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    CPI Data Will Arrive Just Before the Fed Meets. Will It Be a Game Changer?

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    The latest data could help to restore policymakers’ conviction that inflation is in the process of returning to the Federal Reserve’s goal.Just hours before the release of the Federal Reserve’s latest rate decision, fresh inflation data showed that price increases slowed notably in May.The new report is a sign that inflation is cooling again after proving sticky early in 2024, and it could help to inform Fed officials as they set out a future path for interest rates. Policymakers had embraced a rapid slowdown in price increases in 2023, but have turned more cautious after inflation progress stalled early this year. The latest data could help to restore their conviction that inflation is in the process of returning to the central bank’s goal.Here’s what to know: More

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    What to Watch as the Fed Meets

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    Federal Reserve officials are expected to leave interest rates unchanged on Wednesday, but investors and economists will be carefully watching for any hints about when policymakers could begin cutting borrowing costs.Central bankers have held rates at 5.3 percent since July after a rapid series of increases starting in early 2022. Policymakers came into 2024 expecting to lower rates several times, but inflation has proved surprisingly stubborn, delaying those reductions.At the conclusion of their two-day meeting on Wednesday, Fed officials will release economic projections for the first time since March, updating how many rate cuts they expect this year. Policymakers could predict two reductions before the end of the year, economists think, down from three previously. There is even a small chance that officials could project just one rate cut.Regardless, central bankers are likely to remain coy about an important question: Just when will they begin lowering borrowing costs? Policymakers are not expected to cut rates in July, which means that they will have several months of data before their next meeting, on Sept. 17-18. Given that, officials are likely to try to keep their options open.“It will be a message of patience, as simple as that,” said Yelena Shulyatyeva, senior U.S. economist at BNP Paribas. “We want to make sure that inflation is going down, and we will be happy to wait to see that happen.”That won’t keep investors from watching a postmeeting news conference with Jerome H. Powell, the Fed chair, for any hint at when rates might finally start to come down — providing relief for would-be borrowers and further pepping up financial markets.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Why Are People So Down About the Economy? Theories Abound.

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    Things look strong on paper, but many Americans remain unconvinced. We asked economic officials, the woman who coined “vibecession” and Charlamagne Tha God what they think is happening.The U.S. economy has been an enigma over the past few years. The job market is booming, and consumers are still spending, which is usually a sign of optimism. But if you ask Americans, many will tell you that they feel bad about the economy and are unhappy about President Biden’s economic record.Call it the vibecession. Call it a mystery. Blame TikTok, media headlines or the long shadow of the pandemic. The gloom prevails. The University of Michigan consumer confidence index, which looked a little bit sunnier this year after a substantial slowdown in inflation over 2023, has again soured. And while a measure of sentiment produced by the Conference Board improved in May, the survey showed that expectations remained shaky.The negativity could end up mattering in the 2024 presidential election. More than half of registered voters in six battleground states rated the economy as “poor” in a recent poll by The New York Times, The Philadelphia Inquirer and Siena College. And 14 percent said the political and economic system needed to be torn down entirely.What’s going on here? We asked government officials and prominent analysts from the Federal Reserve, the White House, academia and the internet commentariat about what they think is happening. Here’s a summary of what they said.Kyla Scanlon, coiner of the term ‘Vibecession’Price levels matter, and people are also getting some facts wrong.The most common explanation for why people feel bad about the economy — one that every person interviewed for this article brought up — is simple. Prices jumped a lot when inflation was really rapid in 2021 and 2022. Now they aren’t climbing as quickly, but people are left contending with the reality that rent, cheeseburgers, running shoes and day care all cost more.“Inflation is a pressure cooker,” said Kyla Scanlon, who this week is releasing a book titled “In This Economy?” that explains common economic concepts. “It hurts over time. You had a couple of years of pretty high inflation, and people are really dealing with the aftermath of that.”We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    What Trump 2.0 Could Mean for the Federal Reserve

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    A second Trump administration could shake up personnel and financial regulation at America’s central bank, people close to his campaign said.Former President Donald J. Trump relentlessly criticized the Federal Reserve and Jerome H. Powell, its chair, during his time in office. As he competes with President Biden for a second presidential term, that history has many on Wall Street wondering: What would a Trump victory mean for America’s central bank?The Trump campaign does not have detailed plans for the Fed yet, several people in its orbit said, but outside advisers have been more focused on the central bank and have been making suggestions — some minor, others extreme.While some in Mr. Trump’s circles have floated the idea of trying to limit the Fed’s ability to set interest rates independent of the White House, others have pushed back hard on that idea, and people close to the campaign said they thought such a drastic effort was unlikely. Curbing the central bank’s ability to set interest rates without direct White House influence would be legally and politically tricky, and tinkering with the Fed so overtly could roil the very stock markets that Mr. Trump has frequently used as a yardstick for his success.But other aspects of Fed policy could end up squarely in Mr. Trump’s sights, both former administration officials and conservative policy thinkers have indicated.Mr. Trump is poised to once again use public criticism to try to pressure the Fed. If elected, he would also have a chance to appoint a new Fed chair in 2026, and he has already made it clear in public comments that he plans to replace Mr. Powell, whom he elevated to the job before President Biden reappointed him.“There will be a lot of rhetorical devices thrown at the Fed,” predicted Joseph A. LaVorgna, the chief economist at SMBC Nikko Securities America, an informal adviser to the Trump campaign and the chief economist of the National Economic Council during Mr. Trump’s administration.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Fed Minutes Show Officials Were Wary About Inflation at May Meeting

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    Federal Reserve policymakers were still willing to raise rates if the economy surprised them, notes from their most recent meeting suggested.Federal Reserve officials were wary about the recent lack of progress on inflation and remained willing to lift interest rates if conditions made it necessary as of their two-day meeting that ended on May 1.Minutes from the gathering, released Wednesday, showed that “many” officials expressed uncertainty about how much today’s interest-rate setting — 5.3 percent, up sharply from near zero in early 2022 — was weighing on the economy.Officials have been clear that they expect to leave interest rates unchanged for now, hoping that they are tapping the brakes on economic growth enough to quash inflation over time. And central bankers have repeatedly emphasized that they expect the next move on interest rates to be a reduction, not an increase.But policymakers have stopped short of ruling out a future rate increase, allowing that it’s a possibility if inflation proves surprisingly rapid. The minutes underscored that caveat.“Various participants mentioned a willingness to tighten policy further” if needed, the release showed.Stock indexes fell after the release of the minutes, as investors fretted that the Fed’s wariness about inflation could keep interest rates higher.Fed officials have received some comforting news since their last gathering: Inflation cooled slightly in April, a sign that the surprisingly stubborn price pressures at the beginning of the year will not necessarily become a permanent trend. Policymakers have continued to emphasize that they are happy to keep interest rates at today’s levels for an extended period as they wait to make sure that price increases are fully decelerating.“We’re just going to need to accumulate more information,” Loretta Mester, the president of the Federal Reserve Bank of Cleveland, said in an interview this week at the Federal Reserve Bank of Atlanta’s Financial Markets Conference in Florida. She noted that improvements to supply chains lowered inflation quite a bit last year and said that was unlikely to repeat itself this year.When it comes to stamping out price increases enough to lower rates, “I do think it’s going to take longer than I had thought,” Susan Collins, the president of the Federal Reserve Bank of Boston, said in an interview, also in Florida. “I think policy is restrictive, but I think it’s only moderately restrictive.” More

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    Rent Is Harder to Handle and Inflation Is a Burden, a Fed Financial Survey Finds

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    The Federal Reserve’s 2023 survey on household financial well-being found Americans excelling in the job market but struggling with prices.American households struggled to cover some day-to-day expenses in 2023, including rent, and many remained glum about inflation even as price increases slowed.That’s one of several takeaways from a new Federal Reserve report on the financial well-being of American households. The report suggested that American households remained in similar financial shape to 2022 — but its details also provided a split screen view of the U.S. economy.On the one hand, households feel good about their job and wage growth prospects and are saving for retirement, evidence that the benefits of very low unemployment and rapid hiring are tangible. And about 72 percent of adults reported either doing OK or living comfortably financially, in line with 73 percent the year before.But that optimistic share is down from 78 percent in 2021, when households had just benefited from repeated pandemic stimulus checks. And signs of financial stress tied to higher prices lingered, and in some cases intensified, just under the report’s surface.Inflation cooled notably over the course of 2023, falling to 3.4 percent at the end of the year from 6.5 percent going into the year. Yet 65 percent of adults said that price changes had made their financial situation worse. People with lower income were much more likely to report that strain: Ninety-six percent of people making less than $25,000 said that their situations had been made worse.Renters also reported increasing challenges in keeping up with their bills. The report showed that 19 percent of renters reported being behind on their rent at some point in the year, up two percentage points from 2022.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Fed Chair’s Confidence in Slowing Inflation Is ‘Not as High’ as Before

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    Jerome H. Powell, the Federal Reserve chair, said the central bank was poised to leave interest rates on hold after surprisingly stubborn inflation.Jerome H. Powell, the Federal Reserve chair, reiterated Tuesday that policymakers were poised to hold interest rates steady at a high level as they waited for evidence that inflation is slowing further.Fed officials entered 2024 expecting to make interest rate cuts, having lifted borrowing costs sharply to a more than two-decade high of 5.3 percent between 2022 and the middle of last year. But stubbornly rapid inflation in recent months has upended that plan.Central bankers have been clear that rate cuts this year are still possible, but they have also signaled that they are planning to leave interest rates on hold for now as they wait to make sure that inflation is genuinely coming under control.Speaking during a panel discussion in Amsterdam, Mr. Powell said officials had been surprised by recent inflation readings. The Consumer Price Index inflation measure, which is set for release on Wednesday, came down rapidly in 2023 but has gotten stuck above 3 percent this year. The Fed’s preferred measure, the Personal Consumption Expenditures index, is slightly cooler, but it, too, remains well above the Fed’s 2 percent inflation goal.“We did not expect this to be a smooth road, but these were higher than I think anybody expected,” Mr. Powell said on Tuesday of recent inflation readings. “What that has told us is that we will need to be patient and let restrictive policy do its work.”Mr. Powell said that he expected continued growth and a strong labor market in the months ahead, and that he believed inflation would begin to slow again.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Why Higher Fed Rates Are Not Totally Off the Table

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    Fed officials still think their next move will be to cut rates, but they are not entirely ruling out the possibility that they might have to raise them.Investors do not expect the Federal Reserve to raise interest rates again, and officials have made it clear that they see further increases as unlikely. But one important takeaway from recent Fed commentary is that unlikely and inconceivable are not the same thing.After the central bank held rates steady at 5.3 percent last week, the Fed’s chair, Jerome H. Powell, delivered a news conference where what he didn’t say mattered.Asked whether officials might raise interest rates again, he said he thought they probably would not — but he also avoided fully ruling out the possibility. And when asked, twice, whether he thought rates were high enough to bring inflation fully under control, he twice tiptoed around the question.“We believe it is restrictive, and we believe over time it will be sufficiently restrictive,” Mr. Powell said, but he tacked on a critical caveat: “That will be a question that the data will have to answer.”There was a message in that dodge. While officials are most inclined to keep interest rates at their current levels for a long time in order to tame inflation, policymakers could be open to higher interest rates if inflation were to pick back up. And Fed officials have made that clear in interviews and public comments over the past several days.Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said on Tuesday that he was wary about a scenario in which inflation gets stuck at its current level, and hinted that it was possible that rates could rise more.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More