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    Restaurants fight back against the FTC crackdown on ‘junk fees’ as diners balk at new charges

    A proposed rule from the Federal Trade Commission aims to crack down on “junk fees,” but restaurants are hoping their fees and surcharges will still be allowed.
    In 2023, 15% of restaurant owners added surcharges or fees to checks because of higher costs, according to the National Restaurant Association.
    Restaurant operators say the fees keep their menu prices lower, improve employee compensation and are better for customers.

    Leopatrizi | E+ | Getty Images

    Lawmakers want to crack down on “junk fees,” but restaurants are trying to stay out of the fight.
    Surcharges or fees covering everything from credit card processing to gratuities to “inflation” have become more popular on restaurant checks in recent years.

    Last year, 15% of restaurant owners added surcharges or fees to checks because of higher costs, according to the National Restaurant Association. In the second quarter, 3.7% of restaurant transactions processed by Square included a service fee, more than double the beginning of 2022, according to a recent report from the company.
    Opponents of the practice say those fees and surcharges may surprise customers, hoodwinking them into paying more for their meals at a time when their wallets are already feeling thin. Fed-up diners compiled spreadsheets via Reddit of restaurants in Los Angeles, Chicago and D.C. charging hidden fees. Even the Onion took a swing at the practice, publishing a satirical story in May with the headline “Restaurant Check Includes 3% Surcharge To Provide Owner’s Sugar Baby With Birkin.”
    The Biden administration has broadly targeted so-called junk fees, like an undisclosed service charge for concert tickets or unexpected resort fees when checking out of a hotel. This fall, the Federal Trade Commission is expected to publish a rule banning businesses from “charging hidden and misleading fees.”

    U.S. President Joe Biden delivers remarks about retirement security in the State Dining Room at the White House on October 31, 2023 in Washington, DC. The Biden Administration is attempting to crack down on so-called “junk fees” in retirement accounts with a rule prosed by the U.S. Labor Department.
    Chip Somodevilla | Getty Images

    Restaurants are trying to stay out of the Biden administration’s crosshairs. They say surcharges and fees are necessary to keep their businesses afloat and to compensate their employees fairly in a competitive industry with razor-thin profit margins.
    “The challenge for the restaurants is that not all fees are junk fees … People know what they’re paying for when it comes to most fees that are on a restaurant bill,” said Sean Kennedy, executive vice president of public affairs for the National Restaurant Association.

    Fighting fees

    Some customers might disagree with Kennedy.
    While federal law makes it illegal for management to keep their workers’ tips, mandatory service charges are the property of the restaurant. Some states, like New York, have their own laws that say service charges belong to staff.
    A Denver-based restaurant worker said in a public comment responding to the FTC’s proposed rule that his employer describes the fee to customers as “equitably distributed to the staff.” But he was told when he was hired that the business keeps 30% of the proceeds.
    Service fees increase the risk of wage theft, because employers might claim that the money goes to workers but fail to distribute it, the National Women’s Law Center wrote in its public comment. Moreover, customers who pay a service charge are less likely to tip on top of the check, hurting workers’ income, the non-profit organization said.

    The restaurant perspective

    For their part, restaurant operators argue that service fees and other surcharges help them pay their employees more and provide better benefits.
    When Galit, a Middle Eastern restaurant in Chicago, opened its doors in 2019, it tacked on an optional 2% fee to cover health-care costs for its workers. These days, the fee is 4%, plus the restaurant adds a 20% service charge to each bill for hourly workers. The fees are stated clearly on its website, its Resy page and its menu.
     Co-owner and general manager Andres Clavero, who has an accounting background, said the restaurant chose that approach for a few different reasons.
    “We can dictate where it all goes, so some of our service charge of 20% goes to the back of house,” Clavero said.
    Moreover, higher menu prices could scare away customers, plus diners would have to pay higher sales tax. Galit would also have higher payroll taxes. And the service charge aims to address issues with tipping. The practice has grown more controversial in recent years, thanks to studies that connect it to sexual harassment and racial discrimination.
    If the fees were instead baked into the restaurant’s prices, customers might choose cheaper options that don’t provide the same benefits for its employees, Clavero said.
    In some cases, fees help restaurants navigate tricky legislation. For example, service charges became much more common in D.C. after voters approved Initiative 82, which will phase out the tipped wage by 2027. In March, the city passed a bill protecting service fees of 20% or less.
    Kaliwa, a Southeast Asian restaurant in D.C., said it implemented an 8% surcharge to manage rising labor and operating costs.
    “Our priority is to remain transparent with our guests, ensuring they understand the reasons behind these fees,” Kaliwa director Peter Demetri said.
    For Ming-Tai Huh, the head of Square’s restaurant business and a partner of Cambridge Street Hospitality Group, service fees have helped some of his Boston restaurants pay cooks and dishwashers more.
    Massachusetts law forbids sharing servers’ tips with kitchen workers. Thanks to the higher pay from the surcharges, more of the restaurant company’s workers have opted into its health-care program.
    Huh said that the service charge was easier to implement at the company’s fine-dining restaurants. But CSHG ended up taking it away from a fast-casual eatery because of customer pushback. Instead, the company just raised menu prices.

    Lobbyists vs. legislators

    On the state level, restaurants have already had some success in getting excluded from the fight over junk fees.
    In California, last-minute legislation excluded bars and restaurants – as well as grocery stores and grocery delivery services – from having to list the mandatory fees that they charge customers. As a result, the industry was exempt from a broad anti-junk-fee law that went into effect on July 1.
    “We believe that allowing the many restaurants who for decades have used auto gratuity instead of tips, (which is more fair and equitable), and more recently who have added service charges to help offset things like the SF Health Care Security Ordinance, will make it possible for restaurants to continue to support pay equity and contribute to worker health care,” the Golden Gate Restaurant Association wrote in a statement following the legislation’s passage.

    Close-up of a receipt showing a Convenience Fee in addition to charges for food items, Oakland, California, June 12, 2024. California’s SB 478 law would ban so-called “junk fees”.
    Smith Collection | Gado | Archive Photos | Getty Images

    The National Restaurant Association argues that getting rid of fees will lead to customer confusion, higher prices, less transparency and costly compliance. The trade group estimates that the cost for new menus alone would reach more than $4,800 per restaurant.

    Exceptions to the rule

    Even restaurant operators admit that not all fees and surcharges are worth protecting.
    Clavero opposes restaurants that use Covid surcharges more than four years after the pandemic temporarily shuttered dining rooms.
    “To have that, to me, is a cry for help. That’s not being fully open and honest about where your money is going,” he said.
    For its part, the National Restaurant Association said it’s pushing the FTC to protect three fees commonly charged by restaurants: large party, delivery and credit card processing.
    Kennedy said the trade group is trying to help operators preserve their razor-thin margins of 3% to 5%, which is difficult as the costs of doing business keep rising. For example, credit card swipe fees have doubled over the last decade, and are now the third-highest cost for restaurants, according to Kennedy.
    “What we have really been instilling in or membership is to be as open and transparent and public about it as possible, so customers know exactly what they’re getting into when they sit down to dine at their favorite restaurant,” Kennedy said. More

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    Bronfman’s Paramount bid could keep Shari Redstone involved at the company

    Edgar Bronfman Jr. is open to having Shari Redstone stay involved at Paramount if the special committee accepts his consortium’s bid for a controlling stake.
    Skydance’s David Ellison has also held conversations with Redstone about her future with the company.
    One of the individuals who is part of Bronfman’s bid is former AOL CEO Jon Miller. Miller and Redstone run Advancit Capital, a small venture capital firm that invests in media and technology.

    Edgar Bronfman, Jr.
    Cameron Costa | CNBC

    Edgar Bronfman Jr.’s offer for a controlling stake in Paramount Global could keep Shari Redstone close to the company, if his bid is successful.
    Bronfman is open to having Redstone, currently non-executive chairman at Paramount, remain involved with the company if the Paramount special committee accepts his consortium’s bid for National Amusements, the controlling shareholder, according to a person familiar with the matter.

    Bronfman has raised $6 billion to challenge Skydance Media for ownership of National Amusements, the holding company founded by Sumner Redstone, according to people familiar with the matter. Both Bronfman’s bid and Skydance’s bid would also include money to buy out a percentage of Paramount Global common shareholders.
    At $6 billion, Bronfman’s bid would give cash to about 20% of Class B holders at $16 per share. Skydance would pay out about 50% of current Paramount common investors at $15 per share as part of its bid, according to the people familiar.
    It’s not clear if Redstone prefers one offer over the other. The Paramount Global special committee will determine if Bronfman’s offer is a superior proposal for shareholders by Aug. 28. If the committee decides Bronfman’s offer is better, Skydance will then have four business days to match. The deadline for the entire process to be concluded is Sept. 5.
    Bronfman still has a few more days to raise more money for a competing bid to counter Skydance, which agreed to an $8 billion deal to merge with Paramount Global last month. The special committee earlier this week extended the so-called “go-shop” period — during which it could entertain competing offers — by 15 days to review Bronfman’s initial bid.
    One of the individuals who is part of Bronfman’s bid is former AOL CEO Jon Miller, suggesting Redstone could potentially have more control over a future Paramount Global than she’d get with Skydance. Miller, a close ally of Redstone, has been connecting Bronfman with potential capital and would likely take a role with the company if it came under Bronfman’s stewardship — perhaps a board seat and an operational job — according to people familiar with the matter. Bronfman would be CEO of the company if his deal were to be accepted and go through, said the people.

    Miller, Redstone and Redstone’s son-in-law, Jason Ostheimer, together run Advancit Capital, a small venture capital firm that invests in media and technology. The trio are the only three people that appear on the firm’s website. Miller has also operated as a de facto strategic advisor to Redstone for many years, according to people familiar with the matter.
    Redstone has not spoken with Miller about the bid, according to people familiar with the matter.
    While the Redstone family and Bronfman family have run in similar circles, including donating heavily to Jewish foundations, Edgar Bronfman Jr. and Shari Redstone haven’t met many times and don’t have a close preexisting relationship, two of the people said.
    Skydance CEO David Ellison and Redstone have had several discussions about the potential for Redstone to stay in as a shareholder of a combined Skydance-Paramount Global, according to people familiar with the matter.
    Redstone is taking a wait-and-see approach to any future involvement she may want to have in Paramount Global moving forward regardless of its ownership, according to a person familiar with her thinking.
    Spokespeople for Redstone, Bronfman, the Paramount Global special committee and Skydance all declined to comment.

    11th hour bid

    Bronfman has spent the last few weeks aggregating individuals with interest in owning a piece of Paramount Global, including film producer Steven Paul and Patron cofounder John Paul DeJoria, who had previously considered a bid of their own, according to a person familiar with the process, as well as Fortress Investment Group, the credit arm of private equity firm BC Partners, and former Turner Broadcasting CEO John Martin.
    Bronfman’s financing comes from many different sources, which may potentially trigger regulatory concerns if too much of the money is from foreign entities. Having so many different financers may also make Bronfman’s offer riskier than Skydance’s bid, which is backed by private equity firm RedBird Capital and multibillionaire Larry Ellison, the father of David Ellison.
    Bronfman is the chairman of Fubo, a sports streaming service, and the former head of Universal and Warner Music.
    Skydance’s lawyers sent a letter to the Paramount Global special committee demanding the company stop negotiating with Bronfman, the Wall Street Journal reported Thursday. Skydance said Paramount Global breached the terms of the go-shop agreement by not alerting Skydance that it planned to extend the window, the report said.
    Skydance also argued the special committee didn’t have the right to extend the go-shop because a bid had to “reasonably be expected to lead to a superior proposal.” Skydance argued the Bronfman bid didn’t meet the criteria.
    WATCH: Media power struggle: Paramount deal in jeopardy? More

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    How investors can prepare for lower interest rates: It’s ‘like getting a haircut,’ advisor says

    Federal Reserve chair Jerome Powell signaled on Friday that lower interest rates are ahead.
    It would be the first time the central bank cut rates since the beginning of the Covid-19 pandemic.
    Investors likely shouldn’t do much to prepare for that shift, advisors said.
    They can expect lower-risk assets like cash and short-term bonds to pay less of a return.

    Federal Reserve Chairman Jerome Powell.
    Andrew Harnik | Getty Images

    Federal Reserve chair Jerome Powell on Friday gave the clearest indication yet that the central bank is likely to start cutting interest rates, which are currently at their highest level in two decades.
    If a rate cut comes in September, as experts expect, it would be the first time officials have trimmed rates in over four years, when they slashed them to near zero at the beginning of the Covid-19 pandemic.  

    Investors may be wondering what to do at the precipice of this policy shift.
    Those who are already well diversified likely don’t need to do much right now, according to financial advisors on CNBC’s Advisor Council.
    “For most people, this is welcome news, but it doesn’t mean we make big changes,” said Winnie Sun, co-founder and managing director of Sun Group Wealth Partners, based in Irvine, California.
    “It’s kind of like getting a haircut: We’re doing small trims here and there,” she said.

    Many long-term investors may not need to do anything at all — like those holding most or all of their assets in a target-date fund via their 401(k) plan, for example, advisors said.

    Such funds are overseen by professional asset managers equipped to make the necessary tweaks for you.
    “They’re doing it behind the scenes on your behalf,” said Lee Baker, a certified financial planner and founder of Claris Financial Advisors, based in Atlanta.
    More from Personal Finance:Why remote work has staying powerThis RMD strategy can help avoid IRS penaltiesSome colleges is now cost nearly $100,000 a year
    That said, there are some adjustments that more-hands-on investors can consider.
    Largely, those tweaks would apply to cash and fixed income holdings, and perhaps to the types of stocks in one’s portfolio, advisors said.

    Lower rates are ‘positive’ for stocks

    In his keynote address on Friday at the Fed’s annual retreat in Jackson Hole, Wyoming, Powell said that “the time has come” for interest-rate policy to adjust.
    That proclamation comes as inflation has fallen significantly from its pandemic-era peak in mid-2022. And the labor market, though still relatively healthy, has hinted at signs of weakness. Lowering rates would take some pressure off the U.S. economy.

    The Fed will likely be choosing between a 0.25 and 0.50 percentage-point cut at its next policy meeting in September, Stephen Brown, deputy chief North America economist at Capital Economics wrote in a note Friday.
    Lower interest rates are “generally positive for stocks,” said Marguerita Cheng, a CFP and chief executive of Blue Ocean Global Wealth, based in Gaithersburg, Maryland. Businesses may feel more comfortable expanding if borrowing costs are lower, for example, she said.

    But uncertainty around the number of future rate cuts, as well as their size and pace, mean investors shouldn’t make wholesale changes to their portfolios as a knee-jerk reaction to Powell’s proclamation, advisors said.
    “Things can change,” Sun said.
    Importantly, Powell didn’t commit to lowering rates, saying the trajectory depends on “incoming data, the evolving outlook, and the balance of risks.”

    Considerations for cash, bonds and stocks

    Falling interest rates generally means investors can expect lower returns on their “safer” money, advisors said.
    This would include holdings with relatively low risk, like cash held in savings accounts, money market funds or certificates of deposit, and money in shorter-term bonds.
    High interest rates have meant investors enjoyed fairly lofty returns on these lower-risk holdings.

    It’s kind of like getting a haircut: We’re doing small trims here and there.

    Winnie Sun
    co-founder and managing director of Sun Group Wealth Partners

    However, such returns are expected to fall alongside declining interest rates, advisors said. They generally recommend locking in high guaranteed rates on cash now while they’re still available.
    “It’s probably a good time for people who are thinking about buying CDs at the bank to lock in the higher rates for the next 12 months,” said Ted Jenkin, a CFP and the CEO and founder of oXYGen Financial, based in Atlanta.
    “A year from now you probably won’t be able to renew at those same rates,” he said.
    Others may wish to park excess cash — sums that investors don’t need for short-term spending — in higher-paying fixed-income investments like longer-duration bonds, said Carolyn McClanahan, a CFP and founder of Life Planning Partners in Jacksonville, Florida.

    “We’re really being aggressive about making sure clients understand the interest-rate risk they’re taking by staying in cash,” she said. “Too many people aren’t thinking about it.”
    “They’ll be crying in six months when interest rates are a lot lower,” she said.
    Bond duration is a measure of a bond’s sensitivity to interest rate changes. Duration is expressed in years, and factors in the coupon, time to maturity and yield paid through the term.
    Short-duration bonds — with a term of perhaps a few years or less — generally pay lower returns but carry less risk.
    Investors may need to raise their duration (and risk) to keep yield in the same ballpark as it has been for the past two or so years, advisors said. Duration of five to 10 years is probably OK for many investors right now, Sun said.

    Advisors generally don’t recommend tweaking stock-bond allocations, however.
    But investors may wish to allocate more future contributions to different types of stocks, Sun said.
    For example, stocks of utility and home-improvement companies tend to perform better when interest rates fall, she said.
    Asset categories like real estate investment trusts, preferred stock and small-cap stocks also tend to do well in such an environment, Jenkin said. More

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    Jerome Powell (almost) declares victory over inflation

    For economists and investors accustomed to staring at charts, the jagged peaks of the Teton mountains possess more than a passing resemblance to financial trend lines. They also form the backdrop to one of the year’s most keenly awaited central-bank speeches: annual reflections by the chair of the Federal Reserve at a conference hall in Jackson Hole, located in the valley below the Teton range. On August 23rd Jerome Powell did not disappoint. He made clear that having raised interest rates as sharply as any of the slopes in the distance, the central bank was now ready to begin the descent. More

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    U.S. will again offer free at-home Covid tests starting in late September

    The Biden administration will resume offering free at-home Covid tests to American households in late September amid a summer surge of the virus. 
    Americans will soon be able to use COVIDtests.gov to request four free tests, administration officials told reporters.
    The tests will be able to detect the currently circulating Covid variants, most of which are descendants of the highly contagious omicron variant JN.1. 

    Images By Tang Ming Tung | DigitalVision | Getty Images

    The Biden administration on Friday said it will resume offering free at-home Covid-19 tests to American households in late September as the virus has gained a stronger foothold in the U.S. this summer.
    Americans will soon be able to use COVIDtests.gov to request four free tests, administration officials told reporters during a briefing. The tests will be able to detect the Covid variants that are currently circulating, most of which are descendants of the highly contagious omicron variant JN.1. 

    “These tests will help keep families and their loved ones safe this fall and winter season,” Dawn O’Connell, an assistant secretary for preparedness and response at the Health and Human Services Department, said during the briefing. “This is the seventh time over the last three years that the Biden-Harris administration has given families the opportunity to order the over-the-counter Covid-19 tests for free” through the government’s website.
    The government’s program has provided more than 1.8 billion free over-the-counter Covid tests to Americans since it started in 2021, according to O’Connell.
    The government is relaunching the program amid a relatively large spike in Covid cases this summer, and ahead of the fall and winter, when the virus typically spreads at higher levels each year. There is a “high” or “very high” level of Covid being detected in wastewater in almost every U.S. state, according to data from the Centers for Disease Control and Prevention. 
    But the government decided to reopen the program in late September because it’s when more Americans begin to travel and gather indoors with loved ones. 

    More CNBC health coverage

    “As people start to travel, as they start to get together with friends and family through the holidays, we want them to have those four tests available to them at that time,” David Boucher, director of infectious disease preparedness and response at HHS, told reporters during the briefing.

    By then, the latest round of Covid shots from Pfizer and Moderna will be available to most Americans in pharmacies, health clinics and other locations nationwide. The Food and Drug Administration approved those shots, which target a JN.1 offshoot called KP.2, on Thursday.
    Testing is a critical tool for protection as Covid infections climb again. But lab PCR tests — the traditional method of detecting Covid — have become more expensive and less accessible for some Americans since the U.S. government ended the public health emergency in May last year. 
    Still, certain local health clinics and community sites offer at-home tests to the public at no cost. 

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    Delta chief operations officer departing for another company after just over a year on the job

    Delta said COO Mike Spanos would leave at the end of the month for another job.
    Spanos started at Delta as operations chief in May 2023 after holding leadership roles at Six Flags and Pepsi.
    His departure comes weeks after Delta’s meltdown in the wake of a massive CrowdStrike outage, though CEO Ed Bastian said Spanos told him earlier in the summer that he was considering other opportunities outside of the airline.

    Delta Air Lines planes sit parked at Hartsfield-Jackson Atlanta International Airport in Atlanta on June 28, 2024.
    Andrew Harnik | Getty Images

    Delta Air Lines’ chief operating officer is leaving at the end of the month, the company said in a securities filing Friday.
    CEO Ed Bastian said in an employee memo that Chief Operating Officer Mike Spanos is taking a job at another company.

    His departure, after just over a year on the job, comes weeks after Delta suffered a meltdown in the wake of the massive CrowdStrike outage in July. Delta estimates those disruptions cost the airline some $500 million and said it will seek compensation from CrowdStrike and Microsoft.

    Read more CNBC airline news

    However, Bastian said in the memo Friday that Spanos told him earlier in the summer that he was “considering opportunities outside of Delta.”
    Delta doesn’t plan to replace Spanos, Bastian said. Instead, John Laughter, chief of operations and president of Delta’s TechOps maintenance and overhaul unit, and Allison Ausband, chief customer experience officer, will report to Bastian.
    Spanos joined Delta in May 2023 and previously held the role of CEO at Six Flags Entertainment and executive positions at PepsiCo.

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    Fed Chair Powell indicates interest rate cuts ahead: ‘The time has come for policy to adjust’

    Fed Chair Jerome Powell laid the groundwork Friday for interest rate cuts ahead, though he declined to provide exact indications on timing or extent.
    “The time has come for policy to adjust,” the central bank leader said in his much-awaited keynote address at the Fed’s annual retreat in Jackson Hole, Wyoming.
    In addition to assessing the current state of play, Powell took considerable time in the speech to evaluate what led to the surge in inflation.

    Federal Reserve Chair Jerome Powell laid the groundwork Friday for interest rate cuts ahead, though he declined to provide exact indications on timing or extent.
    “The time has come for policy to adjust,” the central bank leader said in his much-awaited keynote address at the Fed’s annual retreat in Jackson Hole, Wyoming. “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”

    Watch live: Fed Chair Jerome Powell speaks from Jackson Hole conference
    With markets awaiting direction on where monetary policy is headed, Powell focused as much on a look back at what caused the inflation that led to an aggressive series of 11 rate hikes from March 2022 through July 2023.
    However, he did note the progress on inflation and said the Fed can now turn its focus equally to the other side of its dual mandate, namely to make sure the economy stays around full employment.
    “Inflation has declined significantly. The labor market is no longer overheated, and conditions are now less tight than those that prevailed before the pandemic,” Powell said. “Supply constraints have normalized. And the balance of the risks to our two mandates has changed.”
    He vowed that “we will do everything we can” to make sure the labor market says strong and progress on inflation continues.

    Stocks added to gains as Powell began to speak while Treasury yields dropped sharply . Traders maintained a 100% chance of at least a quarter percentage point rate cut in September and raised the odds of a potential half-point reduction to about 1-in-3, according to the CME Group’s FedWatch.
    “This was a valedictory of essentially Chair Powell turning the page, saying the mission, which has been focused on inflation for the last two years, has been successful,” economist Paul McCulley, a former Pimco managing director, said on CNBC’s “Squawk on the Street.”

    Sees progress toward goals

    The speech comes with the inflation rate consistently drifting back to the Fed’s 2% target though still not there yet. A gauge the Fed prefers to measure inflation most recently showed the rate at 2.5%, down from 3.2% a year ago and well off its peak above 7% in June 2022.
    At the same time, the unemployment rate has slowly but consistently climbed higher, most recently at 4.3% and in an area that otherwise would trigger a time-tested indicator of a recession. However, Powell attributed the rise in unemployment to more individuals entering the workforce and a slower pace of hiring, rather than a rise in layoffs or a general deterioration in the labor market.
    “Our objective has been to restore price stability while maintaining a strong labor market, avoiding the sharp increases in unemployment that characterized earlier disinflationary episodes when inflation expectations were less well anchored,” he said. “While the task is not complete, we have made a good deal of progress toward that outcome.”
    Markets are expecting the Fed to start cutting in September, though Powell made no mention of when he thinks policy easing will begin. Minutes from the July open market committee meeting, released Wednesday, noted that a “vast majority” of officials believe a September cut will be appropriate so long as there are no data surprises.
    “He’s pretty dovish. He bought the option to do whatever he needs to do next month, which is clearly an ease,” said Joseph LaVorgna, chief economist at SMBC Nikko Securities. “I don’t think the bar for 50 [basis points] is particularly high.”
    In addition to assessing the current state of play, Powell took considerable time in the speech to evaluate what led to the surge in inflation — hitting its highest level in more than 40 years — as well as the Fed’s policy response and why price pressures have eased without a recession.

    ‘Good ship Transitory’

    When inflation first began to rise in early 2021, he and his colleagues — as well as many Wall Street economists — dismissed it as “transitory” and caused by Covid-related factors that would abate.
    “The good ship Transitory was a crowded one,” Powell quipped to laughter form attendees, “with most mainstream analysts and advanced-economy central bankers on board. I think I see some former shipmates out there today.”
    When it became clear that inflation was spreading from goods to services, the Fed pivoted and began hiking, ultimately adding 5.25 percentage points to its benchmark overnight rate that had been around zero following emergency cuts in the early pandemic days.
    The rise in inflation, Powell said, was “a global phenomenon,” the result of “rapid increases in the demand for goods, strained supply chains, tight labor markets, and sharp hikes in commodity prices.”
    He attributed confidence in the Fed and well-anchored expectations that inflation ultimately would ease to the economy avoiding a sharp downturn during the hiking cycle.
    “The FOMC did not flinch from carrying out our responsibilities, and our actions forcefully demonstrated our commitment to restoring price stability,” he said. “An important takeaway from recent experience is that anchored inflation expectations, reinforced by vigorous central bank actions, can facilitate disinflation without the need for slack.”
    Powell added that there is still “much to be learned” from the experience.
    “That is my assessment of events. Your mileage may differ,” he said.
    Correction: The Fed hiked rates 11 times from March 2022 through July 2023. An earlier version misstated the number.

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