that confuses the government and it confuses economists,” he said.Many experts say that part of what causes discontent is European leaders’ failure to find the right messaging on the energy crisis.“We need a kind of wartime mobilization,” said Mr. Tagliapietra. “Not exactly like Churchill — but something of that sort. The leadership needs to tell people: Look, this is a war. An economic war has been launched against us by Russia.”In Prague, officials say they have been trying to send that message, but are wary of provoking anger or fear.“If the subject comes up day after day and it is scaremongered, it will not have a positive effect,” said Petr Tresnak, a deputy minister of industry and trade. “You need an informed public, but you don’t want to cause panic.”The protest in Prague on Wednesday was the second such demonstration in a month.Martin Divisek/EPA, via ShutterstockMatina Stevis-Gridneff More
The purchases are designed “to restore orderly market conditions,” the central bank said, after days of turmoil that followed the government’s plan for sweeping tax cuts and higher borrowing.The Bank of England said on Wednesday that it would temporarily buy British government bonds, a major intervention in financial markets after the new government’s fiscal plans sent borrowing costs soaring higher over the past few days.The news brought some relief to the bond market, but the British pound resumed its tumble, falling 1.7 percent against the dollar, to $1.05, back toward the record low reached on Monday.The British government’s plans to bolster economic growth by cutting taxes, especially for high earners, while spending heavily to protect households from rising energy costs has been resoundingly rejected by markets and economists, in part because of the large amount of borrowing it will require at a time of rising interest rates and high inflation. The International Monetary Fund unexpectedly made a statement about the British economy on Tuesday, urging the government to “re-evaluate” its plans.The sell-off in British assets since Friday, when the government’s plan was announced, has particularly affected bonds with long maturities, the Bank of England said. “Were dysfunction in this market to continue or worsen, there would be a material risk to U.K. financial stability,” it said in a statement. This would lead to a reduction of the flow of credit to businesses and households, it added.“The purpose of these purchases will be to restore orderly market conditions,” the central bank added in its statement, which had an immediate effect on markets. “The purchases will be carried out on whatever scale is necessary to effect this outcome.”Rising Inflation in BritainInflation Slows Slightly: Consumer prices are still rising at about the fastest pace in 40 years, despite a small drop to 9.9 percent in August.Interest Rates: On Sept. 22, the Bank of England raised its key rate by another half a percentage point, to 2.25 percent, as it tries to keep high inflation from becoming embedded in the nation’s economy.Energy Bills to Soar: Gas and electric charges for most British households are set to rise 80 percent this fall, further squeezing consumers and stoking inflation.Investor Worries: The financial markets have been grumbling with unease about Britain’s economic outlook. The government plan to freeze energy bills and cut taxes is not easing concerns.Bond auctions would take place from Wednesday until Oct. 14.The yield on 10-year British government bonds on Wednesday climbed as high as 4.58 percent — the highest since early 2008 — before the central bank’s statement. Thirty-year yields had exceeded 5 percent for the first time since 2002.After the announcement bond yields dropped sharply, with the 30-year yield falling by more than half a percentage point to about 4.35 percent.The central bank’s statement has echoes of a famous promise by Mario Draghi in 2012, when as head of the European Central Bank he vowed to do “whatever it takes” to save the euro, which had come under severe pressure in the markets.Wednesday’s intervention in Britain came after a central bank committee had warned of the risks to Britain’s financial stability from dysfunction in the government bond market.The British government’s sweeping fiscal plan, presented without an independent fiscal and economic assessment, has sent investors fleeing from British assets. The pound fell to a record low against the U.S. dollar on Monday, and traders suspected that the central bank would be forced to raise rates quickly, which pushed up short- and long-term borrowing costs.The speed of the rise in bond yields had disrupted Britain’s mortgage market, with some lenders pulling offers on new mortgages because they had become too difficult to price.“A decision by the government to scrap some of the tax cuts, or to cut spending sharply, would help to alleviate the stress in” currency and bond markets, Samuel Tombs, an economist at Pantheon Macroeconomics, wrote in a research note. “But its actions to date have eroded confidence among global investors, which cannot be easily restored. Accordingly, a painful recession driven by surging borrowing costs lies ahead.”The market turmoil and the central bank’s intervention reveal the extent to which the government’s plans are at odds with the bank’s monetary policy goals. The government is trying to quickly generate economic demand, while the bank is trying to cool it to lower inflation.On Tuesday, Huw Pill, the chief economist of the Bank of England, said the government’s fiscal plans would be met with a “significant” response by officials at the Bank of England, who are scheduled to meet again in early November.Just last Thursday, the central bank said it would initiate its plan to sell bonds back to the market as it tried to end the long era of easy money in its fight against inflation. It had insisted there would be a “high bar” for the bank to deviate from the plan, which would over the next year reduce its holdings of bonds by £80 billion through sales and redemptions, to £758 billion. On Wednesday, the bank said it was postponing the start of sales until the end of October. More
Self-driving eighteen-wheelers are now on highways in states like California and Texas. But there are still human “safety drivers” behind the wheel. What will it take to get them out?This article is part of our series on the Future of Transportation, which is exploring innovations and challenges that affect how we move about the world.In March, a self-driving eighteen-wheeler spent more than five straight days hauling goods between Dallas and Atlanta. Running around the clock, it traveled more than 6,300 miles, making four round trips and delivering eight loads of freight.The result of a partnership between Kodiak Robotics, a self-driving start-up, and U.S. Xpress, a traditional trucking company, this five-day drive demonstrated the enormous potential of autonomous trucks. A traditional truck, whose lone driver must stop and rest each day, would need more than 10 days to deliver the same freight.But the drive also showed that the technology is not yet ready to realize its potential. Each day, Kodiak rotated a new team of specialists into the cab of its truck, so that someone could take control of the vehicle if anything went wrong. These “safety drivers” grabbed the wheel multiple times.Tech start-ups like Kodiak have spent years building and testing self-driving trucks, and companies across the trucking industry are keen to reap the benefits. At a time when the global supply chain is struggling to deliver goods as efficiently as businesses and consumers now demand, autonomous trucks could alleviate bottlenecks and reduce costs.Now comes the most difficult stretch in this quest to automate freight delivery: getting these trucks on the road without anyone behind the wheel.Companies like Kodiak know the technology is a long way from the moment trucks can drive anywhere on their own. So they are looking for ways to deploy self-driving trucks solely on highways, whose long, uninterrupted stretches are easier to navigate than city streets teeming with stop-and-go traffic.“Highways are a more structured environment,” said Alex Rodrigues, chief executive of the self-driving-truck start-up Embark. “You know where every car is supposed to be going. They’re in lanes. They’re headed in the same direction.”Restricting these trucks to the highway also plays to their strengths. “The biggest problems for long-haul truckers are fatigue, distraction and boredom,” Mr. Rodrigues explained on a recent afternoon as one of his company’s trucks cruised down a highway in Northern California. “Robots don’t have a problem with any of that.”It’s a sound strategy, but even this will require years of additional development.Part of the challenge is technical. Though self-driving trucks can handle most of what happens on a highway — merging into traffic from an on-ramp, changing lanes, slowing for cars stopped on the shoulder — companies are still working to ensure they can respond to less common situations, like a sudden three-car pileup.As he continued down the highway, Mr. Rodrigues said his company has yet to perfect what he calls evasive maneuvers. “If there is an accident in the road right in front of the vehicle,” he explained, “it has to stop itself quickly.” For this and other reasons, most companies do not plan on removing safety drivers from their trucks until at least 2024. In many states, they will need explicit approval from regulators to do so.But deploying these trucks is also a logistical challenge — one that will require significant changes across the trucking industry.In shuttling goods between Dallas and Atlanta, Kodiak’s truck did not drive into either city. It drove to spots just off the highway where it could unload its cargo and refuel before making the return trip. Then traditional trucks picked up the cargo and drove “the last mile” or final leg of the delivery.In order to deploy autonomous trucks on a large scale, companies must first build a network of these “transfer hubs.” With an eye toward this future, Kodiak recently inked a partnership with Pilot, a company that operates traditional truck stops across the country. Today, these are places where truck drivers can shower and rest and grab a bite to eat. The hope is that they can also serve as transfer hubs for driverless trucks.“The industry can’t afford to build this kind of infrastructure from scratch,” said Kodiak’s chief executive, Don Burnette. “We have to find ways of working with the existing infrastructure.”They must also consider the impact on truck drivers: They aim to make long-haul drivers obsolete, but they will need more drivers for the short haul.Executives like Mr. Burnette and Mr. Rodrigues believe that drivers will happily move from one job to the other. The turnover rate among long-haul drivers is roughly 95 percent, meaning the average company replaces nearly its entire work force each year. It is a stressful, monotonous job that keeps people away from home for days on end. If they switch to city driving, they can work shorter hours and stay close to home.But a recent study from researchers at Carnegie Mellon University and the University of Michigan questions whether the transition will be as smooth as many expect. Truck drivers are typically paid by the mile. A shift to shorter trips, the study says, could slash the number of miles traveled and reduce wages.Certainly, some drivers fear they cannot make as much money driving solely in cities. Others are loath to give up their time on the highway.“There are many drivers like me,” said Cannon Bryan, a 28-year-old long-haul trucker from Texas. “I wasn’t born in the city. I wasn’t raised in the city. I hate city driving. I enjoy picking up a load in Dallas and driving to Grand Rapids, Mich.”Building and deploying self-driving trucks is far from easy. And it is enormously expensive — on the order of hundreds of millions of dollars a year. TuSimple, a self-driving truck company, has faced concerns that the technology is unsafe after federal regulators revealed that one of its trucks had been involved in an accident. Aurora, a self-driving technology company with a particularly impressive pedigree, is facing challenging market conditions and has floated the possibility of a sale to big names like Apple or Microsoft, according to a report from Bloomberg News.If these companies can indeed get drivers out of their vehicles, this raises new questions. How will driverless trucks handle roadside inspections? How will they set up the reflective triangles that warn other motorists when a truck has pulled to the shoulder? How will they deal with blown tires and repairs?Eventually, the industry will also embrace electric trucks powered by battery rather than fossil fuel, and this will raise still more questions for autonomous trucking. Where and how will the batteries get recharged? Won’t this prevent self-driving trucks from running 24 hours a day, as the industry has promised?“There are so many issues that in reality are far more complex than they might seem on paper,” said Steve Viscelli, an economic and political sociologist at the University of Pennsylvania who specializes in trucking. “Though the developers and their partners are putting a lot of effort into thinking this through, many of the questions about what needs to change cannot yet be answered. We are going to have to see what reality looks like.”Some solutions will be technical, others logistical. The start-up Embark plans to build a roaming work force of “guardians” who will locate trucks when things go wrong and call for repairs as needed.The good news for the labor market is that this technology will create jobs even as it removes them. And though experts say that more jobs will ultimately be lost than gained, this will not happen soon. Long-haul truckers will have years to prepare for a new life. Any rollout will be gradual.“Just when you think this technology is almost here,” said Tom Schmitt, the chief executive of Forward Air, a trucking company that just started a test with Kodiak’s self-driving trucks, “it is still five years away.” More
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