Evelyn Reynolds

Federal Reserve officials will be restricted from owning individual stocks, bonds and other assets under rules announced Friday that first were set forth in October.
The new regulations extended and ban to cryptocurrencies, which were not included in the previous announcement.
They follow a controversy last year in which several officials traded positions just ahead of the Fed’s extraordinary measures to help the economy through the Covid crisis.

Federal Reserve officials won’t be able to trade a slew of assets including stocks and bonds — as well as cryptocurrencies — under new rules that became formal Friday.
Following up on regulations announced in October, the policymaking Federal Open Market Committee announced that most of the restrictions will take effect May 1.

The rules will cover FOMC members, regional bank presidents and a raft of other officials including staff officers, bond desk managers and Fed employees who regularly attend board meetings. They also extend to spouses and minor children.
“The Federal Reserve expects that additional staff will become subject to all or parts of these rules after the completion of further review and analysis,” a release announcing the rules stated.
The rules “aim to support public confidence in the impartiality and integrity of the Committee’s work by guarding against even the appearance of any conflict of interest,” the statement also said.
Central bank officials acted after disclosures last year that several senior Fed officials had been trading individual stocks and stock funds just before the time the central bank adopted sweeping measures aimed at boosting the economy in the early days of the Covid spread.

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Regional presidents Eric Rosengren of Boston and Robert Kaplan left their positions following the controversy.

Crypto ban

The announcement Friday extended the ban to cryptocurrencies like bitcoin, which were not mentioned in the original announcement in October.
Under the regulations, officials still holding market positions will still have 12 months to shed prohibited positions. New Fed officials will have six months to do so.
In the future, officials covered by the new rules must give 45 days’ notice before making any permissible asset purchases, a restriction that will go into effect July 1. They then will have to hold those positions for at least a year and will be banned from any trading during “periods of heightened financial market stress.” There is no set definition of the term, which will be determined by the Fed chair and the board’s general counsel.
Along with stocks, bonds and crypto, the ban extends to commodities, foreign currencies, sector index funds, derivatives, short positions and agency securities or using margin debt to buy assets.
Congress has been debating a measure that also will restrict its members from owning individual stocks, though it has not been adopted yet.

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While there are reasons to confirm President Biden’s Fed nominees, economists say concern that the central bank won’t act to rein in inflation aren’t be among them.
It is virtually guaranteed that the Fed will hike interest rates to combat prices even if Sarah Bloom Raskin, Lisa Cook and Philip Jefferson are yet to be confirmed.
The White House and top Democrats have in recent days worried that — without a fully staffed Fed board of governors — the central bank will lose its edge on rising prices.
“I think there are a lot of reasons why these nominees should be approved,” said Mark Zandi of Moody’s Analytics. “But I wouldn’t put fighting inflation at the top of the list.”

Federal Reserve Chairman Jerome Powell leaves a meeting in the office of Sen. Chris Van Hollen, D-Md., in Hart Building on Wednesday, October 6, 2021.
Tom Williams | CQ-Roll Call, Inc. | Getty Images

There may be plenty of reasons to confirm President Joe Biden’s nominees to the Federal Reserve, but economists say concern that the central bank won’t act to rein in inflation shouldn’t be among them.
It is virtually guaranteed that the Fed will hike interest rates next month to combat rising prices even if Sarah Bloom Raskin, Lisa Cook and Philip Jefferson are yet to be confirmed by the Senate, according to three economists who spoke with CNBC.

The Fed is “going to raise rates in March,” said Jason Furman, who served as chair of the Council of Economic Advisers in the Obama administration. “The only question is, do they raise by 25 basis points or 50 basis points?”
The White House and top Democrats have in recent days raised concerns that without a fully staffed Fed board of governors, the central bank will lose its edge on rising prices. But economists suggested the urgency behind that messaging is politically motivated and that the Fed’s chances to quell inflation aren’t tied to this confirmation process.

Democrats on the Senate Banking Committee are frustrated with an ongoing Republican boycott that is preventing them from advancing all five of the president’s Fed nominees, including current board members Chair Jerome Powell and Lael Brainard.
The GOP says the main reason behind their blockade is concern over Raskin, her views on climate policy and her prior work for fintech company Reserve Trust.
But economists who are tracking the inflation outlook say the Fed is equipped to curb inflation even if the politics stays messy.

Furman said lawmakers should take comfort in the fact that the Fed has already telegraphed several rates hikes ahead.
“I don’t think [the nominees] dramatically change the course of monetary policy one way or the other in the near future,” Furman, now a professor of economics at Harvard University, said of Raskin, Cook and Jefferson.
Asked for comment, the White House referred CNBC to a statement made by Treasury Secretary Janet Yellen in January about the president’s candidates.
“I am confident these nominees will build on that progress. I also know that these individuals will respect the tradition of an independent Fed, as they work to fight inflation, support a strong labor market and ensure our economic growth benefits all workers,” Yellen said on Jan. 14.
“I strongly believe that a fully staffed Federal Reserve is critical to our economic success, and I urge the Senate to act swiftly to confirm these nominees,” she added at the time.
The Fed, the globe’s most powerful central bank, is tasked by Congress to maximize employment and keep inflation in check through adjustments to interest rates. It tends to raise borrowing costs when it feels the economy may be overheating, and it cuts rates in times of economic duress.
It slashed rates to near zero in the spring of 2020 as the Covid-19 pandemic swept across the world and forced thousands of businesses nationwide to close. But now, with vaccines widely available and annualized inflation running north of 7%, the Fed is widely expected to make it more expensive to borrow throughout 2022.
Investors say there’s a 71% chance the Fed raises the overnight lending by 25 basis points at its March meeting, while 29% are betting they go big with a 50-basis-point jump, according to the CME Group’s FedWatch tool.
But with Republicans holding up the confirmation of the president’s nominees, some Democrats have suggested in recent days that the Fed could be left without sufficient firepower to curb the steep inflation.
“Everyone understands we need a full Federal Reserve Board — the first one in nearly a decade — to tackle inflation and bring prices down for American families,” Jen Psaki, the White House press secretary, said on Wednesday.
That sentiment was echoed a day later by Sen. Sherrod Brown, the chairman of the Senate Banking Committee that is attempting to recommend the president’s nominees to the broader Senate.
Brown, D-Ohio, also alluded to the ongoing GOP boycott and Republican Sen. Pat Toomey’s demand to hold Raskin back for further questioning.
“Ranking Member Toomey is holding up our fight against inflation because Ms. Bloom Raskin doesn’t remember a phone call from five years ago,” Brown said in a press release on Thursday.
Moody’s Analytics economist Mark Zandi said Thursday that he likes all of Biden’s nominees, but added that he’s certain the Fed will hike next month.

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“Oh yeah. That’s a slam dunk. It’s just a question of how many rate hikes this year, and for the March meeting, whether they should go for a 50-basis-point hike as opposed to a quarter-point hike,” Zandi, chief economist at Moody’s Analytics, said Thursday.
“I think there are a lot of reasons why these nominees should be approved,” Zandi said. “But I wouldn’t put fighting inflation at the top of the list.”
Michael Feroli, chief economist at JPMorgan, went even further.
He suggested Thursday evening that the additions of Raskin, Cook and Jefferson to the Fed’s governing body would make the central bank more “dovish,” or more apt in general to favor easier monetary policy and lower rates.
“The Board and Committee can operate fine without the confirmations,” he wrote in an email. “It’s not like adding three doves will speed up the hiking cycle.”

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The debacle over Olympic sponsorship shows how the U.S.-China relationship has turned into a minefield for companies trying to do business in both countries.WASHINGTON — Companies usually shell out for Olympic sponsorship because it helps their business and reflects well on their brands. But this year, with the Olympics in Beijing, Procter & Gamble paid even more to try to prevent any negative fallout from being associated with China’s repressive and authoritarian government.The company, one of 13 “worldwide Olympic partners” that make the global sports competition possible, hired Washington lobbyists last year to successfully defeat legislation that would have barred sponsors of the Beijing Games from selling their products to the U.S. government. The provision would have blocked Pampers, Tide, Pringles and other Procter & Gamble products from military commissaries, to protest companies’ involvement in an event seen as legitimizing the Chinese government.“This amendment would punish P.&G. and the Olympic movement, including U.S. athletes,” Sean Mulvaney, the senior director for global government relations at Procter & Gamble, wrote in an email to congressional offices in August.Some of the world’s biggest companies are caught in an uncomfortable situation as they attempt to straddle a widening political gulf between the United States and China: What is good for business in one country is increasingly a liability in the other.China is the world’s biggest consumer market, and for decades, Chinese and American business interests have described their economic cooperation as a “win-win relationship.” But gradually, as China’s economic and military might have grown, Washington has taken the view that a win for China is a loss for the United States.The decision to locate the 2022 Olympic Games in Beijing has turned sponsorship, typically one of the marketing industry’s most prestigious opportunities, into a minefield.Companies that have sponsored the Olympics have attracted censure from politicians and human rights groups, who say such contracts imply tacit support of atrocities by the Chinese Communist Party, including human rights violations in Xinjiang, censorship of the media and mass surveillance of dissidents.“One thing our businesses, universities and sports leagues don’t seem to fully understand is that, to eat at the C.C.P.’s trough, you will have to turn into a pig,” Yaxue Cao, editor of ChinaChange.org, a website that covers civil society and human rights, told Congress this month.The tension is playing out in other areas as well, including with regards to Xinjiang, where millions of ethnic minorities have been detained, persecuted or forced into working in fields and factories. In June, the United States will enact a sweeping law that will expand restrictions on Xinjiang, giving the United States power to block imports made with any materials sourced from that region.Multinational firms that are trying to comply with these new import restrictions have found themselves facing costly backlashes in China, which denies any accusations of genocide. H&M, Nike and Intel have all blundered into public relations disasters for trying to remove Xinjiang from their supply chains.Explore the Games Propaganda Machine: China has used a variety of tools such as bots and fake social media accounts to promote a vision of the Games that is free of controversy.Aussie Pride: Australia has won more medals than ever before at the 2022 Winter Games. Could the country turn into a winter sports wonderland?At High Speed: The ‘Snow Dream’ train line, built to serve the Winter Olympics, has been a source of excitement — and a considerable expense.Reporter’s View: A typical day in Beijing for our reporters may include a 5 a.m. alarm, six buses, a pizza lunch and lots of live-blogging. For some, it’s the first time back in China in a while.Harsher penalties could be in store. Companies that try to sever ties with Xinjiang may run afoul of China’s anti-sanctions law, which allows the authorities to crack down on firms that comply with foreign regulations they see as discriminating against China.Beijing has also threatened to put companies that cut off supplies to China on an “unreliable entity list” that could result in penalties, though to date the list doesn’t appear to have any members.“Companies are between a rock and a hard place when it comes to complying with U.S. and Chinese law,” said Jake Colvin, the president of the National Foreign Trade Council, which represents companies that do business internationally.President Biden, while less antagonistic than his predecessor, has maintained many of the tough policies put in place by President Donald J. Trump, including hefty tariffs on Chinese goods and restrictions on exports of sensitive technology to Chinese firms.The Biden administration has shown little interest in forging trade deals to help companies do more business abroad. Instead, it is recruiting allies to ramp up pressure on China, including by boycotting the Olympics, and promoting huge investments in manufacturing and scientific research to compete with Beijing. The pressures are not only coming from the United States. Companies are increasingly facing a complicated global patchwork of export restrictions and data storage laws, including in the European Union. Chinese leaders have begun pursuing “wolf warrior” diplomacy, in which they are trying to teach other countries to think twice before crossing China, said Jim McGregor, chairman of APCO Worldwide’s greater China region.He said his company was telling clients to “try to comply with everybody, but don’t make a lot of noise about it — because if you’re noisy about complying in one country, the other country will come after you.”Some companies are responding by moving sensitive activities — like research that could trigger China’s anti-sanctions law, or audits of Xinjiang operations — out of China, said Isaac Stone Fish, the chief executive of Strategy Risks, a consultancy.An NBC production crew in Beijing. An effort to prevent Olympic sponsors, like NBC, from doing business with the U.S. government was cut from a defense bill last year.Gabriela Bhaskar/The New York TimesOthers, like Cisco, have scaled back their operations. Some have left China entirely, though usually not on terms they would choose. For example, Micron Technology, a chip-maker that has been a victim of intellectual property theft in China, is closing down a chip design team in Shanghai after competitors poached its employees.“Some companies are taking a step back and realizing that this is perhaps more trouble than it’s worth,” Mr. Stone Fish said.But many companies insist that they can’t be forced to choose between two of the world’s largest markets. Tesla, which counts China as one of its largest markets, opened a showroom in Xinjiang last month.“We can’t leave China, because China represents in some industries up to 50 percent of global demand and we have intense, deep supply and sales relationships,” said Craig Allen, the president of the U.S.-China Business Council.Companies see China as a foothold to serve Asia, Mr. Allen said, and China’s $17 trillion economy still presents “some of the best growth prospects anywhere.”“Very few companies are leaving China, but all are feeling that it’s risk up and that they need to be very careful so as to meet their legal obligations in both markets,” he said.American politicians of both parties are increasingly bent on forcing companies to pick a side.“To me, it’s completely appropriate to make these companies choose,” said Representative Michael Waltz, a Florida Republican who proposed the bill that would have prevented Olympic sponsors from doing business with the U.S. government.Mr. Waltz said participation in the Beijing Olympics sent a signal that the West was willing to turn a blind eye to Chinese atrocities for short-term profits.The amendment was ultimately cut out of a defense-spending bill last year after active and aggressive lobbying by Procter & Gamble, Coca-Cola, Intel, NBC, the U.S. Chamber of Commerce and others, Mr. Waltz said.Procter & Gamble’s lobbying disclosures show that, between April and December, it spent more than $2.4 million on in-house and outside lobbyists to try to sway Congress on a range of tax and trade issues, including the Beijing Winter Olympics Sponsor Accountability Act.Lobbying disclosures for Coca-Cola, Airbnb and Comcast, the parent company of NBC, also indicate the companies lobbied on issues related to the Olympics or “sports programming” last year.Procter & Gamble and Intel declined to comment. Coca-Cola said it had explained to lawmakers that the legislation would hurt American military families and businesses. NBC and the Chamber of Commerce did not respond to requests for comment.Many companies have argued they are sponsoring this year’s Games to show support for the athletes, not China’s system of government.In a July congressional hearing, where executives from Coca-Cola, Intel, Visa and Airbnb were also grilled about their sponsorship, Mr. Mulvaney said Procter & Gamble was using its partnership to encourage the International Olympic Committee to incorporate human rights principles into its oversight of the Games.“Corporate sponsors are being a bit unfairly maligned here,” Anna Ashton, a senior fellow at the Asia Society Policy Institute, said in an event hosted by the Center for Strategic and International Studies, a Washington think tank.Companies had signed contracts to support multiple iterations of the Games, and had no say over the host location, she said. And the funding they provide goes to support the Olympics and the athletes, not the Chinese government.“Sponsorship has hardly been an opportunity for companies this time around,” she said. More

The Federal Reserve on Friday adopted a new set of ethics rules meant to prevent questionable financial market trading activity by top officials, a sweeping response to a scandal that has rocked the central bank since late last year.Fed officials traded in individual stocks, real estate securities and stock funds in 2020, a year in which the central bank rolled out a range of pandemic response programs that placed officials’ day-to-day decisions at the core of what happened in financial markets. Three high-ranking policymakers resigned earlier than they had planned after news of the trading broke last year and early in 2022.Jerome H. Powell, the Fed chair, acknowledged in the wake of the revelations that he and his colleagues were not “happy” with what had happened and said they would revamp the central bank’s ethics rules to prevent a similar situation in the future.The new rules, which were previewed in October, aim to fulfill that promise. They prevent senior officials from purchasing individual stocks or funds tracing business sectors, the Fed said, and they ban investments in individual bonds, cryptocurrencies, commodities or foreign currencies, among other securities.Senior Fed officials must now announce that they are buying or selling a security 45 days in advance, and that notice will not be retractable. Investments must be held for at least one year under the new guidelines.The Fed’s 12 regional bank presidents will be required to publicly disclose securities transactions within 30 days, the way that its seven board members in Washington already do. They must post financial disclosures on their bank websites, something they now do only sporadically.The fresh set of rules will apply to a wide array of personnel with access to sensitive information, from reserve bank first vice presidents and research directors to high-ranking staff members and people designated by the chair.The Fed will also extend its financial trading blackout period — which typically applies in the run-up to Fed meetings — by one day after each meeting. That will align it with the period in which Fed officials are not allowed to give speeches.Most of the restrictions will take effect on May 1, although the new rules on the advance notice and preclearance of transactions will take effect on July 1.Financial disclosures released in late 2021 showed that Robert S. Kaplan, the former Federal Reserve Bank of Dallas president, had made big individual-stock trades, while Eric S. Rosengren, the Boston Fed president, had traded in real estate securities. Mr. Kaplan resigned in September, citing the scandal; Mr. Rosengren resigned simultaneously, citing health issues.Richard H. Clarida, then the Fed’s vice chair, sold and then rapidly repurchased a stock fund on the eve of a major Fed decision, corrected financial disclosures showed. Mr. Clarida also resigned slightly earlier than planned, though he did not cite a reason. More

Sales of previously owned homes in January rose 6.7% from December to a seasonally adjusted annualized rate of 6.5 million units, according to the National Association of Realtors.
The supply of homes for sale fell to a record low, down 16.5% from a year ago.
Tight supply and strong demand pushed the median price of a home sold in January to $350,300, an increase of 15.4% from January 2021.

A sold sign is posted in front of a home in Phoenix, Arizona.
Justin Sullivan | Getty Images

Sales of previously owned homes in January rose 6.7% from December to a seasonally adjusted annualized rate of 6.5 million units, according to the National Association of Realtors. That exceeded Wall Street expectations significantly. Sales were 2.3% lower compared with January 2021.
The supply of homes for sale fell to a record low, down 16.5% from a year ago. There were just 860,000 homes for sale at the end of January. At the current sales pace it would take just 1.6 months to exhaust that inventory. A 4 to 6-month supply is considered a balanced market. That is also a record low.

“Seller traffic is very very low, implying that inventory is struggling to make the turn. Realtors are indicating multiple bidding wars are still happening,” said Lawrence Yun, chief economist for the Realtors.
Tight supply and strong demand pushed the median price of a home sold in January to $350,300, an increase of 15.4% from January 2021.
That price is being somewhat skewed by the fact that the bulk of sales activity is on the higher end of the market. Supply is leanest on the low end. Homes priced between $100,000 and $250,000 were down 23% from a year ago, while sales of homes priced between $750,000 and $1 million rose 33%. Sales of homes priced above $1 million were up 39%.
Homes are also selling fast, with an average 19 days to go under contract. One year ago, when the market was also strong, days-on-market was 21.
These sales are based on contracts signed in November and December, before mortgage rates began to rise sharply. The average rate on the 30-year fixed loan was around 3.2% during that time. Now it is just over 4%, according to Mortgage News Daily.

The share of sales made all in cash rose to 27% from 19% a year ago. Part of that may be due to a rise in the investor share to 22% from 15% a year ago.
“Investors are really popping out, and this may be why we’re seeing a pop in home sales,” said Yun.
“The major question is whether rising rates will quench housing demand that stems, in large part, from a demographic tidal wave of young households at key homebuying ages,” said Danielle Hale, chief economist for Realtor.com. “Our expectation is that we’ll continue to see home sales at a relatively high level throughout 2022, as post-pandemic shifts like rising workplace flexibility enable would-be buyers to expand their geographic search horizons and find an affordable place to call home.”
Sales of newly-built homes, which are counted by contracts signed during the month not closings, jumped nearly 12% in December from November. Buyers are turning more to new construction because of the very low supply of existing homes for sale. Unfortunately builders are not keeping up with demand, as supply chain and labor issues slow production.

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The average rate on a 30-year, fixed-rate mortgage is now the highest since May 2019. And home prices are expected to rise, though probably more slowly.Home prices remain high, and rising borrowing costs are adding to the challenge of buying a home heading into the traditional spring selling season.The pace of housing price increases may slow from double- to single-digit percentages this year, said Danielle Hale, the chief economist for Realtor.com. But prices are still expected to go up, and conditions will probably continue to favor sellers.“Prices will continue to grow, just at a slower pace,” she said, and one of the main reasons is that mortgage rates are expected to rise. “Higher mortgage rates decrease affordability for anyone taking out a mortgage,” which the majority of home buyers do, she said.The average rate on a 30-year, fixed-rate mortgage this week rose to 3.92 percent, the highest rate since May 2019, according to the mortgage finance giant Freddie Mac. A year ago, the average rate was 2.81 percent. Freddie Mac’s weekly survey looks at loans used to buy homes, rather than at borrowers refinancing loans they already have.Mortgage rates are rising quickly. The Mortgage Bankers Association forecasts average rates will be slightly above 4 percent by the end of the year — still low in historic terms, but higher than the 3 percent or lower that borrowers have been seeing. (The association includes rates for refinances as well as purchases in its forecast.)Why are rates rising? In response to higher inflation and a strong employment market, the Federal Reserve is expected in March to begin a series of increases in its benchmark interest rate, indirectly helping to push up mortgage rates. (In general, mortgage rates are tied to the 10-year Treasury bond, which is affected by various factors, including the outlook for inflation.) Consumer price increases recently have reached levels not seen in 40 years, mainly because of lingering supply constraints from the pandemic.The average borrower with a 20 percent down payment would pay about $100 more a month on a new mortgage than one taken out at the end of last year because of rising rates and higher home prices, said Andy Walden, vice president of enterprise research strategy at Black Knight, a mortgage data provider.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: We asked readers to send questions about inflation. Top experts and economists weighed in.What’s to Blame: Did the stimulus cause prices to rise? Or did pandemic lockdowns and shortages lead to inflation? A debate is heating up in Washington.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.Rates are rising as strong demand for homes, along with a tight supply of properties for sale, has pushed up home prices. The typical sale price of a previously owned home in 2021 was just under $347,000, according to the National Association of Realtors — an increase of nearly 17 percent from 2020.Shoppers should still expect a competitive spring housing market, Ms. Hale said. Some potential buyers who have been on the fence may move quickly to lock in mortgage rates before they rise further. “It gives shoppers some urgency to close sooner rather than later,” she said.But some shoppers — particularly first-time buyers — may decide to wait until even higher rates help cool off prices later in the year. The largest share of home buyers are millennials ages 21 to 40, many of whom are first-time buyers, according to the National Association of Realtors.“The spring season will be very interesting,” said Lawrence Yun, the chief economist with the Realtors association.Ultimately, the housing market needs an increase in inventory, Mr. Yun said. “We need a supply of empty homes.” Builders have faced challenges in keeping newly built homes affordable including high lumber prices and difficulty finding construction workers.Buyers may need to consider more affordable homes in less urban areas, Mr. Yun said. That may depend on whether homeowners expect to be able to continue working remotely.One variable in the number of homes for sale is the winding down of mortgage forbearances granted during the pandemic. Many homeowners have been able to resume payments after their payment pause expired. But some may be unable to, forcing them to sell their homes, said Michael Fratantoni, the chief economist with the Mortgage Bankers Association. The number of borrowers in forbearance has been declining, to an estimated 705,000 homeowners at the end of 2021.Inflation F.A.Q.Card 1 of 6What is inflation? More

St. Louis Federal Reserve President James Bullard cautioned that without action on interest rates, inflation could become an even more serious problem.
“We’re at more risk now than we’ve been in a generation that this could get out of control,” he said during a panel talk at Columbia University.
Bullard has called for a full percentage point in rate hikes by July.

James Bullard
Olivia Michael | CNBC

NEW YORK — St. Louis Federal Reserve President James Bullard cautioned Thursday that without central bank action on interest rates, inflation could become an even more serious problem.
“We’re at more risk now than we’ve been in a generation that this could get out of control,” he said during a panel talk at Columbia University. “One scenario would be … a new surprise that hits us that we can’t anticipate right now, but we would have even more inflation. That’s the kind of situation that we want to … make sure it doesn’t occur.”

Bullard has made news lately with his calls for aggressive Fed action. He has advocated for a full percentage point in rate increases by July in an effort to stem price surges that are running at the fastest pace in 40 years.

In his remarks Thursday, Bullard repeated his assertion that the Fed should “front-load” rate hikes as way to get ahead of inflation running at a 7.5% clip over the past year.
Fed officials had been resisting tightening policy, insisting for much of last year that the current run-up in prices was tied to pandemic-specific factors, such as clogged supply chains and outsized demand for goods over services, and would fade over time.
“Overall, I’d say there’s been too much emphasis and too much mindshare devoted to the idea that inflation will dissipate at some point in the future,” Bullard said. “We’re at risk that inflation won’t dissipate, and 2022 will be the second year in a row of quite high inflation. So that’s why given this situation, the Fed should move faster and more aggressively than we would have in other circumstances.”
The Fed has indicated it likely will start raising interest rates in March, which would be the first increase in more than three years. After that, markets are looking for an additional five or six increases in 25 basis-point increments. A basis point is equal to 0.01%.

Bullard said the upcoming change in policy shouldn’t be viewed as an attempt to restrict the markets and the economy.
“It’s not tight policy. Don’t let anybody tell you it’s tight policy,” he said. “It’s removal of accommodation that will signal that we take our responsibility seriously.”
Market pricing for rate hikes has tempered over the past day or two, particularly after a release Wednesday of the January meeting minutes of the Federal Open Market Committee showed officials are looking to take a measured approach toward the removal of policy help.
Traders are now pointing to a 25 basis-point hike in March after previously looking to a 50 basis-point move, according to CME data. The probability for seven hikes dropped Thursday to 43% after approaching 70% earlier in the week.

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A labor shortage that began as businesses reopened from pandemic lockdowns is helping to push up pay. The Fed is watching carefully.Amazon, Bank of America and Chipotle are among a spate of companies raising wages this year as they compete for workers in a labor market with more open positions than unemployed job seekers.But that positive development for workers could morph into a challenge for the Federal Reserve if climbing wages help to keep inflation high, prompting employees to ask for even more money and generating an upward spiral.So far, many economists think such a situation can be kept at bay. But the Fed is closely monitoring inflation and pay data to assess the risk, because the consequences if wages and prices begin to drive each other steadily higher could be serious, requiring a response from the central bank that could be economically painful.The Fed is already poised to raise interest rates in March in an attempt to begin cooling off the economy as inflation runs at its fastest pace in 40 years. But if it needed to restrain a self-perpetuating burst in wages and prices, officials might decide to adjust policy more drastically. Higher interest rates could abruptly hit the brakes on lending and spending, potentially sending the United States into recession and foiling central bankers’ hopes of guiding growth gently toward a more sustainable path.“I think we’re much more likely to have something messier than a magical soft landing,” said Olivier Blanchard, an economist at the Peterson Institute for International Economics. “The wage evolutions are going to be the thing to look at.”Wages are already rising sharply. Pay for restaurant servers and hotel workers began to increase notably in 2021 as companies, reopening after lockdown, struggled to rehire people quickly. Now a wide array of industries are giving raises: The government’s latest employment report showed pay accelerating sharply for education and health workers, manufacturers, and professional and business services.Average hourly earnings jumped 5.7 percent in the year through January, a full percentage point more than economists had forecast.Earnings calls are replete with chief executives explaining that they are increasing pay to attract and retain talent. Unions have won pay bargaining fights. And the White House regularly celebrates signs that power in the work force seems to have shifted toward employees and away from employers.For the most part, that’s good news for labor. But economists have increasingly warned that the confluence of economic trends shaping up now — high inflation, a sense among consumers that prices might stay high for a while and a strong labor market that has handed workers bargaining power — could set the stage for a situation in which wage growth and prices feed off each other.“The combination of very high inflation, hot wage growth and high short-term inflation expectations means that concerns about falling into a wage-price spiral deserve to be taken seriously,” Goldman Sachs economists wrote in a note last week.That would be a big shift. America has not experienced a wage-price spiral since the 1970s and early 1980s, when rapid inflation and skyrocketing wages seemed to perpetuate each other. The Fed lifted interest rates to double digits and caused a painful recession to bring prices under control. Both wage growth and inflation have been slow in the decades since — until now.But even if wages and prices are both rising now, it is not clear that they are egging each other on yet, which is a crucial distinction. In fact, labor market experts point out three big reasons to doubt that a wage-price spiral will happen today.Chief among them: Productivity growth looks strong. If each individual worker can churn out more goods and services, companies should be able to pay more without hurting their profit margins and leading them to pass along the higher costs. Nick Bunker, an economist at the Indeed Hiring Lab, said recent productivity data was an encouraging sign but not a definitive one.“It’s really hard to observe in real time,” he said of the data, noting that the numbers jump around a lot. “I think it’s something to keep an eye on.”It is also unclear just how much wage bargaining power employees have, even with employers eager to hire. Wage growth appears to have been falling behind price increases for many income groups in recent months, suggesting that workers aren’t managing to persuade their companies to compensate them fully for rising costs. Unionization is much lower than in the 1970s, which could leave workers with fewer tools to bargain up pay.If that begins to crimp consumers’ ability to buy new couches and cars, it could cause demand to moderate, naturally restraining inflation.And the tie between wages and prices has been tenuous in recent decades. While research has found a link between the two in the 1960s and 1970s, the relationship collapsed after the early 1980s and has remained tame since.“The relationship between wage growth and services inflation just isn’t that tight,” said Laura Rosner-Warburton, an economist at MacroPolicy Perspectives. “Yes, you will see more inflation from wages in 2022. The question is how much?”A coffee shop in New York advertised open positions this month.Amir Hamja for The New York TimesWhile a wage-price spiral is on a “large list of risk factors” that the administration is closely watching, the “dominant forecast” is that the labor market will stay strong and price gains will moderate this year, said Jared Bernstein, a member of the White House Council of Economic Advisers.Wall Street economists generally think inflation will fade toward 3 percent this year, based on recent analyst notes and interviews. A recent survey from the Federal Reserve Bank of New York showed that consumers, who had been penciling in higher inflation in the years ahead, have begun to lower their expectations for price increases.But several forecasters said there was room for humility and wariness, because the pandemic economy has repeatedly confounded expectations. It has also drastically changed America’s economic backdrop.“The last 20 years have been years of very low inflation, very stable inflation,” Mr. Blanchard said. Before the coronavirus, inflation had hovered around — and then below — 2.5 percent for decades. Today, it has jumped to 7.5 percent.As prices for products including gas, steaks, bacon and camping equipment climb rapidly, eating into paychecks and dominating headlines, consumers are more likely to take note and ask for better pay.“Things change completely when inflation is a big number,” Mr. Blanchard said. “Salience changes.”There are signs that wages are feeding into price increases, at the margin. Prices have recently begun to rise sharply for core services, a set of purchases outside of health care, rent and transportation for which wages tend to make up a major cost of production.“That was concerning,” said Alan Detmeister, an economist at UBS who formerly led the Fed’s wage and price section. But, he added, it is hardly conclusive.More anecdotally, stories of workers winning big wage increases in a tight labor market abound.While wages in lower-qualification fields like leisure and hospitality have been rising rapidly for months, professional pay may also be on the cusp of picking up: Banks have been making big base salary increases, and Amazon will raise its maximum base salary for corporate and technology workers to $350,000 from $160,000 as it competes for a limited pool of highly trained employees.Amazon, which has also increased wages for warehouse employees, has raised prices partly in response.“With the continued expansion of Prime member benefits and the increased member usage that we’ve seen, as well as the rise in wages and transportation costs, Amazon will increase the price of our Prime membership in the United States,” Brian T. Olsavsky, the company’s chief financial officer, said on a Feb. 3 earnings call. The monthly price is rising to $14.99 from $12.99, and the annual membership is jumping to $139 from $119.“This is our first price increase since 2018,” Mr. Olsavsky noted.Other companies are raising pay but have said they are covering the climbing costs by improving efficiency. That’s the sort of sweet spot the White House and the Fed are hoping for, because it could leave workers earning more without pressuring prices relentlessly up.“We do anticipate when we do our annual review process that we will have a nominally higher wage rate increase provided to our associates,” Kevin Hourican, president and chief executive at the food distributor Sysco, said on a Feb. 8 earnings call. “And we have productivity improvement efforts that can help offset those types of increases.” More