Evelyn Reynolds

The central bank of the United States can create money to stimulate the financial sector during emergencies.
The Federal Reserve’s $9 trillion balance sheet has pushed investors into riskier holdings.
Analysts believe assets will be repriced as the Fed’s bonds are sold or mature.

Members of the Federal Reserve are debating how quickly to reduce the central bank’s portfolio of bonds, without starting a recession.Heading into the second quarter of 2022, the balance of Federal Reserve’s assets is almost $9 trillion. The majority of these assets are securitized holdings of government debt and mortgages. Most were purchased to calm investors during the subprime mortgage crisis in 2008 and 2020’s pandemic.”What’s happened is the balance sheet has become more of a tool of policy.” Roger Ferguson, former vice chairman of the Federal Reserve Board of Governors, told CNBC. “The Federal Reserve is using its balance sheet to drive better outcomes in history.”
The U.S. central bank has long used its power as a lender of last resort to add liquidity to markets during times of distress. When the central bank buys bonds, it can push investors toward riskier assets. The Fed’s policies have boosted U.S. equities despite tough economic conditions for small businesses and ordinary workers.Kathryn Judge, a professor at Columbia Law, says the Fed’s stimulus is like grease for the gears of the financial system. “If they apply too much grease too frequently, there are concerns that the overall machinery becomes risk-seeking and fragile in alternative ways,” she said to CNBC in an interview.Analysts believe that the Fed’s choice to raise interest rates in 2022 then quickly reduce the balance sheet could set off a recession as riskier assets are repriced.

Watch the video above to learn more about the recession risks of the Fed’s monetary policies.

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Prices in the year though February were expected to have risen 7.8 percent, which would be the fastest pace of inflation in 40 years as gas prices increased and an array of goods and services became more expensive.Fresh Consumer Price Index data is set for release Thursday morning, and that estimate — the median in a Bloomberg survey of economists — underscores the grim reality facing economic policymakers. Climbing prices are hitting consumers in the pocketbook, causing their confidence to fall and stretching household budgets. The burden is falling most intensely on lower-income households, which devote a big chunk of their budgets to daily necessities that are rapidly becoming costlier.The quickest inflation in most Americans’ lifetimes is hurting President Biden politically, and the challenge could grow temporarily worse amid fallout from sanctions and other economic responses to Russia’s war in Ukraine, which has already pushed gas prices higher. Rising prices tend to make voters unhappy, posing trouble for Democrats ahead of the midterm elections in November.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.They are also a problem for the Federal Reserve, which is in charge of achieving price stability. The central bank has signaled it will raise interest rates by a quarter percentage point at its meeting next week, likely the first in a series of moves meant to increase the cost of borrowing and spending money and slow down the economy. By reducing consumption and slowing the labor market, the Fed is able to take some pressure off inflation over time.“Mortgage rates will go up, the rates for car loans — all of those rates that affect consumers’ buying decisions,” Jerome H. Powell, the Fed chair, told Congress last week. “Housing prices won’t go up as much, and equity prices won’t go up as much, so people will spend less.”Even as the Fed prepares to rein in demand, high gas costs tied to the conflict in Ukraine threaten to keep inflation elevated for longer. They could become a serious issue for central bank policymakers if they help convince consumers that the burst in prices will last. If people begin to expect inflation, they may change their behavior in ways that make it more permanent — accepting price increases more readily and asking for bigger raises to keep up.This is just the latest instance, as far as prices go, in which what can go wrong does seem to be going wrong.Inflation F.A.Q.Card 1 of 6What is inflation? More

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) decreased to 4.09% from 4.15% for loans with a 20% down payment.
Demand for refinances jumped 9% last week compared with the previous week.
Applications for a mortgage to purchase a home increased 9% from the previous week but were 7% lower than the same week one year ago.

A single family home is shown for sale in Encinitas, California.
Mike Blake | Reuters

After rising steadily for months, mortgage rates made a U-turn last week, and borrowers jumped to take advantage. The crisis in Ukraine rattled financial markets and caused a run on the relatively safer bond market. Yields fell and mortgage rates followed.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) decreased to 4.09% from 4.15%, with points remaining unchanged at 0.44 (including the origination fee) for loans with a 20% down payment, according to the Mortgage Bankers Association. The rate was 83 basis points lower one year ago.

As a result, demand for refinances jumped 9% last week compared with the previous week, but application volume was still half of what it was the same week one year ago, when rates were lower.
“Mortgage rates dropped for the first time in 12 weeks, as the war in Ukraine spurred an investor flight to quality, which pushed U.S. Treasury yields lower,” said Joel Kan, an MBA economist. “Looking ahead, the potential for higher inflation amidst disruptions in oil and other commodity flows will likely lead to a period of volatility in rates as these effects work against each other.”
Applications for a mortgage to purchase a home increased 9% from the previous week but were 7% lower than the same week one year ago. Homebuyers are less sensitive to weekly rate moves, and the jump in demand was likely due more to increased supply hitting the market for the spring season. Slightly lower mortgage rates didn’t hurt of course, especially given how high home prices are now.
“The average loan size remained close to record highs, with higher-balance loan applications continuing to dominate growth,” added Kan.
Mortgage rates surged back sharply to start this week, jumping more than 25 basis points in just two days, according to Mortgage News Daily. Investors are moving away from bonds, causing yields to rise, despite the ongoing crisis in Ukraine, which caused rates to drop at the outset.
“While the Ukraine situation does indeed drive demand for bonds, the associated inflation implications are simultaneously pushing demand away,” wrote Matthew Graham, chief operating officer at Mortgage News Daily. “The net effect was a move back up to the highest mortgage rates since early 2019.” 

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Employees at three more Buffalo-area Starbucks have voted to unionize, bringing the total number of company-owned stores with a union to six, out of roughly 9,000 nationwide.The results, announced Wednesday by the National Labor Relations Board, were the latest development in one of the most formidable challenges to a major corporation by organized labor in years. Workers at two Buffalo-area stores voted to unionize in December, while a third store voted to unionize in Mesa, Ariz., last month, dealing a blow to the union-free model that prevailed at the coffee-retailing giant for decades.Since the December votes, workers at more than 100 Starbucks stores in more than 25 states have filed for union elections, in which they are seeking to join Workers United, an affiliate of the Service Employees International Union.Workers in cities including Seattle, Boston, Rochester, N.Y., and Knoxville, Tenn., have begun voting or will do so this month.“These workers fought so hard for their union,” Gary Bonadonna Jr., the leader of Workers United in upstate New York, said in a statement. “We had their backs during this campaign and we’ll continue to have their backs at the bargaining table.”Reggie Borges, a Starbucks spokesman, said in a statement: “We will respect the process and will bargain in good faith guided by our principles. We hope that the union does the same.”The vote counts — 8 to 7, 15 to 12, and 15 to 12 — came as tension between the union and the company has been escalating.The union contends that Starbucks has been systematically cutting hours across the country to prompt the departure of longtime employees so it can replace them with workers who are unsympathetic to unionizing. It also has said Starbucks recently retaliated against pro-union employees in Buffalo by pressuring them to leave the company because they had limited their work availability, and by firing one over time and attendance infractions.In early February, the company fired seven Memphis employees who had sought to unionize, citing safety and security policies.“Starbucks is also using policies that have not previously been enforced, and policies that would not have resulted in termination, as a pretext for firing union leaders,” the union said in a statement, adding that it was confident that the fired workers would be reinstated.Last week, the union filed about 20 unfair labor practice charges, many of which accused Starbucks of singling out union supporters for harsher treatment.Mr. Borges said in an email that “any claims of anti-union activity are categorically false.” He said the company was not systematically cutting hours, which typically fall in the slow winter months of January and February. Starbucks generally tries to honor workers’ preferences for lower availability, he added, but it was unable to at a Buffalo store where several employees had sought to cut their availability at once. He said a worker fired because of time and attendance issues had previously been cited for instances of tardiness.Amy Zdravecky, a management-side lawyer at Barnes & Thornburg, said it was hard to imagine the union losing momentum at this point except as a result of developments at the bargaining table — for example, if the union negotiated a contract that workers considered disappointing.“Until employees see what, if anything, they’re going to get or not get in negotiations, the union has the advantage — they can go out and tell employees that we’ll do all these things for you,” Ms. Zdravecky said.Starbucks workers in Buffalo filed in an initial round of petitions to hold union elections in late August, citing concerns like understaffing and workplace safety amid the pandemic, as well as a desire to have a greater say in how their stores are run.The company soon dispatched out-of-town managers and officials to the city, including Starbucks’s president of retail for North America, whose presence union supporters have said they found intimidating and at times surreal.Starbucks has said the officials were trying to resolve operational issues like poor training and inefficient store layouts. Some emphasized the potential downsides of unionizing in meetings and discussions with workers.The company also substantially increased the number of workers in at least one of the first three stores voting, a move that the company said was to help with understaffing but that the union said was intended to dilute its support. The union later successfully challenged the ballots of some of these workers on the grounds that they weren’t actually based at the store, helping to secure its victory there.Workers at one of the locations where the union won on Wednesday, known as Walden & Anderson, said the company’s approach to their store was even more disruptive than its actions in the Buffalo-area stores that voted in the fall.Starbucks closed the Walden & Anderson store for roughly two months beginning in early September and turned it into a training facility, sending workers to other locations during that time.Colin Cochran was among the pro-union workers at the Starbucks store that was turned into a training facility.Libby March for The New York TimesLeaders of the union campaign at the store said this made it harder for them to communicate with co-workers and maintain support for the union, which had initially been high. “We just didn’t see people for the entire two months we were closed,” said one of the workers seeking to unionize, Colin Cochran. Union supporters did not have access to many of their colleagues’ phone numbers during this time.The store also added workers — from roughly 25 in early September to roughly 40 once the voting began in January. “It felt like every time we got someone on board, two new people would be hired,” Mr. Cochran said of the period after the store reopened in November. “It was like a hydra.” Mr. Cochran and a second worker, Jenna Black, said that the store held workers’ hours fairly steady in the fall and most of the winter, even as the company hired more workers, but that many employees had their hours reduced as the voting came to an end in late February and that some were now considering leaving as a result.“I was holding at 25 hours and then for the past couple of weeks I’ve been down to 16, 18 hours,” Ms. Black said. She added that while she loved her co-workers, “there is no reason to keep devoting my time and making this job a priority when I can’t live off it.”Mr. Cochran said the pattern created the impression that the store wanted the additional workers only in the run-up to the vote, to dilute union support.The union said that workers in several states, including Oregon, Virginia, Ohio, New York, Texas and Colorado, had also reported having their hours cut more than usual for the winter.Michaela Sellaro, a shift supervisor at a Denver store that is seeking to unionize, said she had been scheduled for an average of about 31 hours for the past four weeks after working an average of about 36 hours over the same weeks last year. “It feels like they are threatening our job security,” Ms. Sellaro said.Mr. Borges said that hours had been higher than normal in the fall at Walden & Anderson to provide additional training, but that hours there now reflected customer demand and that the same was true nationally. He cited the Omicron variant of the coronavirus as an additional factor in scheduling nationwide.“We always schedule to what we believe the store needs based on customer behaviors,” he said. “That may mean a change in the hours available, but to say we are cutting hours wouldn’t be accurate.” More

Job openings in the United States and the number of workers quitting their jobs remained near record highs in January, an indicator of demand for labor and of worker leverage.The data, released by the Labor Department on Wednesday as part of its monthly Job Openings and Labor Turnover Survey, or JOLTS report, was another sign of an economy that wobbled slightly yet remained sturdy when faced with the Omicron wave of the coronavirus this winter.Job openings dipped to 11.3 million, down slightly from a record in December, but were still up about 61 percent from February 2020.In a potential sign of the impact wrought by the variant’s spread, several industries that had been rebounding from the pandemic, and had been most hungry for workers, reported fewer job openings. Accommodation and food services experienced a drop of 288,000. Transportation, warehousing and utilities reported 132,000 fewer openings. But openings continued to increase in both manufacturing and the service sector at large.Some 4.3 million people left their jobs voluntarily in January, edging down somewhat from the record 4.5 million who quit in November. While layoffs picked up slightly in January, they were still hovering above historical lows.For Jeffrey Roach, the chief economist at LPL Financial, the most fascinating current in the labor market is the increased share of workers who are quitting jobs not to make a career change but simply to achieve higher pay.“You can see people are actually staying within their industry — and it really helps the ‘lower-skilled’ worker,” he said. “I think we’ll continue to see really high churn rates.”The share of Americans in their prime working years — ages 25 to 54 — who were either working or looking for work plummeted in 2020, yet it has recovered to a rate of 79.5 percent, within 1 percentage point of prepandemic levels, a much faster rebound than occurred after the last downturn.The prevailing environment is likely to increase the price of labor — a welcome development for workers who have dealt with stagnant wages and a lack of power for decades, and an unsettling one for employers as high inflation increases the cost of doing business.Some business executives and managers have expressed concern — in corporate earnings and in private calls — that “wage inflation” could set in and cut into profits if the rapid wage gains that workers achieved last year don’t taper off.“When it comes to their business, they’re very concerned about it: What does that mean to their margins going forward? What kind of pricing power do they have?” said Steve Wyett, chief investment strategist at BOK Financial, a regional bank based in Oklahoma, where unemployment is notably low at 2.8 percent. “How do we protect ourselves against this?”Data from the Federal Reserve Bank of Atlanta shows that workers who quit to take other jobs are receiving larger pay increases than those who are staying put, though much of this movement is in lower-wage sectors.After the Labor Department’s employment survey showed strong wage gains in January, hourly earnings were nearly flat in February. And even if wage gains stay strong, they remain far from runaway levels.Fed data shows that median annual pay increases in the American labor market have been well within the range — 3 to 7 percent — that prevailed from the 1980s until the 2007-9 recession. More

They have pointed to the Biden administration’s policies on the Keystone XL pipeline and certain oil and gas leases, which have had little impact on prices.WASHINGTON — As gas prices hit a high this week, top Republican lawmakers took to the airwaves and the floors of Congress with misleading claims that pinned the blame on President Biden and his energy policies.Mr. Biden warned that his ban on imports of Russian oil, gas and coal, announced on Tuesday as a response to Russia’s invasion of Ukraine, would cause gas prices to rise further. High costs are expected to last as long as the confrontation does.While Republican lawmakers supported the ban, they asserted that the pain at the pump long preceded the war in Ukraine. Gas price hikes, they said, were the result of Mr. Biden’s cancellation of the Keystone XL pipeline, the temporary halt on new drilling leases on public lands and the surrendering of “energy independence” — all incorrect assertions.Here’s a fact check of their claims.What Was Said“This administration wants to ramp up energy imports from Iran and Venezuela. That is the world’s largest state sponsor of terror and a thuggish South America dictator, respectively. They would rather buy from these people than buy from Texas, Alaska and Pennsylvania.”— Senator Mitch McConnell, Republican of Kentucky and the minority leader, in a speech on Tuesday“Democrats want to blame surging prices on Russia. But the truth is, their out-of-touch policies are why we are here in the first place. Remember what happened on Day 1 with one-party rule? The president canceled the Keystone pipeline, and then he stopped new oil and gas leases on federal lands and waters.”— Representative Kevin McCarthy, Republican of California and the minority leader, in a speech on Tuesday“In the four years of the Trump-Pence administration, we achieved energy independence for the first time in 70 years. We were a net exporter of energy. But from very early on, with killing the Keystone pipeline, taking federal lands off the list for exploration, sidelining leases for oil and natural gas — once again, before Ukraine ever happened, we saw rising gasoline prices.”— Former Vice President Mike Pence in an interview on Fox Business on TuesdayThese claims are misleading. The primary reason for rising gas prices over the past year is the coronavirus pandemic and its disruptions to global supply and demand.“Covid changed the game, not President Biden,” said Patrick De Haan, the head of petroleum analysis for GasBuddy, which tracks gasoline prices. “U.S. oil production fell in the last eight months of President Trump’s tenure. Is that his fault? No.”“The pandemic brought us to our knees,” Mr. De Haan added.In the early months of 2020, when the virus took hold, demand for oil dried up and prices plummeted, with the benchmark price for crude oil in the United States falling to negative $37.63 that April. In response, producers in the United States and around the world began decreasing output.As pandemic restrictions loosened worldwide and economies recovered, demand outpaced supply. That was “mostly attributable” to the decision by OPEC Plus, an alliance of oil-producing countries that controls about half the world’s supply, to limit increases in production, according to the U.S. Energy Information Administration. Domestic production also remains below prepandemic levels, as capital spending declined and investors remained reluctant to provide financing to the oil industry.Russia’s invasion of Ukraine has only compounded the issues.“When you throw a war on top of this, this is possibly the worst escalation you can have of this,” said Abhiram Rajendran, the head of oil market research at Energy Intelligence, an energy information company. “You’re literally pouring gasoline on general inflationary pressure.”These factors are largely out of Mr. Biden’s control, experts agreed, though they said he had not exactly sent positive signals to the oil and gas industry and its investors by vowing to reduce emissions and fossil fuel reliance.Mr. De Haan said the Biden administration was “clearly less friendly” to the industry, which may have indirectly affected investor attitudes. But overall, he said, that stance has played a “very, very small role pushing gas prices up.”President Biden announced a ban on imports of Russian oil in response to the country’s invasion of Ukraine.Tom Brenner for The New York TimesMr. Rajendran said the Biden administration had emphasized climate change issues while paying lip service to energy security.“There has been a pretty stark miscalculation of the amount of supply we would need to keep energy prices at affordable levels,” he said. “It was taken for granted. There was too much focus on the energy transition.”But presidents, Mr. Rajendran said, “have very little impact on short-term supply.”“The key relationship to watch is between companies and investors,” he said.It is true that the Biden administration is in talks with Venezuela and Iran over their oil supplies. But the administration is also urging American companies to ramp up production — to the dismay of climate change activists and contrary to Republican lawmakers’ suggestions that the White House is intent on handcuffing domestic producers.Speaking before the National Petroleum Council in December, Jennifer M. Granholm, the energy secretary, told oil companies to “please take advantage of the leases that you have, hire workers, get your rig count up.”Understand Rising Gas Prices in the U.S.Card 1 of 5A steady rise. More

How the Ruble’s Value Has Changed

Note: Scale is inverted to show the decline in the ruble’s value. Price as of 1:10 p.m. Eastern on the global currency market.Source: FactSetBy The New York TimesRussia’s currency continued its descent on Wednesday as trading in the ruble was restarted on the Moscow Exchange. But in an effort to stanch the currency’s decline, the Russian central bank issued an order further restricting access to U.S. dollars.The Central Bank of Russia said on Wednesday that owners of foreign-currency accounts in Russian banks would be allowed to withdraw only up to $10,000 in dollars (regardless of the currency in the account), and that the rest would have to be taken out in rubles. New foreign-currency accounts can be opened, but only rubles will be permitted to be withdrawn. The order will be in place until Sept. 9, the central bank said. Until then, banks cannot sell foreign currency to Russians, either.The measures seem intended to curb the ability of Russian citizens to convert their rubles into dollars or other currencies, as the central bank tries to support the national currency, which is rapidly losing its purchasing power.Russia’s ruble has lost about 40 percent of its value against the U.S. dollar this year as Western leaders have moved to isolate the country from the global economy with sanctions in response to its invasion of Ukraine. Those moves, which include the freezing of Russian central bank assets that are held in the United States, will make it harder for the country to prop up its currency.Since currency trading on the Moscow Exchange was halted on Friday, the United States and Britain said they would stop importing Russian oil, while the European Union laid out a plan to reduce its dependency on Russian energy, and Fitch Ratings said a default on Russia’s sovereign debt was “imminent.”“The further ratcheting up of sanctions, and proposals that could limit trade in energy, increase the probability of a policy response by Russia that includes at least selective nonpayment of its sovereign debt obligations,” Fitch Ratings said on Tuesday.The ruble was trading at 117 to the U.S. dollar in Russia on Wednesday, after closing at 105 rubles to the U.S. dollar on Friday. Trading in rubles in global currency markets, which was very limited, priced the ruble at about 139 to the U.S. dollar.Trading on the Moscow stock market is still halted, the central bank said. It last traded on Feb. 25. More

Americans have felt inflation at the hair salon and in the frozen food aisle. They have seen it while buying pet food, pantry staples and diapers. Yes, gas is pinching them. But so is the price of bacon. Nearly nine in 10 Americans say they have noticed prices rising around them, according to a survey […] More