Evelyn Reynolds

Federal Reserve officials are set to raise interest rates to control inflation, but the return to normal they had hoped to see remains painfully elusive.WASHINGTON — When Federal Reserve officials raise interest rates on Wednesday, they will do so amid an unfortunate economic reality: Many of the inflationary pressures they had long assumed would dissipate have instead lingered, and some are getting worse.Central bankers have consistently underestimated how high inflation would rise, and how long it would last, as the economy has surged back from pandemic shutdowns. They will release a fresh set of quarterly economic projections Wednesday, in which they are likely to raise their inflation forecasts for the fifth time in a row.Like many private sector forecasters, the Fed misjudged how strong American demand would be for goods and how long that demand would help to keep global supply chains running behind schedule, forces that have combined to push up consumer prices.Officials spent much of the past year expecting a relatively quick return to some pandemic-infused version of normality, but backlogged factories, crowded ports and overburdened trucking companies are still failing to catch up. Repeated waves of the virus have exacerbated the problems, which along with rising wages and services prices have sent inflation higher. Consumer price gains hit a new 40-year high in February, pushed up by rising prices for food, rent and gas.Now, as Fed officials prepare to begin a series of interest rate increases to try to bring inflation under control, they again appear to be aiming at a moving target. Supply chains that showed signs of improvement in January and February are being thrown further into disarray by the Russian invasion of Ukraine and sweeping lockdowns in China, developments that promise to lengthen delivery times and add to prices.The war, at the nexus of Europe and Asia, has scrambled flights and ocean shipments; threatened supplies of palladium, nickel and wheat; and sent energy prices soaring, further fueling inflation. Automakers have shuttered factories because of a shortage of parts, and Russia has answered back to sweeping sanctions imposed by the West by announcing its own plans for export controls.In recent days, Chinese cities and provinces have imposed extensive lockdowns to try to stop the spread of the Omicron variant. Shenzhen, a hub of electronics manufacturing and a vital port that is home to 17 million people, announced a lockdown on Sunday night for seven days. Foxconn, a Taiwanese electronics firm that supplies Apple from factories there, said it would suspend operations. Further restrictions in China, home to more than a quarter of global manufacturing, are likely to reverberate through already-tangled supply chains and exacerbate inflation.“The question is whether this is going to be bad or very bad,” Phil Levy, chief economist at the logistics company FlexPort, said of the Chinese shutdowns in particular. He noted that this disruption came when shipping delays were already extreme.“If things get gummed up there, it will reverberate through the whole system,” he said, adding that it matters how long and how sweeping the shutdown proves. “These problems just build.”Mary Lovely, a senior fellow at the Peterson Institute for International Economics, said it was “hard to overstate” the importance of Shenzhen and its surrounding area for electronics, as well as for other industries, like metals, furniture and paper products.“I think it’s definitely going to have effect on supply chains,” she said. She added that she expected those pressures to translate more readily into increased prices than they did earlier in the pandemic.“Now we’re in a period with higher inflation, I think that suppliers may find it easier to pass those costs along, or take this opportunity to raise prices,” Ms. Lovely said.Fed officials have held interest rates near zero since March 2020 and are expected to raise them for the first time since 2018 on Wednesday. By making money more expensive to borrow and spend, the Fed is hoping to cool down demand and beat back inflation — helping conditions to even out when a return to “normal” has been painfully, and consistently, elusive.Quarantine workers in Shanghai on Monday. Further restrictions in China, home to more than a quarter of global manufacturing, are likely to exacerbate inflation and tangled supply chains.Qilai Shen for The New York TimesFed policymakers and Wall Street researchers alike thought that prices would fade as consumers began shifting their spending from imported goods back to movies, vacations and restaurants. That shift would help factories and shipping routes catch up with surging demand, as used car prices — which spiked last year — moderated. Those trends either haven’t happened, or they have been canceled out by increases in the prices of other products and services.Jason Furman, an economist at Harvard University, said many forecasters had been doing what investors sometimes refer to as “pricing to perfection”: assuming that everything is going to go well, even if that is not the most likely outcome.“You can look at the individual items: There’s been a lot of: What if inflation in X, Y, Z goes down?” he said. “And not: What if inflation in A, B, C goes up?”Many of the factors prompting economists to mark up their inflation forecasts now are not even tied to supply chains.Matthew Luzzetti, chief U.S. economist at Deutsche Bank, recently revised up his inflation projections because rent costs are rising so rapidly in the Consumer Price Index. Between that and wage growth, he thinks, high inflation will last unless the Fed intervenes.“For a while, inflation forecasters had been anticipating that the goods side of things would return to more normal dynamics” just as service prices, like rent, began to increase, he said. Services prices have indeed picked up, but normalization in good prices keeps getting “pushed out.”Consumers continue to spend a bigger share of their budgets on goods instead of services — purchases like travel and manicures — compared with before the pandemic. That has meant global producers are still struggling to keep up with demand. Even potentially short-lived disruptions, like the ones taking place in China, can add to a snowball of delays and shortages.Data released this month showed that the U.S. trade deficit hit a record in January, the height of the Omicron wave, in part because of surging imports of cars and energy. The average time to ship a container from a Chinese factory to a U.S. warehouse had stretched to 82 days in February, according to Freightos, a logistics platform, up from 45 days two years before.In many ways, the events of the past few years have been so unusual that few if any forecasters correctly predicted all of them. And Fed officials have acknowledged that they misjudged inflation last year, partly because they expected supply chains to recover more quickly.They are now striking a more wary tone.Jerome H. Powell, the Fed chair, told Congress this month that the war in Ukraine was “not going to help at all with supply chains.”“We haven’t seen much relief on the supply side,” he noted, explaining that he and his colleagues had been waiting for the strains to ease.Mr. Powell predicted that as the Fed raised interest rates this year, it would help cool off demand for car loans and mortgages, weakening spending in the economy and giving companies some room to catch up with demand. Central bankers are hoping that at the same time, the economy is “going back to normal” in terms of supply chains and the breakdown between goods and services, he said.Even so, he acknowledged that the Fed stood ready to act more aggressively if that didn’t happen.“We hope we’re getting help on the inflation front from a bunch of things,” Mr. Powell said. “In any case, we do have the responsibility to generate price stability, and we will use our tools to do that, over time.” More

Citing sanctions, the Russian government warned it might pay foreign debt obligations in rubles. Credit rating agencies say a default is imminent. Russia is teetering on the edge of a possible sovereign debt default, and the first sign could come as soon as Wednesday.The Russian government owes about $40 billion in debt denominated in U.S. dollars and euros, and half of those bonds are owned by foreign investors. And Russian corporations have racked up approximately $100 billion in foreign currency debt, JPMorgan estimates.On Wednesday, $117 million in interest payments on dollar-denominated government debt are due.But Russia is increasingly isolated from global financial markets, and investors are losing hope that they will see their money. As the government strives to protect what’s left of its access to foreign currency, it has suggested it would pay its dollar- or euro-denominated debt obligations in rubles instead. That has prompted credit rating agencies to warn of an imminent default.The Russian currency has lost nearly 40 percent of its value against the U.S. dollar in the past month. Even if the payments were made, economic sanctions would make it difficult for Western lenders to access the rubles if they are in Russian bank accounts.“It is not that Russia doesn’t have money,” Kristalina Georgieva, managing director of the International Monetary Fund, told reporters last week. The problem is, Russia can’t use a lot of its international currency reserves, she said, because they have been frozen by sanctions. “I’m not going to speculate what may or may not happen, but just to say that no more we talk about Russian default as an improbable event.”Last week, the chief economist of the World Bank said Russia and Belarus were squarely in “default territory,” and Fitch Ratings said a default was imminent because sanctions had diminished Russia’s willingness to repay its foreign debts.Russia last defaulted on its debt in 1998, when a currency crisis led it to default on ruble-denominated debt and temporarily ban foreign debt payments. The crisis shocked the financial world, leading to the collapse of the U.S. hedge fund Long-Term Capital Management, which required Federal Reserve intervention and a multibillion-dollar bailout. If Russia failed to make payments on its foreign currency debt, it would be its first such default since the 1917 Russian Revolution.Foreign investor interest in Russian assets fell in 2014 when sanctions were imposed after the country annexed Crimea, and never fully recovered before more sanctions were imposed by Washington in 2019. But holdings aren’t negligible. Russian government bonds were considered investment grade as recently as a few weeks ago, and were included in indexes used to benchmark other funds. JPMorgan estimates that international investors own 22 percent of Russian companies’ foreign currency debt.BlackRock, the world’s largest asset manager, has already incurred losses on Russian assets and equities.Jeenah Moon/BloombergFunds managed by BlackRock, the world’s largest asset manager, have incurred $17 billion in losses on Russian assets, including equities, in recent weeks, according to the firm. The loss in value has a number of causes, including investors selling their holdings.But so far, regulators have said the risk to global banking systems from a Russian default wouldn’t be systemic because of the limited direct exposure to Russian assets. The larger ramifications from the war in Ukraine and Russia’s economic isolation are from higher energy and food prices.Still, financial companies have been scrambling to assess their exposure, according to Daniel Tannebaum, a partner at Oliver Wyman who advises banks on sanctions.“I’m seeing a lot of clients that had exposure to the Russian market wondering what type of default scenarios might be coming up,” said Mr. Tannebaum, who is also a former Treasury Department official. In the case of a default, “those bonds become worthless, for lack of a better term,” he said.On Monday, Russia’s finance minister, Anton Siluanov, accused the countries that have frozen the country’s internationally held currency reserves of trying to create an “artificial default.” The government has the money to meet its debt obligations, he said, but sanctions were hampering its ability to pay. Mr. Siluanov had also said over the weekend that the country had lost access to about $300 billion of its $640 billion currency reserves.The government insists investors will be paid. The finance ministry said on Monday it would send instructions to banks to issue the payment due on dollar- or euro-denominated bonds in dollars or euros, but if the banks don’t execute the order then it will be recalled and payment will be made in rubles instead. The statement also said that the payments could be made in rubles and then converted to another currency only when the country’s gold and foreign exchange reserves are unfrozen.Russia’s finance minister, Anton Siluanov, accused the countries that have frozen the country’s internationally held currency reserves of trying to create an “artificial default.”Alberto Pizzoli/Agence France-Presse — Getty Images“In any case, obligations to our investors will be met. And the ability to receive the funds in foreign currency will depend on the imposed restrictions,” Mr. Siluanov said.But the statement doesn’t provide a clear vision of what might happen on Wednesday. American sanctions allow for the receipt of payments of debt obligations until late May, and so the reasoning behind the Russian finance ministry’s claim that banks might refuse the payments is unclear. The payments due on Wednesday also have a 30-day grace period, so a default wouldn’t technically happen until mid-April. But Russia has already blocked interest payments on ruble-denominated bonds to nonresidents, a sign of its hesitancy to transfer funds abroad.While the Russian finance ministry said it could meet its obligations by paying in rubles, others disagreed.“In order to avoid a default, the only way that Russia can really navigate this is to send the full payment in dollars,” said Trang Nguyen, an emerging markets strategist at JPMorgan.Some Russian bonds issued in recent years do have provisions that allow for repayment in other currencies, including the ruble, if Russia can’t make payments in dollars for reasons “beyond its control.” The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More

CNBC Fed Survey

Forecasters have raised their outlooks for a recession and boosted their inflation projection as the Federal Reserve faces the quandary of fast-rising prices and greater uncertainty from Russia’s invasion of Ukraine, according to the latest CNBC Fed Survey.
The probability of a recession in the U.S. was raised to 33% in the next 12 months, up 10 percentage points from the Feb. 1 survey. The chance of a recession in Europe stands at 50%.

Respondents debated whether the recent surge in commodity prices would prompt the Fed to hike rates faster because it adds to inflation or raise rates less because they reduce growth.

Arrows pointing outwards

CNBC Fed Survey

“The tax impact of higher commodities prices is likely to slow the pace of hiking more than the inflationary impact is to accelerate it,” wrote Guy LeBas, chief fixed income strategist at Janney Montgomery Scott.
But Rob Morgan, senior vice president at Mosaic, wrote: “I expect six quarter-point rate hikes from the Fed in 2022. If CPI reaches 9% in the March or April report, the Fed might be pressured into a 50-basis point hike in May.”
The 33 respondents, who include fund managers, strategists and economists, forecast the Fed will raise rates an average of 4.7 times this year, bringing the funds rate to end the year at 1.4% and to 2% by the end of 2023. Nearly half of the respondents see the central bank hiking five to seven times this year.

Arrows pointing outwards

CNBC Fed Survey

The rate hike cycle is seen ending at a peak funds rate of 2.4%, about the Fed’s neutral rate. But half of all respondents believe the central bank may ultimately have to raise rates above neutral to get control of inflation.

Propelling the rate increases are forecasts for the consumer price index to peak at 8.5% in March, but gradually decline to finish the year at a still high 5.2%. That’s nearly a full percentage point higher than the February survey. The CPI in 2023 is forecast to rise a tamer 3.3%, a rate still above the Fed’s target.
“We might be on the cusp of the Fed raising rates at the same time there is a minus sign in front of GDP,” wrote Peter Boockvar, chief investment officer of Bleakley Advisory Group. “What an awful position to be in, but until inflation falls sharply, they have no choice but to carry on.”

Recession not base case

While a recession is seen as a greater possibility than in February, it’s not the base case for most respondents. The average GDP forecast for this year slipped by 0.8 percentage point but remains at a slightly above-trend 2.8%. The GDP forecast for 2023 dropped by about a half a point from the last survey to 2.4%.
Inflation forecasts had already been high for this year, but Russia’s invasion of Ukraine has aggravated the situation with nearly 90% saying they boosted their 2022 inflation outlook because of the war. They added an average 0.8 percentage point to their inflation forecast. Sixty percent of respondents said they shaved the GDP forecasts due to the conflict, with an average of a half a point.
While inflation forecasts rose and growth outlooks declined, the outlook for stocks is relatively bullish. Respondents lowered their outlook for equities, but only 53% now say stocks are overvalued relative to the outlook for earnings and growth. That’s down from 88% a year ago, and the least bearish respondents have been since the Covid pandemic began.
Meanwhile, the CNBC Risk/Reward ratio (measuring the chance of a 10% correction verus the chance of a 10% increase in the next six months) improved to -9 from -14, meaning a negative correction is judged less likely. The outlook for the S&P 500 dropped to 4,431 this year, suggesting stocks could have 6% upside from the current level. More

The producer price index rose 0.8% in February, slightly lower than the 0.9% Dow Jones estimate.
Wholesale gasoline prices surged more than 14%, helping feed the biggest single-month increase for final-demand goods prices ever in data going back to 2009.
Headline PPI was up 10% from a year ago, tying January for the biggest gain ever.

Another surge in energy prices pushed wholesale goods prices to their biggest one-month jump in record in February, according to Labor Department data released Tuesday.
Final demand prices for goods jumped 2.4% for the month, the largest move ever in data going back to December 2009, the Bureau of Labor Statistics said.

That pushed the headline producer price index up 0.8% on the month, which actually was slightly lower than the 0.9% Dow Jones estimate.
Excluding food, energy and trade services, so-called core PPI rose just 0.2%, well below the 0.6% expectation.
On a year-over-year basis, headline PPI rose 10%, the same as January and tied for the biggest 12-month move ever.
The data came during the week of Feb. 13, prior to the Russian invasion of Ukraine. Energy prices surged even more as the war began, and will show up in next month’s report.
The numbers come with most other inflation gauges running around 40-year highs, thanks to price increases that have spread beyond volatile gas and grocery prices and across a broad spectrum of consumer goods and services.

However, gasoline was still the main story in February when it came to final demand prices.
Some 40% of the increase in wholesale goods prices came from gasoline, which rose 14.8%. Diesel fuel and electric power also helped feed an 8.2% increase in final-demand energy prices, while motor vehicles and equipment and dairy prices also rose. Various prices for food products, such as fresh and dry vegetables along with beef and veal also showed declines.
The PPI is not as closely watched as the consumer price index, but wholesale costs feed into prices at the register and are seen as a harbinger of inflation.

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The Federal Reserve building in Washington, January 26, 2022.
Joshua Roberts | Reuters

The Federal Reserve is poised to announce its first interest rate hike since 2018 on Wednesday.
The central bank is likely to raise its target federal funds rate by 25 basis points, or one-quarter of one percent, to address the worst inflation in more than 40 years, partially brought on by the coronavirus pandemic.

Yet consumers who are already grappling with higher prices putting a strain on their wallets may be wondering how increasing borrowing costs will help tamp down inflation.
The consumer price index jumped 7.9% on the year in February, the highest level since January 1982. Rising costs of items such as food and fuel drove the increase and further eroded any wage gains that workers may have seen in the last year.
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“This is something really hard for the typical consumer to understand, seeing these fast price raises that are so unfamiliar to large parts of our population who haven’t seen inflation rates like this before,” said Tara Sinclair, a senior fellow at the Indeed Hiring Lab. “And then trying to figure out the Fed’s complicated role in all of this is very confusing.”
Here’s what you need to know.

The Fed’s mandate
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.
The Fed’s 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 it along to consumers and businesses, said Yiming Ma, an assistant finance professor at Columbia University Business School.

That rate influences the interest you pay on credit cards to mortgages and car loans, making borrowing more expensive. On the flip side, it also affects rates on savings accounts.
Interest rates and the economy
But how do higher interest rates reel in inflation? By slowing down the economy.
“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 aims 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 Fed can’t directly influence or solve supply chain problems, he said.
“As long as the supply chain is an issue, we’re likely to be contending with outside wage gains,” which drive inflation, he said.
What the Fed wants to avoid
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 the Fed really overshoots 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.

“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 the Fed makes to impact 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 impacting the U.S. economy and act accordingly.
It might get worse before it gets better
When the Fed does raise interest 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. This is particularly tough on low-income workers, who have seen wages rise but not keep pace with inflation.
Of course, the goal is for the Fed to raise rates gradually so that the economy slows just enough to bring down prices without boosting unemployment too much.
“They have to carefully walk that tightrope,” said Sinclair.
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OAKLAND, Calif. — Across from where the Athletics play baseball sits a two-story concrete building painted bright orange and white. It is home to a cannabis dispensary called Blunts and Moore.A pair of inflatable “tube guys” flap crazily on the roof, beckoning customers with their windblown gyrations. A food truck sells tacos in the parking lot under a bright California sun.But there are signs that all is not well here. Bullet holes etched by an assault rifle dot the entrance. Three security guards, dressed in military fatigues, screen customers as they pass through a metal detector. One of the guards, a former infantryman, wears a camouflage Kevlar vest and mirrored sunglasses. A 9-millimeter pistol and 50 rounds of ammunition are strapped to his waist.“It’s crazy to think we need all this war stuff to protect our business,” said the store’s owner, Alphonso Blunt, who is known as Tucky. “But that’s where we are today.”In May 2020, Blunts and Moore was ransacked by thieves with automatic weapons, incurring losses of nearly $1 million, much of which insurance would not cover. The store, which has the air of a high-end boutique, was robbed again in late November, its shelves cleared and the floor speckled with blood from where the thieves had cut their hands on all the smashed glass. Struggling financially, Mr. Blunt turned to his landlord for a rescue but had to give up some managerial control of the store.This is not what Mr. Blunt, the City of Oakland or the State of California had in mind for an ambitious effort to help grow a cannabis industry and provide financial opportunity to struggling neighborhoods with a large number of Black and Hispanic residents.The city’s social equity initiative is designed to help entrepreneurs like Alphonso Blunt, who was arrested for a nonviolent cannabis offense in 2005. He was granted an equity license in 2018 by the city to run his dispensary, Blunts and Moore. Mr. Blunt is among the entrepreneurs in Oakland, many of whom are Black, who were granted equity licenses to run cannabis businesses after California legalized the substance for recreational use in 2016. Applicants who live in areas that had a high number of drug-related arrests or who have a cannabis-related arrest record are given priority to receive the licenses.Race has often been at the heart of the movement to legalize cannabis. Some states legalized the drug largely to stop the cannabis-related arrests that disproportionately ensnared Black and Hispanic people. But there has also been a push by lawmakers in states like California, Illinois and New Jersey to ensure that those same communities can profit from the legalized industry, which has been largely dominated by white owners, some of whom have made a fortune on cannabis.On Thursday, Gov. Kathy Hochul of New York announced that the state planned to give its first cannabis retail licenses to people who had been convicted of a cannabis crime or their relatives.Oakland was one of the first cities to prioritize equity licenses for those like Mr. Blunt, 42, who got teased in high school because his name is a common term for a cannabis cigar. In 2005, he was arrested and accused of possessing several small bags of the drug. The nation’s emerging cannabis industry is being shaped by the broader push for racial justice and the belief that creating business opportunities for Black individuals will help lift communities.But interviews with more than 30 cannabis business owners, investors and regulators in California, an early adopter of equity licenses, show how the hope of fixing historical wrongs is being challenged by the reality of an industry facing troubled business conditions, including issues like high taxes and volatile sales.Billy Martin, left, helping a customer at Blunts and Moore. The store has been robbed at least twice, one of those times by assailants with automatic weapons.Some of the problems are being exacerbated by conflicting state and federal policies. Even as 18 states have legalized the substance for recreational use, the federal government still prohibits it.That means cannabis stores are limited in their access to federally regulated banking services, such as credit cards. Forced to deal largely in cash, the businesses can be a tantalizing target for thieves.The federal prohibition also makes it difficult to obtain bank financing or small-business loans, forcing some Black social equity applicants to enter deals with investors who sometimes end up controlling the business.Another challenge is policing. Some say the police in Oakland, at times, have not switched their mind-set from arresting cannabis dealers to protecting their legal businesses. During a wave of robberies late last year, the police never showed up to some of the crimes, business owners say. The police say a surge in crime during the pandemic has stretched their resources.Insurance companies are also adding to the challenges. Some owners said their claims were denied even though their policies indicated they would be covered. Others said they believe they were treated unfairly during the claims process because they were Black. “You are giving licenses to people who would struggle in any industry, but in cannabis, the deck is further stacked against them,” said John Hudak, deputy director of the Center for Effective Public Management at the Brookings Institution. “States need to do a better job adjusting for the structural racism built into the system.”Since the initiative began in 2017, Oakland has granted cannabis licenses to 282 equity applicants and 328 non-equity applicants. But the city does not keep an ongoing tally of how many of those businesses are currently operating.“While not a panacea, this program is a meaningful step toward embedding fairness and justice in all we do to improve conditions for communities of color,” Greg Minor, an assistant to the city administrator, said in an email. Amid the industry’s struggles, Mr. Minor said, the state recently authorized a $5.4 million grant to support Oakland’s equity program and was considering reducing the cannabis taxes.But for Mr. Blunt, legalization has not produced the boon some might expect. Since he opened his licensed store four years ago, Mr. Blunt has yet to generate a profit.“Social equity sounds like peaches and cream,” Mr. Blunt said. “But I did better selling weed on the street than I am doing right now.”Thin margins and, often, lossesKeith Stephenson started his dispensary, Purple Heart Patient Center, in 2006, but financial difficulties and a robbery in 2020 led him to close it. He hopes to reopen.Keith Stephenson, 53, is a former aviation maintenance technician who is originally from South Los Angeles. He suffers from a severe form of arthritis and takes cannabis to relieve his constant pain.“Cannabis saved my life,” he said.Mr. Stephenson opened his dispensary on Fourth Street in downtown Oakland in 2006, 10 years after California legalized cannabis for medical use.His goal has long been to own a publicly traded cannabis company. But his store has been closed to customers for nearly two years, the result of theft, vandalism and an insurance company that he says treated him poorly because of his race.When Mr. Stephenson started his business, there were few of the generous loans or rent subsidies that the city’s equity initiative now provides. He took out a second mortgage on his house and put up $60,000 in cash as collateral for a secured bank loan. He called the store the Purple Heart Patient Center, inspired by a cannabis strain known as the Granddaddy Purple.Business was rough at first. He was losing $130,000 each month, paying to process the raw cannabis, and for security guards at the front door.Broader legalization brought more customers, but not necessarily higher profits. The state and city impose steep taxes — which can total more than 30 percent of each sale. Some dispensaries take in about $3 million in revenue annually, but their taxes and expenses leave little left over.Mr. Stephenson bought a pair of four-ton safes to store his cash and inventory.Yet there has been a perception around Oakland, he said, that cannabis operators are swimming in money.On May 29, 2020, Mr. Stephenson was watching the news about the murder of George Floyd when he looked at footage from his store’s security camera on his phone. A man was trying to break in through the bulletproof front door.Over the next few days, a band of thieves returned and ransacked the store, stealing everything they could. The police told him they were too busy with the broader unrest provoked by Mr. Floyd’s killing to help.The real fight came months later, when his insurance company reviewed his claims. The adjuster, he said, asked him “leading and insulting” questions, like whether he had left the door open or whether Mr. Stephenson personally knew any of the thieves.“Are you kidding me?” Mr. Stephenson said in recounting the conversation. “Did I leave the door open? Come on, man. Why is the door beaten in?”At one point, the adjuster falsely suggested that money had been taken from an A.T.M. inside the store. Mr. Stephenson believed the adjuster wanted to see if he could catch him in a lie. “It is my belief he would not have said that if I was a white male,” he said.Christy Thiems, a senior director at American Property Casualty Insurance Association, a trade group, said that she did not know the specifics of Mr. Stephenson’s case, but that the claims process could be difficult. Some questioning, she said, could seem offensive to a business owner because adjusters were acting like investigators. Only a limited number of insurance companies are willing to cover the cannabis industry, she added, because of the federal prohibition, and the few insurers operating in the sector are still trying to understand the “unique risk” that the businesses pose.In the end, Mr. Stephenson’s insurer rejected most of his claims. Mr. Stephenson is still planning to reopen his doors to customers late next month or in May.“There is no Plan B,” he said.‘Where are the police?’Amber Senter in the doorway of a secured area at her cannabis facility, damaged by robbers. The police wouldn’t go to the site when she reported the break-in.Weighing a package of cannabis-infused honey at Ms. Senter’s facility.The honey and other extracts can be used in edible products.In the early hours of Nov. 20, a group of 12 people, many of their faces obscured by sweatshirt hoods, streamed into Amber Senter’s cannabis manufacturing facility in East Oakland.This is where Ms. Senter provides space to help social equity cannabis businesses get off the ground.The robbers broke through the first door easily, security footage showed, then a second door and a third. Most of the cannabis product was locked in a cage, which the thieves couldn’t breach. Ms. Senter estimates that the damage totaled $20,000.But when she called the police, they told her to fill out a report online. “Where are the police?” Ms. Senter said. “Why aren’t they helping us?”Over one 24-hour period in November, the police said, they investigated more than a dozen reported burglaries of cannabis businesses across Oakland, including several in which the thieves were armed and one in which officers were shot at as they responded.That rash of robberies followed burglaries and crimes at other cannabis businesses through the spring and summer of 2020.In a statement, a spokesman for the Oakland Police Department said it “treats the cannabis businesses as it does all businesses in the city of Oakland” and added that the police were engaged in “ongoing meetings with cannabis business owners” over safety issues.Ersie Joyner, a security consultant to the cannabis industry, is a former Oakland police captain. He was shot multiple times during a robbery at this Oakland gas station.Ersie Joyner, a retired captain in the Oakland Police Department, said that after arresting drug dealers for decades, some officers still did not respect the cannabis industry as a legitimate enterprise.Mr. Joyner, who supervised Mr. Blunt’s arrest 17 years ago, understands how ingrained drug prosecution is in law enforcement.“The messaging from the highest level of government was that drugs are bad and destroying the community, and law enforcement should have zero tolerance,” Mr. Joyner said. “Looking back, it was absolutely the wrong way of dealing with this societal issue.”Mr. Joyner, who now works as a security consultant to cannabis businesses, said the police needed to adjust their attitudes. He said it took the Oakland police nearly three hours to dispatch officers to the store of one of his clients, whose cannabis business had been robbed.“If this happened to Bank of America, the police would have a more robust response,” said Mr. Joyner, who was nearly killed in a shootout with robbers at an Oakland gas station in late October. The doctors, he said, found 22 bullet holes in his body.In many instances, private security companies are acting as the unofficial police force of the city’s cannabis industry.A door broken in a robbery awaiting repair at Blunts and Moore.One security firm, Black Anchor Tactical Response, operates a set of sport utility vehicles with a color scheme similar to those of Oakland police cruisers. When a client transports cannabis from a warehouse to a store, the company’s guards, some of whom are veterans who served in Iraq and Afghanistan, block off city streets to prevent ambushes. The firm also guards cannabis operators’ homes.While it is difficult to pinpoint what prompted surging crime during the pandemic, the legacy of mass drug arrests still looms over Oakland.About 71 percent of those arrested on suspicion of cannabis offenses in Oakland between 1995 and 2015 were Black, according to an analysis by the city. During that time, Oakland’s Black population was 30 percent.The robberies and property damage are compounding the cannabis industry’s other challenges, such as high taxes.“Why would I want to transition to the legal market if I know I am going to go broke?” said Chaney Turner, a member of the city’s Cannabis Regulatory Commission.Chaney Turner, a member of the city’s Cannabis Regulatory Commission, said the legal, heavily taxed industry had a hard time competing with the lower prices charged on the street.‘This is not sustainable’When Tucky Blunt was selected for one of Oakland’s first equity cannabis licenses in early 2018, he remembers shouting out his gratitude to the crowd gathered at City Hall.“Praise you all,” Mr. Blunt said.Mr. Blunt, who started selling cannabis to his co-workers at a grocery store when he was 16, also remembers being surrounded that day by representatives from established cannabis companies looking to be his partner. Some wanted to lend him money in exchange for an ownership stake in his store; he wanted to own it outright.But he didn’t have the money needed to start a licensed business. So he agreed to do a deal with a larger cannabis operator, Grizzly Peak, started by a real estate contractor from San Diego named Dave Gash.Grizzly Peak, which focuses on cultivating cannabis, was denied a dispensary license in Oakland and was looking for a partner to open a store.Faced with financial difficulties, Mr. Blunt, left, accepted help from his landlord but ceded more managerial control. He still owns the business.Mr. Blunt was proud of his store’s appearance: glass cases displaying cannabis cigarettes and brightly colored packs of gummies and lots of natural light.But Mr. Blunt also struggled with the rising taxes; the cost of the armed guards, who are each paid about $30 an hour; and the looting in the late spring of 2020.The bigger problem, he said, was that one of his partners, who oversaw the books, stopped paying taxes and vendors. A year ago, Mr. Blunt had to close for several months because the store’s finances were a shambles.Grizzly Peak agreed to bail him out, but Mr. Gash told Mr. Blunt, “We have to do it our way, and we need total control.”Mr. Gash’s company has now taken tighter oversight of the store and will split any profits with Mr. Blunt, who still owns a majority stake in the store but is paid a salary as a consultant.“I am grateful that Grizzly Peak believes in me,” Mr. Blunt said. “I wouldn’t be in business without them.”In late November, business was looking up. The store’s finances had been stabilized. But then, a few days before Thanksgiving, Mr. Blunt’s store was robbed for the second time in 18 months. The thieves cleared out much of the store.“This,” he said, “is not sustainable.”“My guys are seeing things they saw in combat,” said Gerritt Jones, center, who served in the Army and is the founder of Black Anchor Tactical Response, which provides security services to cannabis businesses. 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Demand for single-family rental homes is soaring, pushing prices to record highs, as Americans begin to emerge from two years of pandemic hardship and return to big cities.
Single-family rents gained a record 12.6% year over year in January, according to a new report from CoreLogic. That compares to an increase of 3.9% in January 2021.
Single-family rents soared 38.6% in Miami, up from just 2% the previous January.

A house for rent in Corona Del Mar, California.
Scott Mlyn | CNBC

Demand for single-family rental homes is soaring, pushing prices to record highs, as Americans begin to emerge from two years of pandemic hardship and return to big cities.
Single-family rents gained a record 12.6% year over year in January, according to a new report from CoreLogic. That compares to an increase of 3.9% in January 2021.

Every major market saw increases, but cities in the Sun Belt saw truly stunning numbers.
For example, single-family rents soared 38.6% in Miami, up from just 2% the previous January. Orlando, Fla., and Phoenix were next in line, with gains of 19.9% and 18.9%, respectively, as Americans continued their migration to warmer parts of the nation. The Washington, D.C., area saw the lowest annual growth in rent prices — but they were still up 5.6%.
“Single-family-rent growth extended its record-breaking price growth streak to 10 consecutive months in January,” said Molly Boesel, principal economist at CoreLogic.
Demand for single-family rentals is so strong partly because the market for potential homebuyers is so tough. Not only are home prices up 19% from a year ago, but the number of listings are still historically low. That means homes that are listed often sell in a matter of weeks, if not days.
Rent growth is strongest in the middle of the market, according to the report. CoreLogic looked at four tiers of rental prices and found the weakest growth on the edges:

Lower-priced (75% or less than the regional median): up 12%, compared with 3% in January 2021
Lower-middle priced (75% to 100% of the regional median): up 13.3%, from 3.2% in January 2021
Higher-middle priced (100% to 125% of the regional median): up 13.4%, from 3.6% in January 2021
Higher-priced (125% or more than the regional median): up 12.2%, from 4.5% in January 2021

Apartment rents also are still rising, but the gains are moderating slightly, as more supply comes on the market to meet demand.
But the same is not true for the single-family rental market. While more builders and investors opt for build-for-rent projects, the available inventory is still on the low side, with building hampered by supply chain disruptions and the industry labor shortage.

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The Federal Reserve is facing the fastest inflation most Americans have ever seen. Its chair says policymakers will do what it takes to tame prices.To Jerome H. Powell, the chair of the Federal Reserve, Paul Volcker is more than a predecessor. He is one of his professional heroes.“I knew Paul Volcker,” Mr. Powell said during congressional testimony this month. “I think he was one of the great public servants of the era — the greatest economic public servant of the era.”Now, if rapid inflation proves more stubborn than policymakers expect, Mr. Powell could find himself in a situation in which he must follow Mr. Volcker’s lead. The towering former Fed chair is best remembered for waging an aggressive — and painful — assault on the swift price increases that plagued America in the early 1980s.Mr. Volcker’s Fed rolled out policies that pushed a key short-term interest rate to nearly 20 percent and sent unemployment soaring to nearly 11 percent in 1981. Car dealers mailed the Fed keys from unsold vehicles, builders sent two-by-fours from unbuilt houses and farmers drove tractors around the Fed building in Washington in protest. But the approach worked, killing off the rapid price inflation that had festered throughout the 1970s.Mr. Powell was asked this month if the Fed was prepared to do whatever it took to control inflation — even if it meant harming growth, as Mr. Volcker did.“I hope that history will record that the answer to your question is yes,” the Fed chair replied.Few, if any, economists think that the 2022 Fed will need to repeat Mr. Volcker’s policies to the same degree, in part because the central bank is taking action much more quickly. The Fed is expected to begin raising interest rates from near zero at its meeting this week, and is likely to signal that it expects to make a series of moves this year as it tries to cool down the economy and control inflation.Price increases had run high for more than a decade by the time Mr. Volcker became chair in 1979, making them a part of everyday lives. Shoppers expected prices to go up, businesses knew that, and both acted accordingly.This time, inflation has been anemic for years (until recently), and most consumers and investors still expect costs to return to lower levels before long, survey and market data show. While inflation has been rapid for the past year, that is a comparatively short period and one that may not fuel the same kind of expectations for higher prices that bedeviled Mr. Volcker’s era.And while today’s inflation is taking a bite out of household budgets, it is slower than in previous periods: While it rose to 7.9 percent in February, the fastest pace since 1982, it is still well below a peak of 14.6 percent in 1980. Economists expect price gains to begin moderating this year, rather than climbing to such high levels.But in other ways, the backdrop Mr. Powell faces is beginning to look eerily similar to the one Mr. Volcker confronted.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: Times readers sent us their questions about rising prices. Top experts and economists weighed in.How Americans Feel: We asked 2,200 people where they’ve noticed inflation. Many mentioned basic necessities, like food and gas.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.Wages are increasing rapidly, and employers report raising prices to cover their bigger labor bills, posing the possibility of a more muted version of the wage-price spiral that helped keep inflation high during Mr. Volcker’s years.President Ronald Reagan with Paul A. Volcker, the Fed chair, in 1981.Scott Applewhite/Associated PressOil prices are climbing as Russia wages war on Ukraine, mirroring oil price shocks that rocked the economy in the years before Mr. Volcker’s ascent to the chair. The Arab oil embargo of 1973-74 and the Iranian revolution of 1979 both curtailed supply and sharply pushed up pump prices.And geopolitical instability is fueling uncertainty about what will happen next, much as it did in the 1970s, when war raged in Vietnam.“That’s the proper historical reference for what we’re trying not to replicate,” Mr. Powell said of the 1970s during separate remarks to Congress this month. “One of the things that is different now is that central banks — including the Fed — very squarely take responsibility for inflation.”When inflation was taking off in the 1960s and 1970s, Fed officials bickered about how high to raise rates as they worried about hurting the labor market too much. Many economic historians now think that their reluctance to act more quickly allowed those price gains to become locked in until they required a more draconian response.“The one really big difference — huge difference, consequential difference — is that the Fed, and the country, lived through the 1970s,” Donald Kohn, a former Fed vice chair, said in an interview. “I think the Fed is determined not to let us get there.”The inflation challenge facing Mr. Powell, who was renominated by President Biden for a second term as chair and is awaiting Senate confirmation, is the latest economic test that he has had to contend with during his tenure.Mr. Powell, 69, began his first four years as Fed chair in early 2018. By that Christmas, the central bank’s campaign of steady rate increases intended to fend off inflation had collided with President Donald J. Trump’s trade war to send markets plummeting.In 2019, Mr. Trump publicly pushed for lower rates and accosted Mr. Powell — whom the president had chosen to lead the central bank — in interviews and on Twitter, calling him a “bonehead,” an “enemy” and a golfer who could not putt.Then came the onset of the pandemic in 2020, and Mr. Powell and his colleagues crossed red lines and upended norms to rescue markets and the economy. They averted a financial crisis, but 2021 brought with it a new challenge: rapid inflation.Now, critics are questioning whether the monetary help that Mr. Powell’s Fed unleashed to protect the pandemic-stricken economy — lowering rates to near zero and buying trillions of dollars in government bonds — combined with huge fiscal stimulus to supercharge demand and release an inflationary genie that could prove hard to trap.The Fed has already begun removing some of that support, stopping bond purchases and communicating plans to raise interest rates by a quarter-point this month and steadily throughout the rest of the year. Mortgage rates have already begun climbing in anticipation of those actions.But some are asking whether the Fed, which wanted to see full employment return before paring back its support, has been too slow to react to changing conditions.This moment “represents a decade of economic experience in the late 1960s and 1970s, compressed into a year,” said Lawrence H. Summers, a former Treasury secretary who spent last year warning that inflation was going to take off as the government overstimulated the economy.Inflation F.A.Q.Card 1 of 6What is inflation? More