Evelyn Reynolds

Federal Reserve Chairman Jerome Powell speaks at a news conference following a Federal Open Market Committee meeting on May 4, 2022 in Washington, DC.
Win McNamee | Getty Images

The Fed’s main tool to battle inflation is interest rates

The Federal Reserve has a few main goals with respect to the economy: to promote maximum employment, keep prices stable and ensure moderate long-term interest rates.

Generally, the central bank aims to keep inflation around 2% annually, a number that lagged before the pandemic.

Its main tool to battle inflation is interest rates. It does that by setting the short-term borrowing rate for commercial banks, and then those banks pass rates along to consumers and businesses, said Yiming Ma, an assistant finance professor at Columbia University Business School.
That higher rate influences the interest you pay on everything from credit cards to mortgages to car loans, making borrowing more expensive. On the flip side, it also boosts rates on savings accounts.

How raising rates can slow inflation

But how do higher interest rates reel in inflation? They help by slowing down the economy, according to the experts.
“The Fed uses interest rates as either a gas pedal or a brake on the economy when needed,” said Greg McBride, chief financial analyst at Bankrate. “With inflation running high, they can raise interest rates and use that to pump the brakes on the economy in an effort to get inflation under control.”  
Basically, the Fed policymakers aim to make borrowing more expensive so that consumers and businesses hold off on making any investments, thereby cooling off demand and hopefully holding down prices.

The Fed uses interest rates as either a gas pedal or a brake on the economy when needed.

Greg McBride
chief financial analyst, Bankrate

There could also be a secondary effect of alleviating supply chain issues, one of the main reasons that prices are spiking right now, said McBride. Still, the central bank can’t directly influence or solve that particular problem, he said.
“As long as the supply chain is an issue, we’re likely to be contending with” outsize wage gains, which drive inflation, he said.

The Fed wants to avoid stalling the economy

The main worry for economists is that the Fed raises interest rates too quickly and dampens demand too much, stalling the economy.
This could lead to higher unemployment if businesses stop hiring or even lay off workers. If policymakers really overshoot on rate hikes, it could push the economy into a recession, halting and reversing the progress it has made so far.
Treating inflation in the economy is like treating cancer with chemotherapy, said Sinclair of the Indeed Hiring Lab.

“You have to kill parts of the economy to slow things down,” she said. “It’s not a pleasant treatment.”
Of course, it will take some time for any action to affect the economy and curb inflation. That’s why the Federal Open Market Committee carefully watches economic data to decide how much and how frequently to raise rates.
There is also some uncertainty due to the war in Ukraine, which has also increased prices on commodities such as gas. The Fed will have to watch how the war is hampering the U.S. economy and act accordingly.

It might get worse before it gets better

When the Fed does lift rates, it’s also likely that people will see the downsides of those increases before any improvement on inflation, said Sinclair.
Basically, that means consumers may have to pay more to borrow money and still see higher prices at the gas pump and grocery store. That scenario is particularly tough on low-income workers, who have seen wages rise but not keep pace with inflation.
Of course, ideally, the central bank would like to raise rates gradually so that the economy slows just enough to bring down prices without creating too much additional unemployment. The Fed wants to avoid a recession as well as the chance of stagflation — a situation in which inflation remains high while the economy slows.
“They have to carefully walk that tightrope,” said Sinclair.
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Jesse Powell, who leads the crypto exchange Kraken, has challenged the use of preferred pronouns, debated who can use racial slurs and called American women “brainwashed.”Jesse Powell, a founder and the chief executive of Kraken, one of the world’s largest cryptocurrency exchanges, recently asked his employees, “If you can identify as a sex, can you identify as a race or ethnicity?”He also questioned their use of preferred pronouns and led a discussion about “who can refer to another person as the N word.”And he told workers that questions about women’s intelligence and risk appetite compared with men’s were “not as settled as one might have initially thought.”In the process, Mr. Powell, a 41-year-old Bitcoin pioneer, ignited a culture war among his more than 3,000 workers, according to interviews with five Kraken employees, as well as internal documents, videos and chat logs reviewed by The New York Times. Some workers have openly challenged the chief executive for what they see as his “hurtful” comments. Others have accused him of fostering a hateful workplace and damaging their mental health. Dozens are considering quitting, said the employees, who did not want to speak publicly for fear of retaliation.Corporate culture wars have abounded during the coronavirus pandemic as remote work, inequity and diversity have become central issues at workplaces. At Meta, which owns Facebook, restive employees have agitated over racial justice. At Netflix, employees protested the company’s support for the comedian Dave Chappelle after he aired a special that was criticized as transphobic.But rarely has such angst been actively stoked by the top boss. And even in the male-dominated cryptocurrency industry, which is known for a libertarian philosophy that promotes freewheeling speech, Mr. Powell has taken that ethos to an extreme.His boundary pushing comes amid a deepening crypto downturn. On Tuesday, Coinbase, one of Kraken’s main competitors, said it was laying off 18 percent of its employees, following job cuts at Gemini and Crypto.com, two other crypto exchanges. Kraken — which is valued at $11 billion, according to PitchBook — is also grappling with the turbulence in the crypto market, as the price of Bitcoin has plunged to its lowest point since 2020.Mr. Powell’s culture crusade, which has largely played out on Kraken’s Slack channels, may be part of a wider effort to push out workers who don’t believe in the same values as the crypto industry is retrenching, the employees said.This month, Mr. Powell unveiled a 31-page culture document outlining Kraken’s “libertarian philosophical values” and commitment to “diversity of thought,” and told employees in a meeting that he did not believe they should choose their own pronouns. The document and a recording of the meeting were obtained by The Times.Those who disagreed could quit, Mr. Powell said, and opt into a program that would provide four months of pay if they affirmed that they would never work at Kraken again. Employees have until Monday to decide if they want to take part.On Monday, Christina Yee, a Kraken executive, gave those on the fence a nudge, writing in a Slack post that the “C.E.O., company, and culture are not going to change in a meaningful way.”“If someone strongly dislikes or hates working here or thinks those here are hateful or have poor character,” she said, “work somewhere that doesn’t disgust you.”After The Times contacted Kraken about its internal conversations, the company publicly posted an edited version of its culture document on Tuesday. In a statement, Alex Rapoport, a spokeswoman, said Kraken does not tolerate “inappropriate discussions.” She added that as the company more than doubled its work force in recent years, “we felt the time was right to reinforce our mission and our values.”Mr. Powell and Ms. Yee did not respond to requests for comment. In a Twitter thread on Wednesday in anticipation of this article, Mr. Powell said that “about 20 people” were not on board with Kraken’s culture and that even though teams should have more input, he was “way more studied on policy topics.”“People get triggered by everything and can’t conform to basic rules of honest debate,” he wrote. “Back to dictatorship.”The conflict at Kraken shows the difficulty of translating crypto’s political ideologies to a modern workplace, said Finn Brunton, a technology studies professor at the University of California, Davis, who wrote a book in 2019 about the history of digital currencies. Many early Bitcoin proponents championed freedom of ideas and disdained government intrusion; more recently, some have rejected identity politics and calls for political correctness.“A lot of the big whales and big representatives now — they’re trying to bury that history,” Mr. Brunton said. “The people who are left who really hold to that are feeling more embattled.”Mr. Powell, who attended California State University, Sacramento, started an online store in 2001 called Lewt, which sold virtual amulets and potions to gamers. A decade later, he embraced Bitcoin as an alternative to government-backed money.In 2011, Mr. Powell worked on Mt. Gox, one of the first crypto exchanges, helping the company navigate a security issue. (Mt. Gox collapsed in 2014.)Mr. Powell founded Kraken later in 2011 with Thanh Luu, who sits on the company’s board. The start-up operates a crypto exchange where investors can trade digital assets. Kraken had its headquarters in San Francisco but is now a largely remote operation. It has raised funds from investors like Hummingbird Ventures and Tribe Capital.As cryptocurrency prices skyrocketed in recent years, Kraken became the second-largest crypto exchange in the United States behind Coinbase, according to CoinMarketCap, an industry data tracker. Mr. Powell said last year that he was planning to take the company public.He also insisted that some workers subscribe to Bitcoin’s philosophical underpinnings. “We have this ideological purity test,” Mr. Powell said about the company’s hiring process on a 2018 crypto podcast. “A test of whether you’re kind of aligned with the vision of Bitcoin and crypto.”In 2019, former Kraken employees posted scathing comments about the company on Glassdoor, a website where workers write anonymous reviews of their employers.“Kraken is the perfect allegory for any utopian government ideal,” one reviewer wrote. “Great ideas in theory but in practice they end up very controlling, negative and mistrustful.”In response, Kraken’s parent company sued the anonymous reviewers and tried to force Glassdoor to reveal their identities. A court ordered Glassdoor to turn over some names.On Glassdoor, Mr. Powell has a 96 percent approval rating. The site adds, “This employer has taken legal action against reviewers.”Kraken is one of the world’s largest cryptocurrency exchanges.KrakenAt Kraken, Mr. Powell is part of a Slack group called trolling-999plus, according to messages viewed by The Times. The group is labeled “… and you thought 4chan was full of trolls,” referring to the anonymous online message board known for hate speech and radicalizing some of the gunmen behind mass shootings.In April, a Kraken employee posted a video internally on a different Slack group that set off the latest fracas. The video featured two women who said they preferred $100 in cash over a Bitcoin, which at the time cost more than $40,000. “But this is how female brain works,” the employee commented.Mr. Powell chimed in. He said the debate over women’s mental abilities was unsettled. “Most American ladies have been brainwashed in modern times,” he added on Slack, in an exchange viewed by The Times.His comments fueled a furor.“For the person we look to for leadership and advocacy to joke about us being brainwashed in this context or make light of this situation is hurtful,” wrote one female employee.“It isn’t heartening to see your gender’s minds, capabilities, and preferences discussed like this,” another wrote. “It’s incredibly othering and harmful to women.”“Being offended is not being harmed,” Mr. Powell responded. “A discussion about science, biology, attempting to determine facts of the world cannot be harmful.”At a companywide meeting on June 1, Mr. Powell was discussing Kraken’s global footprint, with workers in 70 countries, when he veered to the topic of preferred pronouns. It was time for Kraken to “control the language,” he said on the video call.“It’s just not practical to allow 3,000 people to customize their pronouns,” he said.That same day, he invited employees to join him in a Slack channel called “debate-pronouns” where he suggested that people use pronouns based not on their gender identity but their sex at birth, according to conversations seen by The Times. He shut down replies to the thread after it became contentious.Mr. Powell reopened discussion on Slack the next day to ask why people couldn’t choose their race or ethnicity. He later said the conversation was about who could use the N-word, which he noted wasn’t a slur when used affectionately.Mr. Powell also circulated the culture document, titled “Kraken Culture Explained.”“We Don’t Forbid Offensiveness,” read one section. Another said employees should show “tolerance for diverse thinking”; refrain from labeling comments as “toxic, hateful, racist, x-phobic, unhelpful, etc.”; and “avoid censoring others.”It also explained that the company had eschewed vaccine requirements in the name of “Krakenite bodily autonomy.” In a section titled “self-defense,” it said that “law-abiding citizens should be able to arm themselves.”“You may need to regularly consider these crypto and libertarian values when making work decisions,” it said.In the edited version of the document that Kraken publicly posted, mentions of Covid-19 vaccinations and the company’s belief in letting people arm themselves were omitted.Those who disagreed with the document were encouraged to depart. At the June 1 meeting, Mr. Powell unveiled the “Jet Ski Program,” which the company has labeled a “recommitment” to its core values. Anyone who felt uncomfortable had two weeks to leave, with four months’ pay.“If you want to leave Kraken,” read a memo about the program, “we want it to feel like you are hopping on a jet ski and heading happily to your next adventure!”Kitty Bennett More

The Federal Reserve on Wednesday is expected to raise benchmark borrowing rates by three-quarters of a percentage point.
In addition, the central bank will update its outlook on rates ahead as well as its estimates for GDP, unemployment and inflation.

The Federal Reserve on Wednesday is expected to do something it hasn’t done in 28 years — increase interest rates by three-quarters of a percentage point.
In response to soaring inflation and volatile financial markets, the central bank will hike the rate that banks charge each other for overnight borrowing to a range of 1.5%-1.75%, where it hasn’t been since before the Covid pandemic crisis began.

That rate feeds through to consumer borrowing, impacting virtually all adjustable-rate products such as credit cards and home equity loans.
Along with the rate increase, here’s a quick look at what the Fed also likely will do:

Adjust its future outlook for interest rates via its “dot plot” of individual members’ expectations.
Update its outlook for gross domestic product, inflation and unemployment. Economists figure the Fed will decrease its expectations for GDP this year while raising forecasts for inflation and the unemployment rate.
Change the language in its post-meeting statement to reflect current conditions, namely that inflation is running at a faster pace than anticipated, requiring more aggressive actions to contain price increases running at their fastest level since December 1981.

Goldman Sachs said new language in the statement could indicate that the rate-setting Federal Open Market Committee “anticipates that raising the target range expeditiously will be appropriate until it sees clear and convincing evidence that inflation is moderating,” which the firm said implies “a high bar for reverting to 25bp hikes.”

US Federal Reserve Chairman Jerome Powell speaks during a news conference in Washington, DC, on May 4, 2022.
Jim Watson | AFP | Getty Images

Following the FOMC meeting, Fed Chairman Jerome Powell will address the media. The decision is due at 2:00 p.m. ET and Powell will speak 30 minutes after that.
Powell will be called on to explain the Fed’s recent shift in rate expectations. He and other officials had been pushing the narrative that consecutive rate increases of 50 basis points would be the most likely course.

In fact, at his last news conference in May, Powell dismissed 75 basis points as an option, saying it was “not something the committee is actively considering.” A basis point is one one-hundredth of a percentage point.
Now, Powell could provide indications that multiple 75 basis point hikes are possible if inflation readings don’t start to come down.

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Some economists argue that recessions have become an inevitable part of the economic cycle that fluctuates between periods of expansion and contraction.
The Federal Reserve has attempted to avoid a recession by engineering what’s known as a “soft landing,” but successfully pulling it off is extremely rare.
Policies often have a clear limitation on what they can achieve against an impending downturn.

The U.S. has experienced at least 30 recessions throughout history, dating back as early as 1857.
Some economists argue that they may have become an inevitable part of the financial cycle that fluctuates between periods of expansion and contraction.

“History teaches us that recessions are inevitable,” said David Wessel, a senior fellow in economic studies at The Brookings Institution. “I think there are things we can do with a policy that makes recessions less likely or when they occur, less severe. We’ve learned a lot, but we haven’t learned enough to say that we’re never going to have another recession.”
As the nation’s authority on monetary policies, the Federal Reserve plays a critical role in managing recessions.
The Fed is currently attempting to avoid a recession by engineering what’s known as a “soft landing,” in which incremental interest rate hikes are used to curb inflation without pushing the economy into recession.
“What they’re trying to do is raise rates enough so demand slows,” said Jason Snipe, chief investment officer at Odyssey Capital Advisors.
But a successful soft landing is extremely rare as the monetary policy needed to slow down the economy is often enforced too late to make any meaningful impact.

It was arguably achieved just once, in 1994, thanks to the Fed’s more proactive response to inflation and good timing.
“[It’s] really, really difficult to get into that really, really narrow zone,” said Stephen Miran, former senior advisor at the U.S. Department of Treasury. “It’s the difference between trying to land an airplane in a really wide and spacious open field versus trying to land an airplane on a very, very narrow piece of land with rocks and water on either side.”
Some experts also argue that policies have a limitation on what they can achieve against an impending downturn.
“Policy tends to operate with long lags, which means the ability to effect immediate change in the economy is quite slow. I also think that increasingly we live in a global economy where the cross-currents that are impacting the economic dynamics are very complex,” said Lisa Shalett, chief investment officer, wealth management at Morgan Stanley.
“These are dynamics that the Fed doesn’t have the tools to address and so to a certain extent, we do think that policymakers have certainly developed more tools to fight recessions,” she said. “But we don’t think that you can rely on policymakers to prevent recessions”
Watch the video to find out more about why recessions could be inevitable.

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Retail and food service spending posted a surprise 0.3% decline in May, below the estimate for a 0.1% increase.
Spending at gas stations led but was offset by declines elsewhere, according to numbers that are not adjusted for inflation.

Retail sales turned negative in May as consumers pulled back spending while inflation surged, the Commerce Department reported Wednesday.
Advance retail and food service spending fell 0.3% for the month, below the Dow Jones estimate for a 0.1% gain. Excluding autos, sales were up 0.5%, which fell short of expectations for a 0.8% increase.

The numbers are not adjusted for inflation, which increased 1% for the month on the headline number and 0.6% excluding food and energy.
Sales were well below the pace in April, which posted a downwardly revised 0.7% increase from the initial 0.9% estimate.
Spending for the month declined even though sales at gas stations increased 4% due to fuel prices that scaled new heights, with regular unleaded hitting $4.43 a gallon in May and now running around $5. That growth was offset by a 3.5% decline at motor vehicle and parts dealers.
Miscellaneous store retailers saw a 1.1% drop in sales, while online stores posted a 1% decline. Bars and restaurants registered a 0.7% increase, part of a broader trend that has seen spending gradually shift from goods back to services.
On a yearly basis, sales were still up 8.1% as spending, combined with higher prices, has put a floor under the numbers. Consumers have been resilient through the inflation wave, using savings to compensate for the higher costs.
The retail release comes the same day the Federal Reserve is widely expected to raise interest rates three-quarters of a percentage point in an effort to tame inflation. The consumer price index for May reflected an 8.6% year-over-year increase, the highest since December 1981 and far above the Fed’s 2% target.

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Total mortgage application volume was 52.7% lower last week than the same week one year ago, according to the Mortgage Bankers Association’s seasonally adjusted index.
“Mortgage rates followed Treasury yields up in response to higher-than-expected inflation and anticipation that the Federal Reserve will need to raise rates at a faster pace,” said Joel Kan, an MBA economist.

Total mortgage application volume was 52.7% lower last week than the same week one year ago, according to the Mortgage Bankers Association’s seasonally adjusted index. Sharply rising interest rates are decimating refinance volume, and those rates, along with sky-high home prices and a shortage of houses for sale, are hitting demand from potential buyers.
Last week, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 5.65% from 5.40%, with points rising to 0.71 from 0.60 (including the origination fee) for loans with a 20% down payment. This week they surged even higher, with the average rate hitting 6.28% on Tuesday, according to a daily measure from Mortgage News Daily.

“Mortgage rates followed Treasury yields up in response to higher-than-expected inflation and anticipation that the Federal Reserve will need to raise rates at a faster pace,” said Joel Kan, an MBA economist.
Weekly mortgage application volume rebounded slightly compared with the previous, holiday-adjusted week. Refinance demand rose 4% for the week but was 76% lower than the same week one year ago.
Mortgage applications from homebuyers rose 8% for the week but were 16% lower compared with a year ago.
“Despite the increase in rates, application activity rebounded following the Memorial Day holiday week but remained 0.29 percent below pre-holiday levels,” added Kan.
The housing market is now reeling in a rising interest rate environment. After two years of record-low rates, fueled by the Federal Reserve’s Covid pandemic-induced purchases of mortgage-backed bonds, home prices are overheated and affordability is now in the basement. Major real estate brokerages, Redfin and Compass, both announced layoffs Tuesday.
“Mortgage rates increased faster than at any point in history. We could be facing years, not months, of fewer home sales, and Redfin still plans to thrive. If falling from $97 per share to $8 doesn’t put a company through heck, I don’t know what does,” wrote Redfin CEO Glenn Kelman on the company’s website.

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While lifting some levies on China is unlikely to put a large dent in inflation, administration officials concede they have few other options to address surging prices.WASHINGTON — President Biden is weighing whether to roll back some of the tariffs that former President Donald J. Trump imposed on Chinese goods, in hopes of mitigating the most rapid price gains in 40 years, according to senior administration officials.Business groups and some outside economists have been pressuring the administration to relax at least a portion of the taxes on imports, saying it would be a significant step that the president could take to immediately cut costs for consumers.Yet any action by the administration to lift the tariffs is unlikely to put a large dent in an inflation rate that hit 8.6 percent in May — while the political ramifications could be severe. An influential study this year predicted that a move to lift tariffs could save households $797 a year, but administration officials say the actual effect would most likely be far smaller, in part because there is no chance Mr. Biden will roll back all of the federal government’s tariffs and other protectionist trade measures.The tariff discussion comes at a precarious time for the economy. Persistent inflation has shattered consumer confidence, driven stock markets into bear territory — down 20 percent from their January high — and inflamed fears of a recession as the Federal Reserve moves quickly to raise interest rates.Some administration economists privately estimate the tariff reductions that Mr. Biden is considering would reduce the overall inflation rate by as little as a quarter of a percentage point. Still, in a sign of how big a political problem inflation has become, officials are weighing at least a partial relaxation anyway, in part because the president has few other options.The China tariffs are raising the price of goods for American consumers by essentially adding a tax on top of what they already pay for imported goods. In theory, removing the tariffs could reduce inflation if companies cut — or stopped raising — prices on those products.Mr. Biden has said taming inflation rests mainly with the Federal Reserve, which is trying to cool demand by making money more expensive to borrow and spend. The Fed is expected to raise interest rates on Wednesday, possibly making its biggest increase since 1994, as it tries to get persistent inflation under control. The prospect of big rate increases has spooked Wall Street, which entered bear market territory on Monday before steadying on Tuesday.Any move to tweak the tariffs could carry significant trade-offs. It could encourage companies to keep their supply chains in China, undercutting another White House priority to bring jobs back to America. And it could expose Mr. Biden — and his Democratic allies in Congress — to attacks that he is letting Beijing off the hook when America’s economic relationship with China has become openly hostile, deepening a wedge issue for the midterm elections and the next presidential race.China has yet to live up to the commitments it made as part of the U.S.-China trade deal that Mr. Trump negotiated, including failing to purchase significant amounts of natural gas, Boeing airplanes and other American products. Mr. Trump imposed tariffs on the bulk of products the United States imports from China as part of a pressure campaign aimed at forcing China to change its economic practices. More than two years later, the United States retains a 25 percent tariff on about $160 billion of Chinese products, while another $105 billion, mostly consumer goods, are taxed at 7.5 percent.While Mr. Biden has criticized the way in which Mr. Trump wielded tariffs, he has also acknowledged that China’s economic practices pose a threat to America.Understand Inflation and How It Impacts YouInflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Greedflation: Some experts contend that big corporations are supercharging inflation by jacking up prices. We take a closer look at the issue. Inflation Calculator: How you experience inflation can vary greatly depending on your spending habits. Answer these seven questions to estimate your personal inflation rate.For Investors: At last, interest rates for money market funds have started to rise. But inflation means that in real terms, you’re still losing money.Business groups like the U.S. Chamber of Commerce and economists like Lawrence H. Summers, a Treasury secretary under President Bill Clinton, have urged the White House to repeal as many tariffs as possible, saying it would help consumers deal with rising prices.Mr. Summers and others have approvingly cited the March study on the issue from economists at the Peterson Institute for International Economics, who argued that a “feasible package” of tariff removal — which includes repealing a range of levies and trade programs, not just those applied to China — could cause a one-time reduction in the Consumer Price Index of 1.3 percentage points, amounting to a gain of $797 per American household.In an interview, Mr. Summers said reducing tariffs was “probably the most potent microeconomic or structural action the administration can take to reduce prices and inflationary pressure relatively rapidly.”But even those inside the administration who support easing the tariffs are skeptical that the move would produce anywhere close to the amount of relief that Mr. Summers and others have predicted.“I think some reductions may be warranted and could help to bring down prices of things that people buy that are burdensome,” Janet L. Yellen, the Treasury secretary and an advocate of some tariff rollbacks, told a House committee last week. “I want to make clear, I honestly don’t think tariff policy is a panacea with respect to inflation.”Ms. Yellen met on Tuesday with the board of directors of the National Retail Federation, which has long argued against the tariffs and recently made the case that eliminating them would ease inflation.One key question is whether companies that are given tariff relief would actually pass those savings on in the form of lower prices or choose to absorb them as profits. Consumers have so far continued to pay more for everyday items, a fact that corporations have cited in earnings calls with investors as a reason they can charge more.David French, senior vice president of government relations at the National Retail Federation, said the administration had been trying to understand how quickly tariff cuts would translate into pricing changes, and seeking assurances from retailers that any savings would be passed along to American consumers.“I think in the administration’s mind, there’s going to be a price rollback and money is going to come off the price tag,” he said. “I’m not sure you’re going to see a dramatic change like that.”Instead of price decreases, for example, stores may choose to hold off on increasing prices even more. Retailers “will do as much as they can to demonstrate dramatic changes in pricing where possible,” but they still face pent-up pressures in the supply chain in terms of cost, he said.Rising prices have socked Americans across the economy, draining families’ purchasing power and contributing to a steady decline in Mr. Biden’s approval ratings. The Consumer Price Index was up 8.6 percent in May from a year earlier, its fastest growth rate in 40 years. Mr. Biden says he has made fighting inflation his top economic priority.Unloading cargo at the Port of Los Angeles in March. The United States still has a 25 percent tariff on about $160 billion of Chinese products that was imposed by the Trump administration.Coley Brown for The New York TimesLast week, Mr. Biden announced a two-year pause on tariffs on imported solar panels, which could reduce costs for domestic consumers but which effectively pre-empted a Commerce Department investigation into illegal trade practices by Chinese manufacturers.Domestic trade groups, labor leaders and populist Democrats like Representative Tim Ryan of Ohio, who is locked in a competitive Senate race, have pushed Mr. Biden to keep the tariffs. Mr. Ryan held a news conference on Tuesday urging Mr. Biden not to yield any economic ground to Beijing.Economists disagree on how much inflation relief the administration could get by removing the tariffs.Inflation F.A.Q.Card 1 of 5What is inflation? More

Fed policymakers are entertaining the idea of a 75-basis-point rate increase this week, according to CNBC’s Steve Liesman.
Bond yields pointed to the possibility of a more aggressive Fed as the yield on the 10-year Treasury shot up to 3.37%, while the 2-year yield, which mostly closely tracks Fed intentions, accelerated to 3.34%.

Markets are beginning to anticipate an even faster pace of interest rate hikes, and Federal Reserve officials apparently are contemplating the possibility as well.
Central bank policymakers are entertaining the idea of a 75 basis point increase to the Fed’s benchmark funds rate that banks charge each other for overnight financing, according to CNBC’s Steve Liesman.Changes in the economic outlook, including the likelihood that inflation hasn’t peaked and is running well ahead of the Fed’s 2% goal, could influence a bigger rate move during the two-day meeting that concludes Wednesday.

A 75 basis point move is “a real distinct possibility,” Liesman said.
An earlier Wall Street Journal story Monday afternoon first reported the change in central bank stance. The fed funds rate feeds through to many consumer products that are based on adjustable rates, such as mortgages and credit cards.
Goldman Sachs said it is altering its own expectation of a 50 basis point move to 75, citing the Journal’s reporting and noting that the newspaper had a day previous reported that the bigger move was “unlikely.”
The Wall Street firm’s economists now foresee consecutive 75 basis point rate hikes in June and July, followed by a 50 basis point move in September and 25 basis point moves in November and December, taking the fed funds rate to a range of 3.25%-3.5% by the end of the year.

“The most likely triggers for a shift to a more aggressive pace of tightening are the upside surprise in the May CPI report and the further rise last Friday in the Michigan consumer survey’s measures of long-term inflation expectations that has likely been driven in large part by further increases in gas prices,” Goldman chief economist Jan Hatzius and others said in a note.

Krishna Guha, head of global policy and central bank strategy at Evercore ISI, noted the unusual nature of the media speculation so close to a meeting, when policymakers are prohibited from making public statements.
However, Guha noted that “until and unless we see some kind of unofficial clarification, we are forced to take the reports at what we think is face value: it looks like we were wrong and 75 is after all likely this week. We repeat that we think this is not optimal policy and would separately be bad for markets.”
Market pricing reflected the changed expectations.
The CME Group’s Fed Watch tool, which had been strongly pointing to a 50 basis point hike this week, was showing a 96% probability of a 75 basis point move as of Monday evening.
In recent days, traders in the interest rate futures market have been cranking up their bets that the Fed will go beyond its traditional 25-basis-point hiking pattern.
Recent jumps in bond yields have pointed to the possibility of a more aggressive Fed at the conclusion of the two-day Federal Open Market Committee meeting Wednesday.

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The 10-year Treasury yield shot up to 3.37% Monday, a surge of 21 basis points, while the 2-year yield, which mostly closely tracks Fed intentions, accelerated to 3.34%, a jump of nearly 30 basis points. A basis point is one one-hundredth of a percentage point.
The Fed uses interest rate increases as a way to tamp down demand, which has generated inflation levels running at more than 40-year highs. Markets expect the central bank to continue jacking up rates through at least the end of the year as it tries to pull inflation down nearer its 2% target.
The Journal report did not cite any specific sources for its reporting but said that officials could reconsider their stance on rates in light of several recent reports showing that inflation is not only high historically but is continuing to push upward. The Fed is in its quiet period ahead of the two-day Open Market Committee meeting that opens Tuesday, so officials can’t comment on policy.
Friday’s consumer price index report showed headline inflation in May running at an 8.6% pace. That same day, the University of Michigan’s widely followed consumer sentiment gauge fell to an all-time low, and the report also indicated a ramping up of inflation expectations.
A separate survey from the New York Fed released Monday indicated that one-year inflation expectations are at 6.6%, tied for a record in a data series that goes back to 2012.
The roots of inflation are multi-pronged: Clogged supply chains are pushing up prices, while energy prices are rising due to decreased production, a situation aggravated by the Russian attack on Ukraine. A supply-demand mismatch in the labor market also is fueling much higher wages, which in turn are leading to price increases.

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