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    Fed Considers Tapering Bond Purchases as Economy Grows

    Federal Reserve officials are gathering in Washington this week with monetary policy still set to emergency mode, even as the economy rebounds and inflation accelerates.Economists expect the central bank’s postmeeting statement at 2 p.m. Wednesday to leave policy unchanged, but investors will keenly watch a subsequent news conference with the Fed chair, Jerome H. Powell, for any hints at when — and how — officials might begin to pull back their economic support.That’s because Fed policymakers are debating their plans for future “tapering,” the widely used term for slowing down monthly purchases of government-backed debt. The bond purchases are meant to keep money chugging through the economy by encouraging lending and spending, and slowing them would be the first step in moving policy toward a more normal setting.Big and often conflicting considerations loom over the taper debate. Inflation has picked up more sharply than many Fed officials expected. Those price pressures are expected to fade, but the risk that they will linger is a source of discomfort, ramping up the urgency to create some sort of exit plan. At the same time, the job market is far from healed, and the surging Delta coronavirus variant means that the pandemic remains a real risk. Policy missteps could prove costly.The Fed’s balance sheet has grown, thanks to bond-buying.The Federal Reserve has swollen its balance sheet by buying bonds to bolster the economy during the pandemic, making it a bigger player in markets.

    Source: Federal ReserveBy The New York TimesHere are a few key things to know about the bond-buying, and key details that Wall Street will be watching:The Fed is buying $120 billion in government backed bonds each month — $80 billion in Treasury debt and $40 billion in mortgage-backed securities.Economists mostly expect the central bank to announce plans to slow those purchases this year, perhaps as soon as August, before actually dialing them back late this year or early next. That slowdown is what Wall Street refers to as a “taper.”There’s a hot debate among policymakers about how that taper should play out. Some officials think the Fed should slow mortgage debt buying first because the housing market is booming. Others have said mortgage security buying has little special effect on the housing market. They have hinted or said they would favor tapering both types of purchases at the same speed.The Fed is moving cautiously, and for a reason: Back in 2013, markets convulsed when investors realized that a similar bond-buying program after the financial crisis would slow soon. Mr. Powell and crew do not want to stage a rerun.Bond-buying is just one of the Fed’s policy tools, and is used to lower longer-term interest rates and to get money chugging around the economy. The Fed also sets a policy interest rate, the federal funds rate, to keep borrowing costs low. It has been near zero since March 2020.Central bankers have been clear that tapering off bond purchases is the first step toward moving policy away from an emergency setting. Increases in the funds rate remain off in the distant future. More

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    Inflation Has Arrived, but Washington Isn’t Racing to Limit Price Pops

    Policymakers, now more attuned to the costs of choking off growth early, are sticking by a patient approach as prices rise.Inflation has long been the boogeyman haunting the nightmares of economic policymakers from both parties — and controlling it has been a top economic priority. But as the economy reopens from pandemic shutdowns and prices spike, it is becoming clear just how much that conventional wisdom has shifted in recent years.After three decades of relative price stability and a long stretch of weak price gains, many economists and lawmakers had in recent years come to believe that trying too hard to avoid overheating the economy created its own risk by prematurely cooling growth and leaving workers on the sidelines.The tools that policymakers used to prevent overheating — raising interest rates and reining in government spending — also contributed to less hiring and slower wage growth. Policymakers have paid increasing attention to those trade-offs, especially as chronically slow price gains across the globe made government efforts to control inflation seem somewhere between futile and self-defeating.That view has remained mostly intact at the Federal Reserve and the White House even as prices pop, virus variants threaten to perpetuate supply-chain bottlenecks and some price increases, like rising rents, create the risk that high inflation might last for a while.The Biden administration is emphasizing the benefits of the current moment, which include higher wages and more bargaining power for workers, as it insists that inflation will fade over time. The Fed, which meets this week, is openly nervous about rising prices, but it isn’t doing anything abrupt to counteract them. It says it needs to weigh the risk of inflation against the threat of slowing a labor market that is still missing nearly seven million jobs compared with prepandemic levels.Republicans are condemning rising prices, warning that the administration needs to rein in its spending plans and that the Fed should withdraw support. Even some left-leaning economists have warned that things could get out of control and that central bank officials need to be on watch.Here is a snapshot of what is happening with inflation, including the risks, the rewards and how policymakers are thinking through a strange economic moment.Prices are up this year, and pretty markedly.Inflation is up across a variety of measures, and by significantly more than economists predicted earlier this year.The Consumer Price Index, a Labor Department gauge of how much a basket of goods and services costs to buy, rose 5.4 percent in the year through June. The Fed prefers a separate measure, the Personal Consumption Expenditures index. That gauge tracks both out-of-pocket expenses and the cost of things people consume but don’t directly pay for, like medical care. It climbed 3.9 percent through May.Prices have risen by more than Fed officials expected, based on both their public statements and their economic projections this year.Why the big jump? Some of it owes to temporary data quirks, which were expected to push inflation higher this year. Part of it has come as prices for airline tickets, hotel rooms and other pandemic-affected purchases rebound from last year, also as anticipated. But the surprisingly large part of the increase has come from a surge in consumer demand that is straining delivery routes and outstripping available supply for electronics, housing and laundry machines.That portion of the inflation is more tied to government policies, which put money into consumers’ pockets — and its future trajectory is a lot less predictable. Economists think the bottlenecks will fade, but by how much and how long it will take is uncertain.Those price increases could have a downside.Whether today’s inflation matters and warrants a response will depend on several factors.If, as the White House predicts, quick price gains fade as the economy returns to normal, they shouldn’t be terribly problematic. Households are likely to have to spend a little bit more on some goods and services but may also find that they are earning more. Workers are now seeing decent wage gains, though not quite enough to outpace price gains, and the labor market is expected to continue strengthening as inflation fades.The biggest price gains have also been concentrated in just a few categories, like used cars. Most families do not buy automobiles that often, so the hit from higher costs will not be as salient for consumers as an across-the-board rapid rise in prices for everything consumers buy, like clothing and milk.But if consumers and businesses come to expect higher prices and start accepting bigger price tags and demanding higher wages, that could broaden inflation and keep it elevated. That would be a problem. Rapid inflation makes life hard for people who live on savings, like retirees. If it outstrips pay gains, it can erode a consumer’s ability to buy goods and services. And if inflation becomes hard to predict, as it did in the 1970s and 1980s, it makes planning for the future hard for businesses and households.There are risks that inflation could take time to get back to normal.There are real reasons to worry that inflation could stick around. Supply-chain snarls are expected to fade with time, but new Covid-19 variants and renewed lockdowns in some countries could keep global trade chains from getting back to normal. That could keep prices for goods elevated. (On the flip side, Jason Furman at Harvard points out that renewed lockdowns would also probably drag down consumer demand, which could lead to softer price pressures.)There are other hot inflation risks. Wages are rising, which might feed into faster prices as employers try to cover costs. Rents — which were depressed — are accelerating, potentially a stickier source of inflationary pressure.If inflation becomes pernicious, the Fed has tools to contain it. The central bank is already coming up with a plan to slow its big bond purchases, which keep longer-term borrowing cheap and lift markets. It could also raise its main interest rate, which would trickle through the economy to slow lending and spending.“One way or another, we’re not going to be going into a period of high inflation for a long period of time, because, of course, we have tools to address that,” Jerome H. Powell, the Fed chair, testified this month. “But we don’t want to use them in a way that is unnecessary, or that interrupts the rebound of the economy.”A job fair in St. Louis last month. The Fed is nervous about rising prices, but it says it also needs to weigh the risk of slowing a labor market still missing seven million workers.Whitney Curtis for The New York TimesBut there are also real risks to premature action.As Mr. Powell alluded to, policymakers do not want to move too hastily in response to the recent data. Many officials argue that it does not make sense to react to what is expected to be a short-lived price pickup by dialing back fiscal ambitions or weakening monetary support — policy changes that would reduce demand and lead to slower hiring down the road.Should the Fed pull back support for the economy before many of the 6.8 million jobs that have gone missing since the start of the pandemic return, it could lead to a painful situation in which workers end up stuck out of work.That would cost families paychecks, hurt the country’s potential for growth and tip the economic scales toward employers, who benefit when many available workers are competing for jobs.For decades, “the sensible adult consensus — that the most important thing was to protect against inflation — had a huge cost, and that cost was wages stagnating,” said Benjamin Dulchin, director of the organizing group Fed Up. “The Fed can err on the side of corporate interests and keeping wages lower, or it can err on the side of workers’ interests.”Today’s inflation could offer benefits.Inflation does have some winners. People who owe debts find that they are easier to pay off, and middle-class households who own houses may find that their values appreciate. Research has suggested that inflation in advanced economies can shrink inequality, for instance.But that isn’t even the argument the Fed and the White House are making: They simply do not expect the higher prices to last forever, and they think the short-term costs are worth the long-term benefits of helping the economy through a tough period.Some Democrats think that voracious hiring bolstered by government spending and central bank support will give workers the power to bargain for higher wages — an ability that might last beyond the inflationary phase. And they have been trying to foster a swift recovery from the pandemic downturn, getting people back into jobs and businesses back into full swing quickly.Officials are being patient, even as inflation surprises them.Government officials are setting economic policy today with an eye on the last battle. After the deep 2007-9 recession, the government cut back on spending early and monetary policymakers lifted interest rates before price gains had returned to their 2 percent annual inflation goal. Price gains proceeded to get stuck below that target, and the labor market recovery may have taken longer than it needed to, since the economy had less support.As that episode underlined, slow-moving global trends — including aging demographics and free trade — seem to keep a lid on price gains these days. In Japan and in Europe, policymakers have spent years battling to coax inflation higher. They are worried in part by the looming threat of deflation, which discourages consumption and crushes debtors, who find their pay stagnating or declining as their debt loads remain unchanged.America’s current bout of price pressures actually seems to be helping to guide consumer expectations, which had been slipping lower, back into the comfort zone.And a few heady inflation numbers are a good problem to have, if you ask Kenneth Rogoff, a Harvard economist. The globe just experienced a devastating pandemic that was expected to wreck the economy.“In the current situation, the fact that the economy is booming and they didn’t quite plan for it is still a blessing,” he said. “It’s a rich man’s problem that we’re getting inflation.” More

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    As Lebanon Collapses, Riad Salameh Faces Questions

    People can’t get their money from banks, the currency has crashed and Riad Salameh’s reign at the central bank is facing allegations of fraud.BEIRUT, Lebanon — For decades, Riad Salameh, Lebanon’s central bank chief, was lauded at home and abroad as a financial wizard who kept the economy running and the currency stable despite wars, assassinations and frequent political turmoil.Not anymore.This country at the crossroads of the Middle East is suffering from a collapse of historic proportions: Its banks are largely insolvent, unemployment is soaring, its currency has crashed and many Lebanese blame Mr. Salameh for shortages that have left them struggling to afford food, scrambling to find medication and waiting in long lines to fuel up their cars.Now, Mr. Salameh is being accused of a perhaps more unforgivable sin: enriching himself and his inner circle through years of corruption. Paris anticorruption judges opened an investigation this month into criminal allegations that Mr. Salameh, one of the world’s longest-serving central bank chiefs, fraudulently amassed an outsize fortune in Europe by abusing his power. The judicial investigation follows a preliminary inquiry by the French National Financial Prosecutor’s Office.Prosecutors in Switzerland have asked Lebanese authorities for help with a separate investigation into suspected embezzlement and money laundering linked to Mr. Salameh and his associates.The allegations have caused a sensation in a country enduring a crisis that the World Bank said recently could rank in the top three worldwide over the last 150 years, a “brutal” economic contraction of a magnitude “usually associated with conflicts or wars.”Despite the meltdown, Mr. Salameh, the architect of Lebanon’s monetary policy since 1993, has faced no serious calls for his ouster, even though he oversaw a strategy that required ever more borrowing to pay existing creditors, what some critics have called the world’s largest Ponzi scheme.Riot police officers stood guard in front of the Lebanese central bank in March during a rally against power cuts after two power plants shut down.Wael Hamzeh/EPA, via ShutterstockWhat shields Mr. Salameh from scrutiny at home is his central role in Lebanon’s complex sectarian and often corrupt web of business and political interests. More than 20 interviews with Lebanese, Western and monetary officials, economists and former colleagues of Mr. Salameh’s paint a picture of a brilliant and shrewd yet secretive operator who built an empire inside the central bank and used it to make himself essential to rich and powerful players across Lebanon’s political spectrum.“He is no longer the head of the central bank. He is the accountant for this mafia,” said Jamil al-Sayyed, a member of Parliament and former head of Lebanon’s General Security agency, the body that oversees domestic security and issues identity cards and passports. “He protects them, and in protecting him, they protect themselves.”But the investigations in France and Switzerland pose new threats to his standing.The French judges are investigating a complaint by Sherpa, a French anticorruption group, that accuses Mr. Salameh, his brother Raja Salameh, other relatives and Marianne Hoayek, who heads the central bank’s executive office, of illicitly sweeping funds from Lebanon into Swiss banks and then laundering millions in France through high-end real estate purchases, including luxury property near the Eiffel Tower. The judges have broad powers, which include seeking cooperation from the Lebanese authorities and freezing assets if the origin of their funding appears illegal.Mr. Salameh’s lawyer in France, Pierre-Olivier Sur, said Mr. Salameh disputed the entirety of the allegations.Separately, the Swiss attorney general’s office is examining a web of bank accounts from Switzerland to Panama that it says Mr. Salameh and his brother may have used to shelter the “possible embezzlement” of central bank funds and to “carry out money laundering.”Swiss prosecutors say documents show that Mr. Salameh hired Forry Associates, a brokerage firm owned by his brother, to handle central bank sales of government bonds, and that from 2002 to 2015 the bank transferred at least $330 million in commissions to the firm’s Swiss account. Mr. Salameh has said that the contract was legal.Large sums in the Forry account were moved to Swiss accounts held by Mr. Salameh, and a portion of the money was ultimately used to buy millions of euros’ worth of real estate in France, Germany, Britain and Switzerland, Swiss prosecutors said.At Heaven’s Joy in Beirut, a center for the elderly and people in need. More than half of the country’s 6.7 million people may be living below the poverty line, the World Bank said.Diego Ibarra Sanchez for The New York TimesBeyond the real estate, Swiss prosecutors are looking into allegations that Raja Salameh transferred over $200 million from Forry’s Swiss account to his accounts in Lebanese banks with powerful political ties. Among them was Bankmed, owned by the family of Rafik Hariri, the former Lebanese prime minister who appointed Mr. Salameh as central bank chief, and whose son Saad Hariri is the country’s most prominent Sunni Muslim politician.Neither Mr. Salameh nor his brother or associates have been charged by Swiss or French prosecutors. It is unclear how long the investigations will take.Talk of self-dealing by Mr. Salameh has circulated for years. In the WikiLeaks diplomatic cables, a former U.S. ambassador to Lebanon, Jeffrey Feltman (now special envoy for the Horn of Africa), described Mr. Salameh in 2007 as having “whiffs of rumored corrupt behavior, a penchant for secrecy and extralegal autonomy at the Central Bank.”Mr. Salameh, 70, declined to be interviewed for this article, did not respond to written questions and has denied any wrongdoing. He has repeatedly said he accumulated a personal fortune of $23 million during a 20-year career as a banker at Merrill Lynch before being tapped to head the central bank. Raja Salameh could not be reached for comment.Riad Salameh told CNBC last year before the investigations were announced that he would not resign over Lebanon’s financial troubles because he had a “strategy to get out of this crisis.” He defended his record, saying he had kept Lebanon “afloat while it lived wars, assassinations, civil strife and so on.”“It is really unfair to judge Lebanon as if it was Sweden,” he said.But some Lebanese question how Mr. Salameh can remain at the helm of the central bank. Inflation has surged to 80 percent, overseas investors have left and more than half of the country’s 6.7 million people may be living below the poverty line, the World Bank said.“He is responsible for monetary policy, and it has failed dramatically,” said Henri Chaoul, a former adviser to Lebanon’s minister of finance who resigned last year. “Under what rules of law and governance is he still around?”Rafik Hariri, center, the former Lebanese prime minister who appointed Mr. Salameh as central bank chief.Jamal Saidi/ReutersA polished, canny political operator who is a Lebanese-French dual citizen, Mr. Salameh has been enmeshed in Lebanon’s politics since Rafik Hariri named him central bank governor in 1993. Mr. Salameh had been Mr. Hariri’s private banker at Merrill Lynch.Mr. Hariri was trying to rebuild Lebanon after a disastrous 15-year civil war, and Mr. Salameh set out to stabilize the currency and reel in foreign investment.Mr. Salameh fixed the Lebanese pound at about 1,500 to the dollar, a peg that would underpin the economy for more than 20 years but required a constant stream of dollars to stay sustainable.The system was fragile because it risked collapse if the money ran out. But every time Lebanon faced new crises, external help kept coming. The assassination of the elder Mr. Hariri in 2005 and a destructive war between the Lebanese militant group Hezbollah and Israel in 2006 brought inflows of international aid. Wealthy members of the Lebanese diaspora continually sent foreign currency home.Mr. Salameh’s supporters hailed him as a skilled savior for keeping the economy stable in a country where nothing else seemed to be. As governments came and went, running chronic budget deficits, Mr. Salameh held fast to the money reins.In Lebanon’s sect-based political system, the president must be a Maronite Christian, which Mr. Salameh is, and his reputation as a financial mastermind at one point made him a contender for the country’s highest office. He once told a businessman who asked about his economic plans, “Get me the presidency and I’ll tell you.”Mr. Salameh also used his post to do favors for power brokers in Lebanon’s political system, according to former central bank employees and foreign officials who spoke on the condition of anonymity. Sons of prominent officials got jobs at the central bank. Businessmen, politicians and journalists producing favorable coverage allegedly benefited handsomely from central bank-subsidized loans and other financial arrangements that most likely would have raised red flags with regulators in other countries.But after decades of relative stability, Mr. Salameh’s system began to unravel. By 2015, Lebanon’s ratio of debt to economic output — a measure of debt’s burden on a nation’s economy — was the third highest in the world, at 138 percent; when Mr. Salameh took office, it was 51 percent, ranking 97th. Next door, a civil war was raging in Syria, raising fears of instability.Protesters last month in Beirut took to the streets, angered by deteriorating living conditions and government inaction.Bilal Hussein/Associated PressCommercial banks, saddled with risky Lebanese sovereign bonds, had been required to keep 15 percent of foreign currency deposits in the central bank to shore up its reserves, and Mr. Salameh attracted further deposits with even higher interest rates.Interest rates on dollar deposits at commercial banks also rose, in some cases to 20 percent or higher, to attract dollars in what some analysts describe as a Ponzi scheme, in which new money was always needed to pay creditors.In late 2019, the system came crashing down. Banks imposed limits on withdrawals and the central bank began dipping into its reserves, which included large amounts of depositors’ money, to maintain the currency’s peg to the dollar. Antigovernment protesters set fire to A.T.M.s, and banks locked their doors.“As long as the system was working, no one cared,” said Dan Azzi, a former Lebanese banker. “Now that it has failed, everyone is angry.”The government’s default on a $1.2 billion bond payment in March 2020 underscored the collapse. “Our debt has become greater than Lebanon can bear,” Prime Minister Hassan Diab said in a televised speech.The coronavirus pandemic and a huge explosion in the port of Beirut last August further devastated the economy.Estimates put the central bank’s losses at $50 billion to $60 billion. The International Monetary Fund has offered assistance, but Lebanese officials accuse Mr. Salameh of blocking an audit sought by the United States and other countries that would unlock I.M.F. aid, as well as a separate investigation into alleged fraud at the central bank.Most Lebanese have said goodbye to whatever savings they had while the currency has crashed, reducing salaries once worth $1,000 a month to about $80. The central bank is burning through its reserves, spending about $500 million per month to subsidize imports of fuel, medicine and grain.“Lebanon has been living on borrowed time, and now the chickens have come home to roost,” said Toufic Gaspard, a Lebanese economist and former adviser at the I.M.F. “The whole banking system has collapsed, and we have become a cash economy.”The crash has soured many Lebanese on their once celebrated central banker.“I can’t say anything good about Riad Salameh,” said Toufic Khoueiri, a co-owner of a popular kebab restaurant, while having lunch with a friend in Beirut. “Our money is not stuck in the banks, but simply stolen.”His friend, Roger Tanios, a lawyer, said he had once admired Mr. Salameh for keeping Lebanon financially stable but had changed his mind.Mr. Salameh, he said, had gone spectacularly off course.“Every country has its mafia,” Mr. Tanios said. “In Lebanon, the mafia has its country.”Ben Hubbard reported from Beirut, and Liz Alderman from Paris. 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    Inflation Likely to Remain High in Coming Months, Fed Chair Powell Says

    Price gains are up “notably,” Jerome Powell told House lawmakers. That’s because of several temporary factors.Jerome H. Powell told House lawmakers that inflation had increased “notably” in the country’s reopening from the pandemic and would most likely stay higher in the next months before moderating.Pool photo by Graeme JenningsJerome H. Powell, the Federal Reserve chair, told House lawmakers on Wednesday that inflation had increased “notably” and was poised to remain higher in coming months before moderating — but he gave no indication that the recent jump in prices will spur central bankers to rush to change policy.The Fed chair attributed rapid price gains to factors tied to the economy’s reopening from the pandemic, and indicated in response to questioning that Fed officials expected inflation to begin calming in six months or so.Mr. Powell testified before the Financial Services Committee at a fraught moment both politically and economically, given the recent spike in inflation. The Consumer Price Index jumped 5.4 percent in June from a year earlier, the biggest increase since 2008 and a larger move than economists had expected. Price pressures appear poised to last longer than policymakers at the White House or Fed anticipated.“Inflation has increased notably and will likely remain elevated in coming months before moderating,” Mr. Powell said in his opening remarks.He later acknowledged that “the incoming inflation data have been higher than expected and hoped for,” but he said the gains were coming from a “small group” of goods and services directly tied to reopening.Mr. Powell attributed the continuing pop in prices to a series of factors: temporary data quirks, supply constraints that ought to “partially reverse” and a surge in demand for services that were hit hard by the pandemic.He said longer-run inflation expectations remained under control — which matters because inflation outlooks help shape the future path for prices. And he made it clear that if the situation got out of hand, the Fed would be prepared to react.“We are monitoring the situation very carefully, and we are committed to price stability,” Mr. Powell said. He added that “if we were to see that inflation were remaining high and remaining materially higher above our target for a period of time — and that it was threatening to uproot inflation expectations and create a risk of a longer period of inflation — then we would absolutely change our policy as appropriate.”For now, the Fed chair voiced comfort with the central bank’s relatively patient policy path even in light of the hotter-than-expected price data. He said that the labor market was improving but that “there is still a long way to go.” He also said the Fed’s goal of achieving “substantial further progress” toward its economic goals before taking the first steps toward a more normal policy setting “is still a ways off.”Fed officials are debating when and how to slow their $120 billion of monthly government-backed bond purchases, which would be the first step in moving policy away from an emergency mode. Those discussions will continue “in coming meetings,” Mr. Powell said.The central bank is also keeping its policy interest rate near zero, which helps borrowing remain cheap for consumers and businesses. Officials have set out a higher standard for lifting that rate from rock bottom: They want the economy to return to full employment and inflation to be on track to average 2 percent over time.The Fed’s guidance states that officials want to see inflation “moderately” above 2 percent for a time, and Mr. Powell was asked on Wednesday what that standard meant when price pressures were so strong.“Inflation is not moderately above 2 percent — it’s well above 2 percent,” Mr. Powell said of the current data. “The question will be where does this leave us in six months or so — when inflation, as we expect, does move down — how will the guidance work? And it will depend on the path of the economy.”Raising rates is not yet up for discussion, officials have said publicly and privately. The bulk of the Fed’s policy-setting committee does not expect to lift borrowing costs until 2023, based on its latest economic projections.Given Mr. Powell’s comments, that watchful stance is unlikely to shift, economists said.“We still don’t think higher inflation will result in a quicker policy tightening,” Andrew Hunter, senior U.S. economist at Capital Economics, wrote in response to Mr. Powell’s prepared testimony. “Asset purchases probably won’t start to be tapered until next year, with interest rates not raised until the first half of 2023.”The Fed is weighing the risks of higher inflation against the huge number of people who remain out of work. Congress has tasked the central bank with fostering both stable prices and maximum employment. While price pressures have picked up markedly, there are still 6.8 million fewer jobs than there were in February 2020, the month before pandemic layoffs started in earnest.That so many people remain out of work is something of a surprise, because employers report widespread labor shortages, and wage increases and signing bonuses abound as they try to lure talent.“Labor shortages were often cited as a reason firms could not staff at desired levels,” according to the Fed’s latest “Beige Book” of anecdotal economic reports from business contacts across its 12 districts. “All districts noted an increased use of nonwage cash incentives to attract and retain workers.”Mr. Powell said he expected people to return to work as health concerns abated and other issues keeping people sidelined faded, and he predicted that “job gains should be strong in coming months.” More

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    Cryptocurrency Seeks the Spotlight, With Spike Lee’s Help

    The filmmaker’s commercial for a crypto company is one of many recent marketing efforts to make digital cash palatable for newbies.Before Spike Lee accepted cryptocurrency, he turned down Crocs.Years ago, the filmmaker rejected an offer to buy into the Colorado company that makes perforated foam clogs, a decision that caused him to miss out when its stock soared on the strength of the footwear fad.“I wish I would’ve given some money back then,” Mr. Lee said in a recent interview. “Anytime something is new, you’re going to have people who are going to be skeptical. With some of the best ideas, people thought the inventors were crazy.”Now he has taken a leap into another cultural craze, having agreed to direct and star in a television commercial for Coin Cloud, a company that makes kiosks for buying and selling Bitcoin and other virtual currencies. Although cryptocurrency is not widely used for transactions, an increasing number of merchants now accept it as payment.The commercial, which he shot last month, is one of several recent marketing efforts meant to broaden the audience for a form of currency that can intimidate people accustomed to cash and credit cards.Mr. Lee, outfitted nattily in a straw hat and gold-tipped cane while filming part of the commercial on Wall Street, led a diverse cast that included his daughter Satchel, the “Pose” actress Mj Rodriguez and the drag queen Shangela. Other shoot locations included Fort Greene Park and the Chillin’ Bar and Grill in Washington Heights, where breakfast patrons craned to catch a glimpse of the director as he filmed a Coin Cloud machine on the sidewalk.“Old money is not going to pick us up; it pushes us down,” Mr. Lee says in the commercial, which portrays the cryptocurrency system as a more accessible and equitable alternative to traditional, discriminatory financial institutions.“The digital rebellion is here,” he says.Cryptocurrency has also been known to intimidate investors, with its extreme volatility and the overwhelming number of virtual alternatives, known as coins. The marketing of this relatively new money has so far been limited mostly to ads on trade websites and targeted pushes on social media, where aficionados swap meme-fueled in-jokes about coin values rocketing to the moon.The industry is increasingly betting that celebrities can help demystify cryptocurrency for the uninitiated.The actor Alec Baldwin offered crisp definitions of cryptocurrency in a series of online ads for the crypto trading platform eToro, and the National Football League star Tom Brady signed on as a brand ambassador for FTX, a crypto exchange that also has a deal to sponsor Major League Baseball.Alec Baldwin is advertising for the cryptocurrency trading platform eToro.eToroThe actor Neil Patrick Harris recently appeared in a TV commercial for the digital currency kiosk operator CoinFlip. “Now anyone, anywhere, can turn cash into crypto!” he declares.EToro and Coinbase, another exchange, collectively spent $22.8 million on advertising last year, nearly double the $12.4 million they shelled out in 2019, according to the research firm Kantar. In recent months, Coinbase hired the Martin Agency, the advertising company behind GEICO and DoorDash.As Madison Avenue fields more inquiries from cryptocurrency clients, agency executives are feeling pressure to better communicate the investment risks, rather than romanticize the industry.“I get very nervous because I start looking at the way that some of the platforms are specifically targeting younger investors,” said Alex Hesz, the chief strategy officer of the advertising giant DDB Worldwide. In the face of frenzied cryptocurrency trading, ad agencies should push for moderation and diversification, he said. “Maximizing is what’s being encouraged here — the idea that this is an amazing asset, and as much as you want to put in, come on and jump on in, the Bitcoin’s lovely,” Mr. Hesz said. “We would never feel comfortable for an alcohol client, or a high-salt or high-sugar or high-fat client, to encourage that level of unequivocal behavior.”Some celebrity endorsements of cryptocurrencies have run into trouble. In 2017, the Securities and Exchange Commission cautioned that some famous people were hyping the virtual currency sales known as initial coin offerings without disclosing that they had been paid to promote them. The commission has since settled charges against the boxer Floyd Mayweather Jr., the music producer DJ Khaled and the actor Steven Seagal.Social media influencers and e-sports stars have also been linked to shady cryptocurrency schemes, accused of pumping up coins just before their value crashes.Coin Cloud’s chief marketing officer, Amondo Redmond, said he hoped Mr. Lee’s stature would help elevate the industry by delivering something “more than just cool creative, but that is really at the forefront of digital currency becoming mainstream.”“It’s more than just adding a celebrity face,” he said.Mr. Lee, who won an Oscar in 2019 in the best adapted screenplay category for “BlacKkKlansman,” has worked on ads for Capital One, Uber and, most famously, Nike. In the 1980s and 1990s, he directed and starred in commercials for Air Jordans, playing his cinematic alter ego Mars Blackmon opposite Michael Jordan.“That was lightning in a bottle,” Mr. Lee said from a flight bound for the Cannes Film Festival, where he is the first Black person to lead the festival jury.He declined to say how much he had been paid for the Coin Cloud commercial, but noted that “if anyone’s known my body of work over the last four decades, you kind of know about the way I see the world, and when they approached me, it fit in line.”As the coronavirus pandemic continues to highlight financial disadvantages for people of color, Mr. Lee hopes to promote cryptocurrency as neutral to race, gender, age and other identifying characteristics.But he was no expert before filming began, and had to take “a crash course” on crypto. He insisted that the commercial include a line urging viewers to do their own research on virtual money.Mr. Lee said he now planned to invest in virtual coins. He said he would not, however, go anywhere near the digital ownership certificates known as nonfungible tokens.“NFTs, I don’t understand that,” he said, laughing. “I’m old school, so sometimes my children have to turn on the TV — all those remotes and stuff.” More

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    Top U.S. Officials Consulted With BlackRock as Markets Melted Down

    The world’s largest asset manager was central to the pandemic crisis response. Emails and calendar records underscore that critical role.As Federal Reserve Chair Jerome H. Powell and Treasury Secretary Steven Mnuchin scrambled to save faltering markets at the start of the pandemic last year, America’s top economic officials were in near-constant contact with a Wall Street executive whose firm stood to benefit financially from the rescue. More

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    Fed Minutes April 2021: Officials Hint They Might Soon Talk About Slowing Bond-Buying

    Minutes from the Federal Reserve’s April meeting showed some officials wanted to soon talk about a plan to pull back some central bank support for the economy if “rapid progress” persisted.Federal Reserve officials were optimistic about the economy at their April policy meeting as government aid and business reopenings paved the way for a rebound — so much so that and “a number” of them began to tiptoe toward a conversation about dialing back some support for the economy.Fed policymakers have said they need to see “substantial” further progress toward their goals of inflation that averages 2 percent over time and full employment before slowing down their $120 billion in monthly bond purchases. The buying is meant to keep borrowing cheap and bolster demand, hastening the recovery from the pandemic recession.Officials said “it would likely be some time” before their desired standard was met, minutes from the central bank’s April 27-28 meeting released Wednesday showed. But the minutes also noted that a “number” of officials said that “if the economy continued to make rapid progress toward the committee’s goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases.”The line was among the clearest signals yet that some Fed officials had considered beginning a serious conversation about pulling back monetary help. Jerome H. Powell, the Fed’s chair, has been repeatedly asked whether the central bank is “talking about talking about” slowing its so-called quantitative easing program — and he has consistently said “no.”In fact, when he faced the question at a news conference following the April meeting, Mr. Powell said, “No, it is not time yet. We have said we’ll let the public know when it is time to have that conversation, and we’ve said we’d do that well in advance of any actual decision to taper our asset purchases, and we will do so.”That could be because while a “number” of individual policymakers are beginning to think out loud about when to begin discussing the policy shift, the full committee has yet to decide to start the conversation.In any case, the April minutes may already be out of date. Surprising and at times confusing data released since the meeting could make the Fed’s assessment of when to dial back support — or even to start talking about doing so in earnest — more difficult. A report on the job market showed that employers added far fewer new hires than expected. At the same time, an inflation report showed that an expected increase in prices is materializing more rapidly than many economists had thought it would.“You just have to gather more information,” said Julia Coronado, founder of MacroPolicy Perspectives and a former Fed economist. “It’s going to be noisy for months, and months, and months.”The Fed has also set its policy interest rates at near-zero since March 2020, in addition to its bond purchases. Both policies are meant to help an economy damaged by pandemic shutdowns to recover more quickly.Officials have been clear that they plan to slow down bond-buying first, while leaving interest rates at rock bottom until the annual inflation rate has moved sustainably above 2 percent and the labor market has returned to full employment.Markets are extremely attuned to the Fed’s plans for bond purchases, which tend to keep asset prices high by getting money flowing around the financial system. Central bankers are, as a result, very cautious in talking about their plans to taper those purchases. They want to give plenty of forewarning before changing the policy to avoid inciting gyrations in stocks or bonds.Stocks whipsawed in the moments after the 2 p.m. release, tumbling as yields on government bonds spiked. The S&P 500 regained some of its losses by the end of the day, ending down 0.3 percent. The yield on 10-year Treasury notes jumped to 1.68 percent.Even before the recent labor market report showed job growth weakening, Fed officials thought it would take some time to reach full employment, the minutes showed.“Participants judged that the economy was far from achieving the committee’s broad-based and inclusive maximum employment goal,” the minutes stated. Many officials also noted that business leaders were reporting hiring challenges — which have since been blamed for the April slowdown in job gains — “likely reflecting factors such as early retirements, health concerns, child-care responsibilities, and expanded unemployment insurance benefits.”When it comes to inflation, Fed officials have repeatedly said they expect the ongoing pop in prices to be temporary. It makes sense that data are very volatile, they have said: The economy has never reopened from a pandemic before. That message echoed throughout the April minutes and has been reiterated by officials since.“We do expect to see inflationary pressures over the course, probably, of the next year — certainly over the coming months,” Randal K. Quarles, the Fed’s vice chair for supervision, said during congressional testimony on Wednesday. “Our best analysis is that those pressures will be temporary, even if significant.”“But if they turn out not to be, we do have the ability to respond to them,” Mr. Quarles added.Mr. Quarles pointed out that the central bank lifted interest rates to guard against inflationary pressures after the global financial crisis. The expected pickup never came, and in hindsight pre-emptive moves were “premature,” he said. He suggested that the central bank should avoid repeating that mistake.He said that the key was for the central bank to be prepared, but that if it tried to stay ahead of inflation now it could end up “significantly constraining the recovery.”Mr. Quarles’s comments came in response to repeated — and occasionally intense — questioning by Republican lawmakers during a House Financial Services Committee hearing, many of whom cited concerns about the recent price inflation report. The back-and-forth underlined how politically contentious the Fed’s patient approach could prove in the coming months. Inflation is expected to remain elevated amid reopening data quirks and as supply tries to catch up to consumer demand.Some lawmakers pressed Mr. Quarles on how long the Fed would be willing to tolerate faster price gains — a parameter the central bank as a whole has not clearly defined.When it comes to increases, “I don’t think that we can say that one month’s, or one quarter’s, or two quarters’ or more is necessarily too long,” Mr. Quarles said. More

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    A Fed vice chair says trying to choke off inflation could ‘constrain’ the recovery.

    Randal K. Quarles, the Federal Reserve’s vice chair for supervision and regulation, said that the central bank was monitoring inflation but that for now it expected the pickup underway to be temporary — and that reacting too soon would come at a cost.“For me, it’s a question of risk management,” Mr. Quarles said during testimony before the House Financial Services Committee. “History would tell us that the economy is unlikely to undergo these inflationary pressures for a long period of time.”Mr. Quarles pointed out that after the global financial crisis, the central bank lifted interest rates to guard against inflationary pressures. The expected pickup never came, and in hindsight the moves were “premature,” he said. He suggested that the central bank should avoid repeating that mistake.“We’re coming out of an unprecedented event,” Mr. Quarles said, noting that officials have the tools to tamp down inflation if it does surprise central bankers by remaining elevated. The Fed could dial back bond purchases or lift interest rates to slow growth and weigh down prices.He said that the key is for the central bank to be prepared, but that if it tried to stay ahead of inflation now it could end up “significantly constraining the recovery.”Mr. Quarles’s comments came in response to repeated — and occasionally intense — questioning by Republican lawmakers, many of whom cited concerns about a recent and rapid pickup in consumer prices. The back and forth underlined how politically contentious the Fed’s patient approach to its policy could prove in the coming months. Inflation is expected to remain elevated amid reopening data quirks and as supply tries to catch up to consumer demand.Some lawmakers pressed Mr. Quarles on how long the Fed would be willing to tolerate higher prices — a parameter the central bank as a whole has not clearly defined.When it comes to increases, “I don’t think that we can say that one month’s, or one quarter’s, or two quarters’ or more is necessarily too long,” Mr. Quarles said. He noted that it was possible that inflation expectations could climb amid a temporary real-world price increase. But if that happened and caused a “more durable inflationary environment, then the Fed has the tools to address it,” he said. More