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    High Inflation in June Puts Pressure on Interest Rates

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    Prices surged 9.1 percent in June as consumers faced rapidly rising costs for gas, food and rent, a higher-than-expected reading and bad news for Americans at a moment when their wages are falling further behind the nation’s soaring cost of living.The fresh Consumer Price Index report released on Wednesday contained particularly worrying signs for the Federal Reserve, providing evidence that price pressures are broad and stubborn in ways that may make them difficult to wrestle under control.Overall, inflation is likely to moderate in July because gas prices have fallen this month — a gallon of regular gas hit an average of about $5 in June, and the cost is now hovering around $4.63. But fuel prices are volatile, making it impossible to know if today’s lower gas prices will last, and the report suggested that underlying inflation pressures remained intense.In particular, a core inflation index that strips out food and fuel prices to give a sense of the broad trend remained surprisingly high. That measure climbed 5.9 percent over the year through June, barely a slowdown from last month’s 6 percent increase. Core prices also jumped 0.7 percent from May to June, more than the previous monthly increase.Persistent price gains portend trouble for President Biden, whose approval ratings have taken a hit amid climbing costs, and could require continued forceful action from the Fed. The central bank is raising rates to slow the economy and to try to restrain inflation, and it is likely to continue adjusting policy quickly — even if doing so risks tipping the economy into a recession — as inflation looks increasingly out of control.“It’s an ugly report,” said Julia Coronado, the founder of MacroPolicy Perspectives. “I don’t think there is anything good about this report, as far as the Fed is concerned, as far as the U.S. consumer is concerned.”The global economy has been buffeted by a series of shocks that have pushed inflation higher since the outset of the pandemic. Factory shutdowns and shipping shortages have roiled supply chains, and worker shortages are making it harder for airlines to fly at capacity and for hotels to rent out rooms. Russia’s invasion of Ukraine has disrupted gas and food supplies.President Biden has acknowledged the pain that inflation is causing, calling it “unacceptably high” in a statement on Wednesday. Erin Schaff/The New York TimesWhile economic policymakers initially hoped that the disruptions would fade and that prices would ease on their own, they have stopped waiting for that to happen — especially as price increases prove not only pronounced but also widespread, rising rapidly across an array of goods and services.The Fed has been raising interest rates since March in an effort to slow consumer and business demand, hoping to cool the economy and bring inflation back down. The central bank has sped up those rate moves as price increases have proved surprisingly stubborn, and the new inflation report spurred speculation that the Fed might turn even more aggressive.Read More About Oil and Gas PricesPrices Drop Sharply: U.S. gas prices have been on the decline, offering some relief to drivers. But weather, war and demand will influence how long it lasts.Gas Tax Holiday: President Biden called on Congress to temporarily suspend the federal gas tax, but experts remain skeptical the move would benefit consumers much.‘Only Bad Options’: Mr. Biden’s trip to Saudi Arabia is unlikely to reduce oil prices. And it is not clear that anything else he might do would work, either.Summer Driving Season: The spike in gas prices is being driven in part by vacationers hitting the road. Here’s what our reporter saw on a recent trip.Officials lifted rates by 0.75 percentage points in June, the biggest move since 1994, and had been expected to make a similarly sized move at its meeting in late July. But after the new inflation data, investors began to expect a percentage-point move, based on market pricing.Fed officials themselves were hesitant to call for such a large move.“My most likely posture is 0.75, because of the data I’ve seen,” Mary Daly, president of the Federal Reserve Bank of San Francisco, said in an interview Wednesday night. She explained that she had expected a high number, so the report did not sway her.“I saw that data and thought: This wasn’t good news, wasn’t expecting good news,” she said.Ms. Daly said she could see a situation in which a bigger, one-percentage-point increase would be possible should consumer inflation expectations move higher and consumer spending fail to slow down.Loretta Mester, president of the Federal Reserve Bank of Cleveland, said on Bloomberg Television on Wednesday night that the new inflation report was “uniformly bad” and that there would be no reason to do less than the 0.75 points that the Fed approved in June. But she also suggested that she would watch incoming data and wait to see how the economy evolved before deciding whether an even larger move might be appropriate. The Fed’s next policy meeting is July 26-27.Raphael Bostic, the president of the Federal Reserve Bank of Atlanta, told reporters on Wednesday that “everything is in play,” but he, too, made it clear that he was “not wedded to any specific course of action.”Even a 0.75-point increase would be an unusually quick pace for a central bank that has tended to move gradually in recent decades. The Fed risks tipping the economy into a recession as it rapidly raises interest rates, because those increases might hit the brakes on the economy so hard that they jar businesses, prompting them to stop hiring and setting off a chain reaction in which households are left with less money to spend.But policymakers feel that they must choke off inflation quickly even if it increases the chance of a painful slowdown. That’s because they worry that, as inflation remains rapid, consumers and businesses could be getting used to it.If people begin to ask for higher wages in anticipation of price increases — negotiating cost-of-living adjustments of 6 or 7 percent, for example, instead of the typical 2 to 3 percent — companies could try to pass their swelling labor costs along to customers by raising prices. That could perpetuate rapid inflation, making it much trickier for the Fed to stamp it out.“The path toward price stability is going to entail some pain, but less pain if we do it than if we don’t do it,” Ms. Mester said.Meals at restaurants, tickets for sporting events and other services are growing more expensive.Amir Hamja for The New York TimesInflation is high across much of the world right now, as Russia’s invasion of Ukraine pushes up food and fuel prices and transportation and manufacturing issues continue to keep some goods scarce. But the new inflation report also shows evidence of price pressures that have little to do with global supply. Meals at restaurants, tickets for sporting events and other services are growing more expensive.For consumers, the fresh report is confirmation that it is increasingly tough to make ends meet. While wages are rising, they have failed to keep up with rapid price increases. After accounting for price increases, average hourly earnings have declined 3.6 percent over the past year.At the same time, necessities are becoming more expensive. Food prices overall rose 10.4 percent in June from a year earlier, the biggest annual increase since 1981. Rent for a house or an apartment also costs significantly more, having climbed at the fastest monthly pace since 1986.That is making life difficult for many families. Soaring housing costs have made relocating difficult for Elizabeth Haynes, 41, who lives with her husband in McKinney, Texas. The couple wants to relocate to another state, but high housing costs are so far prohibitive.“We’re trying to get out of Texas, and that’s proving really difficult with the rental costs and the housing costs and the shortages and all of that,” said Ms. Haynes, who is hoping to land a place she can afford in Connecticut. “So that’s kind of our big pain point.”As rapid price increases burden many Americans, they are also taking a toll on economic confidence, posing a big challenge for Mr. Biden and Democrats ahead of the midterm elections. Mr. Biden has acknowledged the pain inflation is causing, saying in a statement on Wednesday that it is “unacceptably high.”But he also called the report “out of date” because it did not capture the recent retreat in prices at the gasoline pump and in other commodities. Democrats have suggested things will soon get better, pointing out that, as fuel costs subside, overall inflation is likely to decline from its 9.1 percent reading in June.“I think we’re peaking — I think we’re going to be going down from here,” Representative Nancy Pelosi, the House speaker, said when asked for her reaction to the new data.While there is hope in Washington and on Wall Street that inflation will come down sustainably, economists have repeatedly suggested that inflation has peaked over the past 12 months only to watch it pick back up.That is partly because prices for certain goods have behaved strangely: Cars have been in short supply, and their prices have been skyrocketing, for instance. It is also partly because economists have dismissed big price swings in various goods and services as temporary one-offs, and the surprises have just continued to add up.“People have not done a very good job of predicting car inflation,” said Jason Furman, an economist at Harvard. “Beyond that, inflation is about more than 10 individual stories about 10 individual goods and services — it’s about forces in the overall economy.”If people begin to ask for higher wages in anticipation of price increases, companies could try to pass their swelling labor costs along to customers by raising prices.Hiroko Masuike/The New York TimesThat said, there are some reasons that today’s rapid price gains could abate based on the economy’s fundamentals.Consumers may struggle to sustain their spending as prices jump. If they move in with roommates, stop taking vacations or pull back on social activities to save money, supply could begin to catch up with demand, allowing price gains to decelerate.Stores including Target are already trying to sell off bloated inventories, which could allow retail prices to slow. Costs for goods including sporting equipment and televisions have already begun to cool.But, for now, hints at and forecasts for a cool-down are likely to be insufficient comfort for economic policymakers when there is little sign in the data that any concerted pullback is kicking in.“We have to be so humble about forecasting inflation,” said Blerina Uruci, an economist at T. Rowe Price, who does expect inflation pressures to fade. “We’ve just been so wrong, so consistently, in one direction.”Reporting was contributed by More

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    Inflation Soared in June, Pinching Consumers and Challenging Policymakers

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    Prices surged 9.1 percent in June as consumers faced rapidly rising costs for gas, food and rent, a higher-than-expected reading and bad news for Americans at a moment when their wages are falling further behind the nation’s soaring cost of living.The fresh Consumer Price Index report released on Wednesday contained particularly worrying signs for the Federal Reserve, providing evidence that price pressures are broad and stubborn in ways that may make them difficult to wrestle under control.Overall, inflation is likely to moderate in July because gas prices have fallen this month — a gallon of regular gas hit an average of about $5 in June, and the cost is now hovering around $4.63. But fuel prices are volatile, making it impossible to know if today’s lower gas prices will last, and the report suggested that underlying inflation pressures remained intense.In particular, a core inflation index that strips out food and fuel prices to give a sense of the broad trend remained surprisingly high. That measure climbed 5.9 percent over the year through June, barely a slowdown from last month’s 6 percent increase. Core prices also jumped 0.7 percent from May to June, more than the previous monthly increase.Persistent price gains portend trouble for President Biden, whose approval ratings have taken a hit amid climbing costs, and could require continued forceful action from the Fed. The central bank is raising rates to slow the economy and to try to restrain inflation, and it is likely to continue adjusting policy quickly — even if doing so risks tipping the economy into a recession — as inflation looks increasingly out of control.“It’s an ugly report,” said Julia Coronado, the founder of MacroPolicy Perspectives. “I don’t think there is anything good about this report, as far as the Fed is concerned, as far as the U.S. consumer is concerned.”The global economy has been buffeted by a series of shocks that have pushed inflation higher since the outset of the pandemic. Factory shutdowns and shipping shortages have roiled supply chains, and worker shortages are making it harder for airlines to fly at capacity and for hotels to rent out rooms. Russia’s invasion of Ukraine has disrupted gas and food supplies.President Biden has acknowledged the pain that inflation is causing, calling it “unacceptably high” in a statement on Wednesday. Erin Schaff/The New York TimesWhile economic policymakers initially hoped that the disruptions would fade and that prices would ease on their own, they have stopped waiting for that to happen — especially as price increases prove not only pronounced but also widespread, rising rapidly across an array of goods and services.The Fed has been raising interest rates since March in an effort to slow consumer and business demand, hoping to cool the economy and bring inflation back down. The central bank has sped up those rate moves as price increases have proved surprisingly stubborn, and the new inflation report spurred speculation that the Fed might turn even more aggressive.8 Signs That the Economy Is Losing SteamCard 1 of 9Worrying outlook. More

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    Biden Seeks Price Cap on Russian Oil Amid Fears of Gas Shock

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    Negotiating and selling the plan is a crucial task facing Treasury Secretary Janet L. Yellen as she travels to Asia in hopes of averting $7 a gallon gasoline.WASHINGTON — Relief at the gas pump coupled with this past week’s news that businesses continue to hire at a blistering clip have tempered many economists’ fears that America is heading into a downturn.But while President Biden’s top aides are celebrating those economic developments, they are also worried the economy could be in for another serious shock later this year, one that could send the country into a debilitating recession.White House officials fear a new round of European penalties aimed at curbing the flow of Russian oil by year-end could send energy prices soaring anew, slamming already beleaguered consumers and plunging the United States and other economies into a severe contraction. That chain of events could exacerbate what is already a severe food crisis plaguing countries across the world.To prevent that outcome, U.S. officials have latched on to a never-before-tried plan aimed at depressing global oil prices — one that would complement European sanctions and allow critical flows of Russian crude onto global markets to continue but at a steeply discounted price.Europe, which continues to guzzle more than two million barrels of Russian oil each day, is set to enact a ban on those imports at the end of the year, along with other steps meant to complicate Russia’s efforts to export fuel globally. While Mr. Biden pushed Europe to cut off Russian oil as punishment for its invasion of Ukraine, some forecasters, along with top economic aides to the president, now fear that such policies could result in huge quantities of Russian oil — which accounts for just under a tenth of the world’s supply — suddenly taken off the global market.Analysts have calculated that such a depletion in supply could send oil prices soaring to $200 per barrel or more, translating to Americans paying $7 a gallon for gasoline. Global growth could slam into reverse as consumers and businesses pull back spending in response to higher fuel prices and as central banks, which are already raising interest rates in an effort to tame inflation, are forced to make borrowing costs even more expensive.The potential for another oil shock to puncture the global economy, and perhaps Mr. Biden’s re-election prospects, has driven the administration’s attempts to persuade government and business leaders around the world to sign on to a global price cap on Russian oil.It is a novel and untested effort to force Russia to sell its oil to the world at a steep discount. Administration officials and Mr. Biden say the goal is twofold: to starve Moscow’s oil-rich war machine of funding and to relieve pressure on energy consumers around the world who are facing rising fuel prices.To transport its oil to market, Russia draws on financing, ships and, crucially, insurance from Britain, Europe and the United States. The European penalties, as currently constructed, would not only cut Russia off from most of the European oil market but also from those other Western supports for its shipments. If strictly enforced, those measures could leave Moscow with no means of transporting its oil, at least temporarily.The Biden administration’s proposal would not affect the European ban, but it would ease some of the other restrictions — but only if the transported Russian oil is sold for no more than a price set by the United States and its allies. That would allow Moscow to continue moving oil to the rest of the world. The oil now flowing to France or Germany would go elsewhere — Central America, Africa or even China and India — and Russia would have to sell it at a discount.8 Signs That the Economy Is Losing SteamCard 1 of 9Worrying outlook. More

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    Veterans of Carter-Era Inflation Warn That Biden Has Few Tools to Tame Prices

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    President Biden and Democrats face political peril as costs keep rising and midterm elections loom.WASHINGTON — When inflation surged in the late 1970s, President Jimmy Carter convened his top economic advisers for weekly lunch meetings in which they tended to offer overly optimistic forecasts of how high prices would rise.But the political consequences of rising prices could not be escaped: By 1978, Democrats had lost seats in the House and Senate. A year later, Mr. Carter’s Treasury secretary, W. Michael Blumenthal, was ousted in a cabinet shake-up. In 1980, Mr. Carter lost his re-election bid in a landslide as the Federal Reserve, intent on bringing inflation down, raised interest rates so aggressively that it tipped the economy into a painful recession.President Biden and the Democrats in power now face a similar predicament as they scramble to tame inflation after a year of telling Americans that price gains would be short-lived. In recent weeks, Mr. Biden has pressed oil refineries to ramp up production, proposed a three-month gas tax holiday and called on the Federal Reserve to do what is needed to cool an overheating economy. But to veterans of the Carter administration, the echoes of the past call for a greater sense of urgency from Mr. Biden despite his limited power to bring prices down.“The basic problem that this president faces is really not too dissimilar from the one that confronted Carter,” said Mr. Blumenthal, who is 96 and divides his time between Princeton, N.J., and Germany, where he was born. “President Biden faces this dilemma, and it’s certainly my hope that he will choose clearly, choose decisively and be very clear not only about the fact that he recognizes that inflation has to be dealt with, but that he is really willing to support painful steps to do that.”That pain could be severe if the Fed, as economists increasingly expect, is forced to tip the economy into recession in order to bring inflation to heel. The central bank has already begun raising interest rates quickly and signaled it will do whatever it takes to restore “price stability” as it tries to avoid the mistakes of the 1970s.Veterans of the Carter administration say Mr. Biden would be wise to also learn from the past and avoid half-measures that have popular appeal but do little to resolve the underlying problem, as well as forgoing large spending initiatives.The United States has been buffeted by soaring prices this year as supply chain disruptions that emerged during the pandemic coincided with a surge in food and energy prices spurred by Russia’s war in Ukraine. The Consumer Price Index picked up by 8.6 percent in May from a year earlier, as price increases climbed at the fastest pace in more than 40 years. Gas hit $5 per gallon in June and is now averaging around $4.80.The dynamic has parallels to the 1970s, when the Arab oil embargo of 1973-74 and the Iranian revolution of 1979 curtailed oil supply so severely that it fueled shortages, sending gas prices soaring. Inflation peaked at 14.6 percent in 1980 before easing as Paul A. Volcker, who was the Fed chair, aggressively raised interest rates to nearly 20 percent and triggered a recession that eventually tamed inflation.The Carter administration tried an array of measures to contain rising inflation that proved ineffective. Among them was a scheme to encourage businesses to voluntarily cap wages and prices, a release of grain reserves to smooth food prices and a call for deficit reduction.In an impassioned “fireside chat” to the nation in February 1977, Mr. Carter urged Americans to embrace conservation to cope with energy shortages and rising fuel costs.Understand Inflation and How It Impacts YouInflation 101: What’s driving inflation in the United States? What can slow the rapid price gains? Here’s what to know.Inflation Calculator: How you experience inflation can vary greatly depending on your spending habits. Answer these seven questions to estimate your personal inflation rate.Greedflation: Some experts say that big corporations are supercharging inflation by jacking up prices. We take a closer look at the issue. Changing Behaviors: From driving fewer miles to downgrading vacations, Americans are making changes to their spending because of inflation. Here’s how five households are coping.“All of us must learn to waste less energy,” Mr. Carter said. “Simply by keeping our thermostats, for instance, at 65 degrees in the daytime and 55 degrees at night, we could save half the current shortage of natural gas.”Mr. Blumenthal said Mr. Biden should heed the lessons of Mr. Carter’s failed attempts to curb inflation by avoiding measures that are counterproductive. He urged Mr. Biden to support a substantial interest rate increase and to abandon his sweeping legislative package in favor of deficit reduction, which some economists argue could dampen prices by slowing growth depending on how it is approached.“Inflation fighting comes first,” said Mr. Blumenthal, who escaped Nazi Germany and lived in Shanghai during a period of hyperinflation in the 1940s. “He has to show the recognition to the public that inflation has lasting deleterious effects on the economy and that by trying to take half measures now, you merely prolong the pain of these effects.”Mr. Carter, center, with Mr. Blumenthal, second from right, at the White House in 1977. “The basic problem that this president faces is really not too dissimilar from the one that confronted Carter,” Mr. Blumenthal said. Bettman/Getty ImagesMr. Biden has acknowledged that inflation could be persistent and has said his administration is doing what it can to ease price pressures. He has primarily blamed President Vladimir V. Putin and his invasion of Ukraine for price increases but has also faulted American oil refineries and even gas stations. As travelers set out for the July Fourth holiday weekend, Mr. Biden accused gas station owners of profiteering and urged them to lower their prices.“Bring down the price you are charging at the pump to reflect the cost you’re paying for the product,” Mr. Biden said on Twitter.The Biden administration has been looking for ways to lower oil prices globally. Treasury Secretary Janet L. Yellen has been pressing her European counterparts to impose a price cap on Russian oil exports, and the Group of 7 industrialized nations agreed last week to explore the idea.Some of the proposals for easing the pain of inflation on Americans, such as the gas tax holiday or student loan debt forgiveness, have been dismissed by economists who say they might make inflation worse. Others have been criticized, like Mr. Biden’s upcoming trip to Saudi Arabia, which some have called pandering to a state that the president once likened to a “pariah” over its role in the assassination of Jamal Khashoggi, a Washington Post columnist and a prominent dissident. Mr. Biden said last week that he would not ask the Saudis to increase oil production.C. Fred Bergsten, the assistant secretary for international affairs at the Treasury Department from 1977 to 1981, said the United States should avoid the kind of domestic oil price controls that were in place during the 1970s and that the Carter administration eventually abandoned in 1979. Describing them as an “abysmal failure,” Mr. Bergsten said they distorted energy markets.“One lesson from the Carter administration is don’t do that,” Mr. Bergsten, 81, said. “Energy price controls discourage production and held down the supply side over time.”Mr. Bergsten suggested that rolling back some of the Trump-era tariffs on $360 billion worth of Chinese goods that economists say have driven up costs for American consumers could offer some marginal relief from inflation. He also thinks Democrats should consider tax increases that would be targeted mostly at the wealthy to reduce the pent-up demand in the economy that continues to push prices higher. Proposals such as the gas tax holiday would most likely just fuel more inflation, he predicted, by giving drivers more money to spend, and would make the Biden administration look desperate by resorting to gimmicks.“Even if Biden doesn’t have many alternatives to deal with it, the image is of a lack of decisive and effective management of the country and the economy,” said Mr. Bergsten, who made several trips to Saudi Arabia in the 1970s to try to get Riyadh to boost oil production.The moment is politically perilous for Mr. Biden, with the November midterm elections approaching, and politics is also complicating the federal response.Republicans have realized the political power of rising prices, seizing on inflation as a key talking point ahead of the midterms, often comparing Mr. Biden to Mr. Carter.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Pessimism about the economy is growing, a U.S. poll shows.

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    Americans are becoming more pessimistic about the economy, more worried about inflation — and now, more anxious about the job market, as well.Fifty-two percent of American adults say they are worse off financially than they were a year ago, according to a survey conducted for The New York Times this month by the online research platform Momentive. That was up from 41 percent in April, and was by far the highest share in the survey’s five years. Only 14 percent of Americans said they were better off than a year ago, the worst in the survey’s history.The dour mood is also reflected in other surveys. The University of Michigan’s index of consumer sentiment this month hit its lowest level in its 70-year history. Another measure of consumer confidence, from the Conference Board, has also fallen, though less drastically.There is no mystery as to what is causing consumers’ bleak outlook: prices that are rising at the fastest rate in a generation. More than nine in 10 Americans say they are concerned about inflation, according to the Momentive poll, including 70 percent who say they are “very concerned,” up from 63 percent in April.Inflation has emerged as a major political challenge for President Biden and congressional Democrats. Only 31 percent of Americans said they approved of Mr. Biden’s approach to inflation; support was muted even among Democrats, only 58 percent of whom said they approved of Mr. Biden’s approach, and only 15 percent of them “strongly.”Survey respondents were equally critical of the approach taken by the Federal Reserve, which has begun aggressively raising interest rates in an effort to bring down inflation. Only 30 percent of Americans said they approved of the Fed’s handling of the issue.Until recently, worries about inflation have been offset, at least to some degree, by the strong job market, which has enabled workers to push for higher pay and better benefits. But there are hints that could be changing. Forty-seven percent of adults in June said they thought it was a good time to look for a job, down from 60 percent in April. And nearly half of respondents said they thought the U.S. economy had entered a recession.About the Survey: The data in this article came from an online survey of 5,342 adults conducted by the polling firm Momentive from June 13 to June 19. The company selected respondents at random from the more than two million people who take surveys on its platform each day. Responses were weighted to match the demographic profile of the population of the United States. The survey has a modeled error estimate (similar to a margin of error in a standard telephone poll) of plus or minus 2 percentage points, so differences of less than that amount are statistically insignificant. More

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    Inflation Complicates Biden’s Deliberations on Student Loan Forgiveness

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    The president is trying to balance his campaign promise to cancel thousands of dollars in student debt for tens of millions of borrowers with concerns such a move would be seen as a handout.WASHINGTON — The soaring cost of food, gasoline and other staples is further complicating a fraught debate among President Biden and his closest advisers over whether to follow through on his campaign pledge to cancel thousands of dollars of student loan debt for tens of millions of people.While Mr. Biden has signaled to Democratic lawmakers that he will probably move forward with some form of student loan relief, he is still pressing his team for details about the economic ramifications of wiping out $10,000 of debt for some — or all — of the nation’s 43 million federal student loan recipients.In meetings this spring, Mr. Biden repeatedly asked for more data on whether the move would primarily benefit well-off borrowers from private universities who might not need the help, according to people involved in the process. The country’s 8.6 percent inflation rate, a four-decade high, has added another layer of complexity to the decision: What would it mean for the economy if the government forgives some $321 billion in loans?“You’re talking about millions, possibly billions of dollars that could be spent. You should do it with eyes wide open,” said Cedric Richmond, who stepped down as a senior adviser to Mr. Biden last month. “He wants to make sure that it’s based in equity and it doesn’t exacerbate disparities.”While Mr. Biden has yet to make a decision on student debt cancellation, his aides say he will before the end of August. The White House has been deeply divided over the political and economic effects of loan forgiveness. Mr. Biden’s chief of staff, Ron Klain, has argued that it would galvanize a base of young voters increasingly frustrated with the president. Other aides have presented data showing that many Americans who saved money to pay off tuition for themselves or their children would resent the move.Some economic advisers have made the case to Mr. Biden that the move might actually relieve inflation, at least a little, if he pairs debt forgiveness to a restart of the interest payments on student loans, which have been paused since early in the pandemic.Mr. Biden’s deliberations are emblematic of his attempts to straddle deep ideological divides in the country, often within his party. According to people familiar with his thinking, Mr. Biden is struggling to balance his promise to deliver sweeping proposals to address racial and economic disparities with concerns that loan cancellation would exacerbate inflation and be seen as a giveaway, undermining his image as a champion for labor and the working class.Mr. Biden is considering a framework for student debt relief that his economic aides have assured him would not exacerbate inflation and could potentially ease price growth slightly.Under the plan, Mr. Biden would cancel some debt for certain borrowers, likely up to $10,000 each, which would effectively give some of those borrowers more money to spend on goods and services, like buying furniture or dining out, potentially creating additional demand that could further push up prices. Any move to relieve debt would include some type of income limits on those who qualify.But at the same time, he would end a pause on student loan interest payments for all borrowers, which was imposed in March 2020 and has been extended seven times, most recently until Aug. 31. That would effectively force many of those borrowers to spend less on goods and services to resume their loan payments.Mr. Biden’s aides believe that pairing the two policies could pull a small amount of consumer buying power out of the economy. By some administration estimates, the two policies could bring inflation down very slightly. At minimum, aides say, they would cancel each other out.“Given that fighting inflation is the president’s top domestic priority,” Jared Bernstein, a member of the White House Council of Economic Advisers, said in an interview, “the key economic fact here is that if debt payment restart and debt relief were to occur at roughly the same time, the net inflationary effect should be neutral.”Designing a plan to be inflation-neutral, at worst, under the administration’s accounting would require limiting the debt relief to far less than what more liberal Democrats have pushed Mr. Biden to grant.Opponents of debt cancellation would prefer Mr. Biden restart loan payments and not forgive any debt, which they say would have a better chance of dampening inflation. And they say the administration is making its inflation math appear rosier by looking at the resumption of interest payments as a new policy that could work as a counterbalance to canceling some debt, when the pause was always intended to be only temporary.The administration’s math showing the paired policies to be neutral for inflation “is not the way I would prefer to think about it,” said Marc Goldwein, the senior policy director at the Committee for a Responsible Federal Budget, a nonpartisan fiscal watchdog group in Washington, and a critic of cancellation proposals. “But it’s not totally bizarre for somebody to think about it that way.”Mr. Biden told reporters this week that he was close to making a decision on student debt. A White House official, speaking on the condition of anonymity to discuss internal discussions, said the administration wanted to wait until the end of August to assess how much of a problem inflation is by then, as well as any legislative movement in Congress.The White House has said it would prefer that Congress pass legislation on student loan relief, but Senate Democrats lack the votes, leaving executive action as the only apparent pathway. And pressure is building from Democrats who want Mr. Biden to make good on his campaign promise.President Biden has signaled that he will probably move forward with some form of student loan relief.Haiyun Jiang/The New York TimesDuring a White House meeting in May, Senators Elizabeth Warren of Massachusetts, Chuck Schumer of New York and Raphael Warnock of Georgia, all Democrats, presented data to Mr. Biden showing that debt cancellation would benefit borrowers who failed to obtain a degree to rebut the notion that relief would be a giveaway to the privileged, according to a person briefed on the meeting. Vice President Kamala Harris has also met with Mr. Biden to break down the groups that would benefit, another official said.Democrats have often cited a report from Temple University showing that nearly 40 percent of full-time undergraduates who enrolled in the 2011-12 academic year accumulated some debt but did not have a degree after six years.Republicans in Congress have attacked the White House as fiscally irresponsible. Representative Virginia Foxx of North Carolina, the top Republican on the Education and Labor Committee, said in a letter to the Education Department this month that she was “gravely concerned the department will further harm borrowers and taxpayers if it acts on student loan forgiveness, in part because of its inability to follow through on its grandiose proposals.”Student Loans: Key Things to KnowCard 1 of 4Corinthian Colleges. More

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    Biden Weighs Tariff Rollback to Ease Inflation, Even a Little Bit

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    While lifting some levies on China is unlikely to put a large dent in inflation, administration officials concede they have few other options to address surging prices.WASHINGTON — President Biden is weighing whether to roll back some of the tariffs that former President Donald J. Trump imposed on Chinese goods, in hopes of mitigating the most rapid price gains in 40 years, according to senior administration officials.Business groups and some outside economists have been pressuring the administration to relax at least a portion of the taxes on imports, saying it would be a significant step that the president could take to immediately cut costs for consumers.Yet any action by the administration to lift the tariffs is unlikely to put a large dent in an inflation rate that hit 8.6 percent in May — while the political ramifications could be severe. An influential study this year predicted that a move to lift tariffs could save households $797 a year, but administration officials say the actual effect would most likely be far smaller, in part because there is no chance Mr. Biden will roll back all of the federal government’s tariffs and other protectionist trade measures.The tariff discussion comes at a precarious time for the economy. Persistent inflation has shattered consumer confidence, driven stock markets into bear territory — down 20 percent from their January high — and inflamed fears of a recession as the Federal Reserve moves quickly to raise interest rates.Some administration economists privately estimate the tariff reductions that Mr. Biden is considering would reduce the overall inflation rate by as little as a quarter of a percentage point. Still, in a sign of how big a political problem inflation has become, officials are weighing at least a partial relaxation anyway, in part because the president has few other options.The China tariffs are raising the price of goods for American consumers by essentially adding a tax on top of what they already pay for imported goods. In theory, removing the tariffs could reduce inflation if companies cut — or stopped raising — prices on those products.Mr. Biden has said taming inflation rests mainly with the Federal Reserve, which is trying to cool demand by making money more expensive to borrow and spend. The Fed is expected to raise interest rates on Wednesday, possibly making its biggest increase since 1994, as it tries to get persistent inflation under control. The prospect of big rate increases has spooked Wall Street, which entered bear market territory on Monday before steadying on Tuesday.Any move to tweak the tariffs could carry significant trade-offs. It could encourage companies to keep their supply chains in China, undercutting another White House priority to bring jobs back to America. And it could expose Mr. Biden — and his Democratic allies in Congress — to attacks that he is letting Beijing off the hook when America’s economic relationship with China has become openly hostile, deepening a wedge issue for the midterm elections and the next presidential race.China has yet to live up to the commitments it made as part of the U.S.-China trade deal that Mr. Trump negotiated, including failing to purchase significant amounts of natural gas, Boeing airplanes and other American products. Mr. Trump imposed tariffs on the bulk of products the United States imports from China as part of a pressure campaign aimed at forcing China to change its economic practices. More than two years later, the United States retains a 25 percent tariff on about $160 billion of Chinese products, while another $105 billion, mostly consumer goods, are taxed at 7.5 percent.While Mr. Biden has criticized the way in which Mr. Trump wielded tariffs, he has also acknowledged that China’s economic practices pose a threat to America.Understand Inflation and How It Impacts YouInflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Greedflation: Some experts contend that big corporations are supercharging inflation by jacking up prices. We take a closer look at the issue. Inflation Calculator: How you experience inflation can vary greatly depending on your spending habits. Answer these seven questions to estimate your personal inflation rate.For Investors: At last, interest rates for money market funds have started to rise. But inflation means that in real terms, you’re still losing money.Business groups like the U.S. Chamber of Commerce and economists like Lawrence H. Summers, a Treasury secretary under President Bill Clinton, have urged the White House to repeal as many tariffs as possible, saying it would help consumers deal with rising prices.Mr. Summers and others have approvingly cited the March study on the issue from economists at the Peterson Institute for International Economics, who argued that a “feasible package” of tariff removal — which includes repealing a range of levies and trade programs, not just those applied to China — could cause a one-time reduction in the Consumer Price Index of 1.3 percentage points, amounting to a gain of $797 per American household.In an interview, Mr. Summers said reducing tariffs was “probably the most potent microeconomic or structural action the administration can take to reduce prices and inflationary pressure relatively rapidly.”But even those inside the administration who support easing the tariffs are skeptical that the move would produce anywhere close to the amount of relief that Mr. Summers and others have predicted.“I think some reductions may be warranted and could help to bring down prices of things that people buy that are burdensome,” Janet L. Yellen, the Treasury secretary and an advocate of some tariff rollbacks, told a House committee last week. “I want to make clear, I honestly don’t think tariff policy is a panacea with respect to inflation.”Ms. Yellen met on Tuesday with the board of directors of the National Retail Federation, which has long argued against the tariffs and recently made the case that eliminating them would ease inflation.One key question is whether companies that are given tariff relief would actually pass those savings on in the form of lower prices or choose to absorb them as profits. Consumers have so far continued to pay more for everyday items, a fact that corporations have cited in earnings calls with investors as a reason they can charge more.David French, senior vice president of government relations at the National Retail Federation, said the administration had been trying to understand how quickly tariff cuts would translate into pricing changes, and seeking assurances from retailers that any savings would be passed along to American consumers.“I think in the administration’s mind, there’s going to be a price rollback and money is going to come off the price tag,” he said. “I’m not sure you’re going to see a dramatic change like that.”Instead of price decreases, for example, stores may choose to hold off on increasing prices even more. Retailers “will do as much as they can to demonstrate dramatic changes in pricing where possible,” but they still face pent-up pressures in the supply chain in terms of cost, he said.Rising prices have socked Americans across the economy, draining families’ purchasing power and contributing to a steady decline in Mr. Biden’s approval ratings. The Consumer Price Index was up 8.6 percent in May from a year earlier, its fastest growth rate in 40 years. Mr. Biden says he has made fighting inflation his top economic priority.Unloading cargo at the Port of Los Angeles in March. The United States still has a 25 percent tariff on about $160 billion of Chinese products that was imposed by the Trump administration.Coley Brown for The New York TimesLast week, Mr. Biden announced a two-year pause on tariffs on imported solar panels, which could reduce costs for domestic consumers but which effectively pre-empted a Commerce Department investigation into illegal trade practices by Chinese manufacturers.Domestic trade groups, labor leaders and populist Democrats like Representative Tim Ryan of Ohio, who is locked in a competitive Senate race, have pushed Mr. Biden to keep the tariffs. Mr. Ryan held a news conference on Tuesday urging Mr. Biden not to yield any economic ground to Beijing.Economists disagree on how much inflation relief the administration could get by removing the tariffs.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Inflation Sped Up Again in May, Dashing Hopes for Relief

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    The Consumer Price Index picked up by 8.6 percent, as price increases climbed at the fastest pace in more than 40 years.A surge in prices in May delivered a blow to President Biden and underscored the immense challenge facing the Federal Reserve as inflation, which many economists had expected to show signs of cooling, instead reaccelerated to climb at its fastest pace since late 1981.Consumer prices rose 8.6 percent from a year earlier and 1 percent from April — a monthly increase that was more rapid than economists had predicted and about triple the previous pace. The pickup partly reflected surging gas costs, but even with volatile food and fuel prices stripped out the climb was 0.6 percent, a brisk monthly rate that matched April’s reading.Friday’s Consumer Price Index report offered more reason for worry than comfort for Fed officials, who are watching for signs that inflation is cooling on a monthly basis as they try to guide price increases back down to their goal. A broad array of products and services, including rents, gas, used cars and food, are becoming sharply more expensive, making this bout of inflation painful for consumers and suggesting that it might have staying power. Policymakers aim for 2 percent inflation over time using a different but related index, which is also elevated.The quick pace of inflation increases the odds that the Fed, which is already trying to cool the economy by raising borrowing costs, will have to move more aggressively and inflict some pain to temper consumer and business demand. The central bank is widely expected to raise rates half a percentage point at its meeting next week and again in July. But Friday’s data prompted a number of economists to pencil in another big rate increase in September. A more active Fed would increase the chances of a marked pullback in growth or even a recession. More