Evelyn Reynolds

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    How Inflation and High Interest Rates Have Changed the Economy

    As inflation cools and the Federal Reserve cuts rates, an era of economic upheaval is coming to a close, but not without lingering marks.People with jobs have started showing up at homeless shelters in Atlanta. Families who can’t cover their grocery bills are pushing up demand at a Boston food bank. A dearth of available houses is plaguing Sacramento. Yet reports of recent raises abound, and a partly retired homeowner near Pittsburgh is happy about his savings.America’s bout of painfully high inflation — and the period of high interest rates meant to cure it — is finally drawing toward a close. Price increases are nearly back to a normal pace, so much so that the Federal Reserve voted on Wednesday to lower borrowing costs for the first time in more than four years.But even as the nation’s tumultuous pandemic economic era begins to approach its end, the period is destined to leave lingering marks.There are many things to celebrate about the current moment. Inflation has so far cooled without a major economic pullback, a development few economists thought possible. Consumers are still spending at a solid clip. Years of strong job growth and solid wage gains have lifted up many workers, and a run-up in stock prices is padding retirement accounts.The Greater Boston Food Bank has delivered more than 100 million pounds of food every year since 2020, up from less than 70 million in 2019.Sophie Park for The New York TimesYet the past several years have also brought serious and lasting challenges. Prices remain sharply elevated compared with their prepandemic levels, and many families are still struggling to adjust. Some have seen their wages fall behind costs. For others, pay gains have kept pace with inflation, but the memory of cheaper egg and rent prices endures, leaving an ongoing sense of sticker shock. And across the country, housing affordability has tanked, a trend that could take time and even policy changes to reverse.Grocery Inflation Jumped, Then CooledGrocery inflation was even more rapid than overall price increases in 2022, though it has recently calmed notably.

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

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    Fed Cuts Interest Rates for First Time in Four Years

    Fed officials kicked off rate cuts with a half-point reduction, confident that inflation is cooling and eager to keep the job market strong.The Federal Reserve cut interest rates on Wednesday by half a percentage point, an unusually large move and a clear signal that central bankers think they are winning their war against inflation and are turning their attention to protecting the job market.“Our patient approach over the past year has paid dividends,” Jerome H. Powell, the Fed chair, said during his news conference. But now “the upside risks to inflation have diminished, and the downside risks to unemployment have increased.”The Fed’s decision lowers rates to about 4.9 percent, down from a more than two-decade high.The pivot comes in response to months of fading inflation, and it is meant to prevent the economy from slowing so much that the job market begins to weaken more painfully. Officials have been keeping a careful eye on a recent uptick in the unemployment rate, and by starting off with a big cut, the Fed is in effect taking out insurance against a bigger employment slowdown.Reinforcing that cautious message, the decisive reduction came alongside economic projections that suggested a more rapid pace of rate cuts than officials had envisioned just a few months ago. Officials now expect to make another half-point reduction before the end of the year.“We’re going to take it meeting by meeting,” Mr. Powell said. “We made a good, strong start to this, and that is frankly a sign of our confidence, confidence that inflation is coming down.”Jerome H. Powell, the Fed chair, said that the central bank would take future interest rate cuts “meeting by meeting” after lowering rates by a half percentage point, an unusually large move.Tom Brenner/ReutersWhere Fed Officials Expect Rates Will Be More

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    Boeing to Begin Temporary Layoffs Due to Strike

    The aerospace giant said it would temporarily lay off tens of thousands of employees to stem losses from a walkout by the machinists’ union.Boeing will start furloughing tens of thousands of employees in the coming days as it seeks to blunt the effects of a strike involving its largest union, the company said on Wednesday.The strike, which began on Friday, has drastically slowed production of commercial airplanes because most of the union’s more than 33,000 members work in manufacturing in the Seattle area. Boeing announced a series of cost-cutting measures this week to stem losses that could reach into the billions of dollars in a prolonged strike.“With production paused across many key programs in the Pacific Northwest, our business faces substantial challenges and it is important that we take difficult steps to preserve cash and ensure that Boeing is able to successfully recover,” the company’s chief executive, Kelly Ortberg, said in a message to employees on Wednesday.Mr. Ortberg joined Boeing last month, part of a management shuffle after a panel blew off one of the company’s planes in flight this year, leading to a crisis for the company. In response, federal regulators limited Boeing’s plane production and the company initiated a series of changes aimed at improving quality and safety.Managers planned to meet with workers on Wednesday to review how the temporary furloughs, which Mr. Ortberg said would affect “a large number of U.S.-based executives, managers and employees,” would play out. He also said that he and other company leaders would take a pay cut for the rest of the strike, though he did not say by how much.Employees will continue to receive benefits. And, for some, the temporary furloughs will be cycled in, with workers taking one week off every four weeks, on a rolling basis. It was not immediately clear which workers would be affected by the furloughs. Engineers, who are represented by a chapter of the Society of Professional Engineering Employees in Aerospace, are still required to work during the strike.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    What Trump Has Said About Interest Rates, and Why It Matters

    Federal Reserve officials do not answer to the White House and they insist that they do not take politics into account when they are setting interest rates. But because borrowing costs have a big effect on the economy and the nation’s economic vibe, the central bank’s decision on Wednesday is sure to draw political attention.Former President Donald J. Trump regularly promises to bring interest rates down if he is elected president again — even though the president has little to no direct impact on borrowing costs. While in office he publicly railed against the Fed for taking too long to cut rates, to little avail.And Mr. Trump has remained focused on the Fed as it approaches its first rate cut in more than four years.“You’ll see, they’ll do the interest rate cut and all of the political stuff tomorrow,” Mr. Trump said during a town hall in Michigan this week. “Will he do a half a point? Will he do a quarter of a point? But the reason is that the economy is not good. Otherwise you wouldn’t be able to do it.”In fact, Mr. Trump has suggested repeatedly that it would be political of the Fed to cut borrowing costs in the weeks leading up to the election. Rate cuts are “something that they know they shouldn’t be doing,” he told Bloomberg Businessweek earlier this year. At another point he told Fox News that lower rates would “help the Democrats.” He has since suggested that presidents should “have a say” on interest rates, though he later walked the comment back.Vice President Kamala Harris, the Democratic nominee, has largely avoided talking about the Fed. While President Biden steers clear of saying what the Fed should do, he has at times tiptoed close to doing so, including earlier this year when he said he “bet” that interest rates were going to come down.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Cheaper Mortgages and Car Loans: Lower Rates Are on the Horizon

    The costs of 30-year mortgages and new car loans have been inching down in recent months, welcome news for borrowers who have endured years of high prices and high interest rates. These borrowing costs are expected to fall further: The Federal Reserve is poised to cut its benchmark interest rate on Wednesday, and officials are […] More

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    A Fed Rate Cut Would Cap a Winning Streak for Biden and Harris on Prices

    Improved data on borrowing costs and price growth has buoyed consumers, but it might be coming too late to significantly affect the presidential raceAfter more than a year of waiting, hoping and assuring Americans that the economy could pull off a so-called “soft landing,” President Biden and Vice President Kamala Harris appear to be on the brink of seeing that happen.Inflation has cooled. Economic growth remains strong, though job gains are slowing. Mortgage costs are falling and the Federal Reserve is poised to begin cutting interest rates on Wednesday.And yet, it is unclear whether those developments will significantly alter voters’ predominantly negative perceptions of the economy ahead of the presidential election.Recent weeks have brought a run of good data on consumer prices and interest rates for the administration. The price of gasoline has fallen below $3 a gallon in much of the South and Midwest and is nearing a three-year low nationally. Spiking grocery prices have slowed to a crawl. Mortgage rates are down more than a percentage point from their recent peak. The Census Bureau reported last week that the typical household income rose faster than prices last year for the first time since the pandemic. The overall inflation rate has returned to near historically normal levels, and the Fed is poised to begin cutting interest rates from a two-decade high.The Biden administration, which has taken heat from Republicans and many economists for fueling inflation with its economic policies, has begun to celebrate those developments in bold terms. Officials are claiming vindication for their multi-trillion-dollar efforts to boost households and businesses in their recovery from the pandemic recession.Mr. Biden’s Council of Economic Advisers published a blog post on Tuesday highlighting economic and job growth under Mr. Biden that has surpassed projections. Lael Brainard, who heads Mr. Biden’s National Economic Council, told the Council on Foreign Relations in New York on Monday that the American economy has now reached a “turning point.”We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Ray Dalio names the top five forces shaping the global economy

    U.S. billionaire Ray Dalio named the top five forces at the front and center of the world’s economy. 
    The founder of Bridgewater Associates named key factors which he deemed are interrelated, and often cyclical.

    Ray Dalio, founder of Bridgewater Associates, speaks onstage during The Wall Street Journal’s 2024 The Future Of Everything Festival at Spring Studios on May 22, 2024 in New York City
    Dia Dipasupil | Getty Images Entertainment | Getty Images

    SINGAPORE — U.S. billionaire Ray Dalio named the top five forces at the front and center of the world’s economy. 
    Speaking at the Milken Institute’s Asia Summit in Singapore, the founder of Bridgewater Associates said the five factors are interrelated and often cyclical. Dalio made his remarks Wednesday ahead of the U.S. Federal Reserve’s interest rate decision.

    1. Debt, money and the economic cycle

    With uncertainty still circling around what the Fed will do at its meeting this week, Dalio raised concerns about how the country’s debt will be managed.
    “We’re going to have a Fed interest rate change, and [what will] that whole dynamic do? What happens to all the debt? How will that be dealt with?” he mused. 

    The U.S. central bank has kept benchmark rates at their highest level in 23 years, leading the government to allocate $1.049 trillion for debt service — an increase of 30% compared with a year ago. This is part of an anticipated total of $1.158 trillion in payments for the entire year.
    “What is the value of it and as one man’s debts or another man’s assets? How is it as a storehold of wealth? These are important questions that are pressing questions,” he threw the question out to attendees.

    2. Internal order and disorder

    “The second is the issue of internal order and disorder,” Dalio said, referring to U.S. politics ahead of the election.

    “There are irreconcilable differences between the right and the left, prompted by large wealth and value gaps… and they call into question even the orderly transition of power,” he added.
    For the first time in the 2024 election cycle, Vice President Kamala Harris is now considered more likely to win than former President Donald Trump, a CNBC Fed Survey released Tuesday showed.
    Last week, the candidates debated issues from abortion rights to tariffs and other policy proposals.
    Still, no matter who occupies the White House, the president’s policy agenda has limited impact on the overall health of the U.S. economy.

    3. Great power conflicts

    Dalio cited geopolitics as his third concern: namely, the relationship between the U.S. and China.
    The U.S.-China relationship has been defined by a range of ongoing tensions, such as territorial issues in the South China Sea, Taiwan’s political status and economic tariffs.
    “I think probably, there’s a fear of war that will stand in the way — mutually assured destruction. But it’s disorder,” he emphasized later, without naming a specific ignition point.

    4. ‘Acts of nature’

    Dalio then said “acts of nature” have historically posed a bigger threat to humanity and society than war.
    “Acts of nature, droughts, floods and pandemics have killed more people and been responsible for more domestic orders and international orders changing,” Dalio noted.
    And the cost of climate change is about to increase, he emphasized. According to the World Economic Forum, the climate crisis results in a 12% loss in global GDP for each 1°C increase in temperature.

    5. Technology

    Technology is going to “be fantastic” if one is able to adopt and invest in it appropriately, the billionaire said.
    “The potential productivity benefits of that are enormous,” he said, elaborating that technology produces unicorn companies, and when it does — a sliver of the population fares better.
    “Whoever wins the technology war is going to win the military war,” he further said.
    As he assessed the five factors on a whole, Dalio concluded that the “surprises are more on the downside than the upside,” he said. More