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Eurozone Inflation Holds Steady at 5.3 Percent

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The NewsConsumer prices in the eurozone rose 5.3 percent in August compared with a year earlier, sticking at the same pace as the previous month and defying economists’ expectations for a slowdown, according to an initial estimate by the statistics agency of the European Union.While inflation has slowed materially from its peak of above 10 percent in October last year, there are signs that some inflationary pressures are persistent, even as bloc’s economy weakens. Food inflation was again the largest contributor to the headline rate, rising 9.8 percent from a year earlier on average across the 20 countries that use the euro currency.Inflation was also given some upward momentum by a jump in energy costs, which rose 3.2 percent in August from the previous month.Core inflation, which strips out food and energy prices, and is used as a gauge of domestic price pressures, slowed to 5.3 percent, from 5.5 percent in July.By Country: Higher energy prices add to inflation pressures in the region’s largest economies.In some of the eurozone’s largest economies, rebounding energy prices offset slowing food inflation. The annual rate of inflation accelerated to 5.7 percent in France and to 2.4 percent in Spain this month.In Spain, inflation had fallen below 2 percent, the European Central Bank’s target, in June, but has since climbed back above it.Inflation in Germany, Europe’s largest economy, was 6.4 percent in August, slowing only slightly from the previous month, as household energy and motor fuel costs increased.What’s Next: The European Central Bank weighs another rate increase.The acceleration of inflation in some of the region’s largest economies arrives two weeks before the European Central Bank’s next policy meeting. As analysts parse the data, the question is whether the reports are troubling enough to persuade policymakers to raise interest rates again at their mid-September meeting. The central bank has raised rates nine consecutive times, by 4.25 percentage points in about a year, and there is growing evidence that higher rates are restraining the economy, particularly as lending declines.Last month, Christine Lagarde, the president of the central bank, said she and her colleagues had “an open mind” about the decision in September and subsequent meetings. Policymakers are trying to strike a balance between raising rates enough to stamp out high inflation, while not causing unnecessary economic pain.“We might hike, and we might hold,” she said. “And what is decided in September is not definitive; it may vary from one meeting to the other.”On Thursday, before the eurozone data was released, Isabel Schnabel, a member of the bank’s executive board, said that “underlying price pressures remain stubbornly high, with domestic factors now being the main drivers of inflation in the euro area.” This meant a “sufficiently restrictive” policy stance was needed to return inflation to the bank’s 2 percent target “in a timely manner,” she added. More

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    Eurozone Inflation Edges Lower, but Pressure on Prices Continues

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    The annual rate of inflation was 8.5 percent in February, down from 8.6 percent a month earlier, among countries using the euro.With the winter drawing to a close, inflation levels eased in Europe last month, the European Commission reported on Thursday, even as concerns grew that stubbornly high prices could put pressure on central bankers to keep raising interest rates.Consumer prices in the 20 countries that use the euro as their currency rose at an annual rate of 8.5 percent in February, down slightly from January’s rate of 8.6 percent. Year-over-year rates have been declining since reaching a peak 10.6 percent in October.But some of the largest economies showed troubling increases, and core inflation — a measure that excludes the most erratic categories like food and energy — rose to a record high of 5.6 percent in February, from 5.3 percent.In France, inflation hit 7.2 percent in February, its highest point in more than two decades while in Spain, inflation grew at an annual rate of 6.1 percent. Germany, Europe’s largest economy, reported that the annual rate crept up to 9.3 percent.The grim economic outlook for Europe that had been predicted last fall has considerably brightened. Fears of a deep recession turned out to be overblown. Vertigo-inducing energy prices have dropped thanks in part to a warm winter and conservation efforts. Still, the road is bumpy.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Eurozone Inflation Eases on Lower Energy Prices

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    The rate of price increases in countries using the euro slowed to 9.2 percent in December, down from 10.1 percent a month earlier.Lower energy prices helped to push inflation in Europe lower last month, the European Commission reported on Friday, but many prices are still rising at a brisk pace and policymakers have given little indication that they plan to halt planned interest rate increases.Consumer prices in the countries that use the euro as their currency rose at an annual rate of 9.2 percent in December, down from the double-digit levels of 10.1 percent in November and 10.6 percent in October.Declines in inflation reported this week in France, Germany and Spain sparked hopes that the relentless rise across the continent may have finally peaked. But several influential voices urged caution, noting that while the so-called headline rate of inflation has eased, core inflation, which strips out volatile food and energy prices, has not shown the same drop. In fact, for December, the eurozone’s core rate of inflation rose to 5.2 percent, from 5 percent the month before.Europe has benefited from a streak of mild weather, which has lowered the demand for energy, particularly the natural gas used to power much of the continent’s heating infrastructure. Several governments have also offered subsidies to blunt the painfully high energy prices that consumers pay. The drop in Germany’s inflation rate, to 9.6 percent in December from 11.3 percent the month before, was partly due to one-time assistance to help households pay their energy bills, according to the government’s statistics office.The data showed that energy prices in the eurozone rose at an annual rate of 25.7 percent in December, down from as high as 41.5 percent in October. “Europe is very lucky at the moment with the weather,” said Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics. He added that government energy relief had inserted a “wedge between reality and the data.”“It’s a price control,” he said, and “once you take out that, it’s not as clear that inflation is that benign.”Nearly all eurozone countries marked a decline in their main inflation rate in December, including France (6.7 percent, from 7.1 percent in November), Italy (12.3 percent, from 12.6 percent), Spain (5.6 percent, from 6.7 percent) and the Netherlands (11 percent, from 11.3 percent). The numbers bolstered the argument that the eurozone’s record-setting pace of inflation in the past year will slowly lose steam in 2023. “We are likely past the peak,” said Riccardo Marcelli Fabiani, an economist at Oxford Economics, in a note on Friday. But he added, “we expect inflation to cool only gradually, remaining high in the short term.”The European Central Bank, which has a target of 2 percent annual inflation, has already indicated that it is likely to raise interest rates half a point in February. Christine Lagarde, the bank’s president, said last month that she expected interest rates to rise “significantly further, because inflation remains far too high and is projected to stay above our target for too long.”The December data, showing easing overall inflation but persistent underlying price pressure, will probably stoke “tense negotiations among policymakers in the next few months” noted Mr. Vistesen after the numbers were released. The Federal Reserve, the U.S. central bank, is also expected to continue raising rates.This week, Gita Gopinath, first deputy managing director of the International Monetary Fund, told the Financial Times that the Fed should “stay the course” with its planned increases.“I think it’s clear that we haven’t turned the corner yet on inflation,” she said. At the same time, the fund has also projected that a third of the world economy will face recession this year. More

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    Eurozone Inflation Reaches 10.7 Percent as Economies Slow Down

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    The rise in consumer prices hit another record in October, with more than half of the countries that use the euro registering double-digit increases.Consumer prices in the countries that use the euro as their currency rose at a stunning annual rate of 10.7 percent in October, the European Commission reported on Monday, while economic growth across the continent grew by 0.2 percent over the quarter that spanned July, August and September.Prices have been on an relentless upward march since last year, as painfully high energy and food prices continued to push inflation to record levels. Over the past 12 months, energy prices rose by 41.9 percent while food prices increased by 13.1 percent.More than half of the 19 countries in the eurozone recorded double-digit inflation rates in the year through October, including Germany (11.6 percent), the Netherlands (16.8 percent), Italy (12.8 percent) and Slovakia (14.5 percent), with the Baltic countries at the highest end of the spectrum with rates over 21 percent.In September, the inflation rate across the eurozone was 9.9 percent. Twelve months ago, it was 4.1 percent.“This is a significant acceleration,” said Lucrezia Reichlin, an economist at the London Business School. “Inflation is becoming broad-based.”Although economic growth overall slowed from 0.8 percent in the second quarter — April, May and June — some countries registered bigger expansions than analysts anticipated. Germany, Europe’s largest economy, grew by 0.3 percent during the third quarter, driven in part by consumer spending. Italy’s economy grew by 0.5 percent and Sweden’s by 0.7 percent. Elsewhere, growth slowed. In France and Spain, growth increased by just 0.2 percent. Austria and Belgium saw their economies shrink by 0.1 percent.In the larger bloc of 27 countries that make up the European Union, third-quarter growth also increased by 0.2 percent.The International Monetary Fund has warned that “European policymakers face severe trade-offs and tough policy choices as they address a toxic mix of weak growth and high inflation that could worsen.”Inflation is vexing many of the world’s economies and may worsen, particularly in the wake of Russia’s withdrawal from an agreement that allowed grain exports from Ukraine that is likely to push up food prices.Last week, the United States announced that consumer prices rose by 6.2 percent in the year through September, by one measure. Britain’s inflation rate was 8.8 percent over the same period.Central banks appear resolutely determined to halt the rise. “Inflation remains far too high and will stay above the target for an extended period,” Christine Lagarde, the president of the European Central Bank, said last week after announcing the bank was raising interest rates by three-quarters of a percentage point for the second time in a row.The International Monetary Fund has also urged central bankers to stay the course possibly through next year. It noted that “almost half the recent surge in European core inflation remains unexplained by its usual drivers,” suggesting that the war in Ukraine and aftershocks of the coronavirus pandemic were contributing to a new inflationary dynamic.The Federal Reserve is expected to raise interest rates by three-quarters of a percentage point when policymakers meet on Wednesday. It would be the sixth increase this year. The Bank of England, meeting on Thursday, is also expected to raise rates by the same amount.However painful higher interest rates may be for consumers and borrowers in the United States, the sting is even sharper in other regions around the world. Higher interest rates attract investors, which pushes up the value of the dollar. For emerging nations with high debt bills denominated in dollars, though, their already heavy burden grows even larger. At the same time, nations that have to import American goods or essentials like energy and food that are often priced in dollars, get much more expensive. Those countries get poorer.While most economists have urged a hard line on inflation, there are an increasing number of voices questioning whether central bankers are going too far, too fast. Higher interest rates are not going to suddenly increase the supply of oil, wheat and microchips, and may even exacerbate shortages by stunting investment.There is also fear that efforts to corral inflation will accelerate countries’ slide into recession by choking off investment and raising unemployment. Several analysts said on Monday that they expected growth in the final three months of the year to deteriorate.Andrew Kenningham, the chief Europe economist at Capital Economics, warned in a report that the eurozone “is heading for a deeper recession and higher inflation than most expect.” More

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    Strong Dollar Is Good for the US but Bad for the World

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    The Federal Reserve may have no choice but to wage a relentless inflation fight, but countries rich and poor are feeling the pain of plunging currencies.The Federal Reserve’s determination to crush inflation at home by raising interest rates is inflicting profound pain in other countries — pushing up prices, ballooning the size of debt payments and increasing the risk of a deep recession.Those interest rate increases are pumping up the value of the dollar — the go-to currency for much of the world’s trade and transactions — and causing economic turmoil in both rich and poor nations. In Britain and across much of the European continent, the dollar’s acceleration is helping feed stinging inflation.On Monday, the British pound touched a record low against the dollar as investors balked at a government tax cut and spending plan. And China, which tightly controls its currency, fixed the renminbi at its lowest level in two years while taking steps to manage its decline.Weakening CurrenciesHow the values of global currencies have changed against the U.S. dollar from three months ago

    Data through 3 p.m. Eastern time MondaySource: FactSetBy The New York TimesIn Nigeria and Somalia, where the risk of starvation already lurks, the strong dollar is pushing up the price of imported food, fuel and medicine. The strong dollar is nudging debt-ridden Argentina, Egypt and Kenya closer to default and threatening to discourage foreign investment in emerging markets like India and South Korea.“For the rest of the world, it’s a no-win situation,” said Eswar Prasad, an economics professor at Cornell and author of several books on currencies. At the same time, he said, the Fed has no choice but to act aggressively to control inflation: “Any delay in action could make things potentially even worse.”Policy decisions made in Washington frequently reverberate widely. The United States is a superpower with the world’s largest economy and hefty reserves of oil and natural gas. When it comes to global finance and trade, though, its influence is outsize.That is because the dollar is the world’s reserve currency — the one that multinational corporations and financial institutions, no matter where they are, most often use to price goods and settle accounts. Energy and food tend to be priced in dollars when bought and sold on the world market. So is a lot of the debt owed by developing nations. Roughly 40 percent of the world’s transactions are done in dollars, whether the United States is involved or not, according to a study done by the International Monetary Fund.And now, the value of the dollar compared with other major currencies like the Japanese yen has reached a decades-long high. The euro, used by 19 nations across Europe, reached 1-to-1 parity with the dollar in June for the first time since 2002. The dollar is clobbering other currencies as well, including the Brazilian real, the South Korean won and the Tunisian dinar.One reason is the string of crises that have rocked the globe including the coronavirus pandemic, supply chain chokeholds, Russia’s invasion of Ukraine and the series of climate disasters that have imperiled the world’s food and energy supply. In an anxious world, the dollar has traditionally been a symbol of stability and security. The worse things get, the more people buy dollars. On top of that, the economic outlook in the United States, however cloudy, is still better than in most other regions.In Britain, the pound touched a record low against the dollar.Andrew Testa for The New York TimesMillions are at risk of famine in Somalia, which is facing extreme drought and a jump in food prices.Ed Ram/Getty ImagesChina set its currency at the lowest point in two years on Monday.Mark R Cristino/EPA, via ShutterstockRising interest rates make the dollar all the more alluring to investors by ensuring a better return. That, in turn, means they are investing less in emerging markets, which puts further strains on those economies.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Shock Waves Hit the Global Economy, Posing Grave Risk to Europe

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    The threat to Europe’s industrial might and living standards is particularly acute as policymakers race to decouple the continent from Russia’s power sources.Russia’s invasion of Ukraine and the continuing effects of the pandemic have hobbled countries around the globe, but the relentless series of crises has hit Europe the hardest, causing the steepest jump in energy prices, some of the highest inflation rates and the biggest risk of recession.The fallout from the war is menacing the continent with what some fear could become its most challenging economic and financial crisis in decades.While growth is slowing worldwide, “in Europe it’s altogether more serious because it’s driven by a more fundamental deterioration,” said Neil Shearing, group chief economist at Capital Economics. Real incomes and living standards are falling, he added. “Europe and Britain are just worse off.”Several countries, including Germany, the region’s largest economy, built up a decades-long dependence on Russian energy. The eightfold increase in natural gas prices since the war began presents a historic threat to Europe’s industrial might, living standards, and social peace and cohesion. Plans for factory closings, rolling blackouts and rationing are being drawn up in case of severe shortages this winter.The risk of sinking incomes, growing inequality and rising social tensions could lead “not only to a fractured society but a fractured world,” said Ian Goldin, a professor of globalization and development at Oxford University. “We haven’t faced anything like this since the 1970s, and it’s not ending soon.”Other regions of the world are also being squeezed, although some of the causes — and prospects — differ.Gazprom, Russia’s state-owned energy company, said this week that it would not resume the flow of natural gas through its Nord Stream 1 pipeline until Europe lifted Ukraine-related sanctions.Hannibal Hanschke/EPA, via ShutterstockHigher interest rates, which are being deployed aggressively to quell inflation, are trimming consumer spending and growth in the United States. Still, the American labor market remains strong, and the economy is moving forward.China, a powerful engine of global growth and a major market for European exports like cars, machinery and food, is facing its own set of problems. Beijing’s policy of continuing to freeze all activity during Covid-19 outbreaks has repeatedly paralyzed large swaths of the economy and added to worldwide supply chain disruptions. In the last few weeks alone, dozens of cities and more than 300 million people have been under full or partial lockdowns. Extreme heat and drought have hamstrung hydropower generation, forcing additional factory closings and rolling blackouts.A troubled real estate market has added to the economic instability in China. Hundreds of thousands of people are refusing to pay their mortgages because they have lost confidence that developers will ever deliver their unfinished housing units. Trade with the rest of the world took a hit in August, and overall economic growth, although likely to outrun rates in the United States and Europe, looks as if it will slip to its slowest pace in a decade this year. The prospect has prompted China’s central bank to cut interest rates in hopes of stimulating the economy.Understand the Decline in U.S. Gas PricesCard 1 of 5Understand the Decline in U.S. Gas PricesGas prices are falling. More

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    A Weak Euro Heads to an Uncomfortable Milestone: Parity With the Dollar

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    The list of ailments troubling the eurozone economy was already stark: the highest inflation rate on record, energy insecurity and increasing whispers about a recession. This month, another threat emerged. The weakening euro has raised expectations that it could reach parity with the U.S. dollar.Europe is facing “a steady stream of bad news,” Valentin Marinov, a currency strategist at Crédit Agricole, said. “The euro is a pressure valve for all these concerns, all these fears.”The currency, which is shared by 19 countries, hasn’t fallen to or below a one-to-one exchange rate with the dollar in two decades. Back then, in the early 2000s, the low exchange rate undercut confidence in the new currency, which was introduced in 1999 to help bring unity, prosperity and stability to the region. In late 2000, the European Central Bank intervened in currency markets to prop up the fledgling euro.Today, there are fewer questions about the resilience of the euro, even as it sits near its lowest level in more than five years against the dollar. Instead, the currency’s weakness reflects the darkening outlook of the bloc’s economy.Since Russia invaded Ukraine in late February, the euro has fallen more than 6 percent against the dollar as governments seek to cut Russia from their energy supplies, trade channels are disrupted and inflation is imported into the continent via high energy, commodity and food prices.While a weak euro is a blessing for American holidaymakers heading to the continent this summer, it is only adding to the region’s inflationary woes by increasing the cost of imports and undercutting the value of European earnings for American companies.Many analysts have determined that parity is only a matter of time.One euro will be worth one dollar by the end of the year and fall even lower early next year, according to analysts at HSBC, one of Europe’s largest banks. “We find it hard to see a silver lining for the single currency at this stage,” they wrote in a note to clients in early May.Traders are watching to see if the euro will drop below $1.034 against the dollar, the low it reached in January 2017. On May 13 it came close, falling to $1.035.Diners in a restaurant in Milan, Italy. American vacationers in Europe can enjoy the benefits of a weak euro, but imported goods will cost more.Luca Bruno/Associated PressBelow that level, the prospects of the euro reaching parity become “quite material,” according to analysts at the Dutch bank ING. Analysts at the Japanese bank Nomura predict that parity will be reached in the next two months. For the euro, “the path of least resistance is lower,” analysts at JPMorgan wrote in a note to clients. They expect the currency to reach parity in the third quarter.Economists at Pantheon Macroeconomics said last month that an embargo on Russian gas would push the euro to parity with the dollar, joining other analysts linking the sinking euro to the efforts to cut oil and gas ties with Russia.“The outlook for the euro now is very, very tied to the energy security risk,” said Jane Foley, a currency strategist at Rabobank. For traders, the risks intensified after Russia cut off gas sales to Poland and Bulgaria late last month, she added. If Europe’s supplies of gas are shut off either by a self-imposed embargo or by Russia, the region is likely to tip into recession as replacing Russian energy supplies is challenging.

    The strength of the U.S. dollar has also dragged the euro close to parity. The dollar has become the haven of choice for investors, outperforming other currencies that have also been considered safe places for money as the risk of stagflation — an unhealthy mix of stagnant economic growth and rapid inflation — stalks the globe. Last week, the Swiss franc fell below parity with the dollar for the first time in two years, and the Japanese yen is at its lowest level since 2002, bringing an unwanted source of inflation to a country that is used to low or falling prices.There are plenty of reasons investors are looking for safe places to park their money. Economic growth is slow in China because of shutdowns prompted by the country’s zero-Covid policy. There are recession risks in Europe and growing predictions of a recession in the United States next year. And many so-called emerging markets are being battered by rising food prices, worsening crises in areas including East Africa and the Middle East.“It’s a pretty grim outlook for the global economy,” Ms. Foley said. It “screams safe haven and it screams the dollar.”Also in the dollar’s favor is the aggressive action of the Federal Reserve. With inflation in the United States hovering around its highest rate in four decades, the central bank has ramped up its tightening of monetary policy with successive interest rate increases, and many more are predicted. Traders are betting that U.S. interest rates will climb another 2 percentage points by early next year to 3 percent, the highest level since 2007.The Russia-Ukraine War and the Global EconomyCard 1 of 7A far-reaching conflict. More

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    Weakened Euro May Become Equal to the U.S. Dollar

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    The list of ailments troubling the eurozone economy was already stark: the highest inflation rate on record, energy insecurity and increasing whispers about a recession. This month, another threat emerged. The weakening euro has raised expectations that it could reach parity with the U.S. dollar.Europe is facing “a steady stream of bad news,” Valentin Marinov, a currency strategist at Crédit Agricole, said. “The euro is a pressure valve for all these concerns, all these fears.”The currency, which is shared by 19 countries, hasn’t fallen to or below a one-to-one exchange rate with the dollar in two decades. Back then, in the early 2000s, the low exchange rate undercut confidence in the new currency, which was introduced in 1999 to help bring unity, prosperity and stability to the region. In late 2000, the European Central Bank intervened in currency markets to prop up the fledgling euro.Today, there are fewer questions about the resilience of the euro, even as it sits near its lowest level in more than five years against the dollar. Instead, the currency’s weakness reflects the darkening outlook of the bloc’s economy.Since Russia invaded Ukraine in late February, the euro has fallen more than 6 percent against the dollar as governments seek to cut Russia from their energy supplies, trade channels are disrupted and inflation is imported into the continent via high energy, commodity and food prices.While a weak euro is a blessing for American holidaymakers heading to the continent this summer, it is only adding to the region’s inflationary woes by increasing the cost of imports and undercutting the value of European earnings for American companies.Many analysts have determined that parity is only a matter of time.One euro will be worth one dollar by the end of the year and fall even lower early next year, according to analysts at HSBC, one of Europe’s largest banks. “We find it hard to see a silver lining for the single currency at this stage,” they wrote in a note to clients in early May.Traders are watching to see if the euro will drop below $1.034 against the dollar, the low it reached in January 2017. On May 13 it came close, falling to $1.035.Diners in a restaurant in Milan, Italy. American vacationers in Europe can enjoy the benefits of a weak euro, but imported goods will cost more.Luca Bruno/Associated PressBelow that level, the prospects of the euro reaching parity become “quite material,” according to analysts at the Dutch bank ING. Analysts at the Japanese bank Nomura predict that parity will be reached in the next two months. For the euro, “the path of least resistance is lower,” analysts at JPMorgan wrote in a note to clients. They expect the currency to reach parity in the third quarter.Economists at Pantheon Macroeconomics said last month that an embargo on Russian gas would push the euro to parity with the dollar, joining other analysts linking the sinking euro to the efforts to cut oil and gas ties with Russia.“The outlook for the euro now is very, very tied to the energy security risk,” said Jane Foley, a currency strategist at Rabobank. For traders, the risks intensified after Russia cut off gas sales to Poland and Bulgaria late last month, she added. If Europe’s supplies of gas are shut off either by a self-imposed embargo or by Russia, the region is likely to tip into recession as replacing Russian energy supplies is challenging.

    The strength of the U.S. dollar has also dragged the euro close to parity. The dollar has become the haven of choice for investors, outperforming other currencies that have also been considered safe places for money as the risk of stagflation — an unhealthy mix of stagnant economic growth and rapid inflation — stalks the globe. Last week, the Swiss franc fell below parity with the dollar for the first time in two years, and the Japanese yen is at its lowest level since 2002, bringing an unwanted source of inflation to a country that is used to low or falling prices.There are plenty of reasons investors are looking for safe places to park their money. Economic growth is slow in China because of shutdowns prompted by the country’s zero-Covid policy. There are recession risks in Europe and growing predictions of a recession in the United States next year. And many so-called emerging markets are being battered by rising food prices, worsening crises in areas including East Africa and the Middle East.“It’s a pretty grim outlook for the global economy,” Ms. Foley said. It “screams safe haven and it screams the dollar.”The Russia-Ukraine War and the Global EconomyCard 1 of 7A far-reaching conflict. More

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    Rapid Inflation, Lower Employment: How the U.S. Pandemic Response Measures Up

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    The United States spent more on its policy response than other advanced economies. Now economists are revisiting how that worked.The United States spent more aggressively to protect its economy from the pandemic than many global peers, a strategy that has helped to foment more rapid inflation — but also a faster economic rebound and brisk job gains.Now, though, America is grappling with what many economists see as an unsustainable worker shortage that threatens to keep inflation high and may necessitate a firm response by the Federal Reserve. Yet U.S. employment has not recovered as fully as in Europe and some other advanced economies. That reality is prodding some economists to ask: Was America’s spending spree worth it?As the Fed raises interest rates and economists increasingly warn that it may take at least a mild recession to bring inflation to heel, risks are mounting that America’s ambitious spending will end up with a checkered legacy. Rapid growth and a strong labor market rebound have been big wins, and economists across the ideological spectrum agree that some amount of spending was necessary to avoid a repeat of the painfully slow recovery that followed the previous recession. But the benefits of that faster recovery could be diminished as rising prices eat away at paychecks — and even more so if high inflation prods central bank policymakers set policy in a way that pushes up unemployment down the road.“I’m worried that we traded a temporary growth gain for permanently higher inflation,” said Jason Furman, an economist at Harvard University and a former economic official in the Obama administration. His concern, he said, is that “inflation could stay higher, or the Fed could control it by lowering output in the future.”The Biden administration has repeatedly argued that, to the extent the United States is seeing more inflation, the policy response to the pandemic also created a stronger economy.“We got a lot more growth, we got less child poverty, we got better household balance sheets, we have the strongest labor market by some metrics I’ve ever seen,” Jared Bernstein, an economic adviser to President Biden, said in an interview. “Were all of those accomplishments accompanied by heat on the price side? Yes, but some degree of that heat showed up in every advanced economy, and we wouldn’t trade that back for the historic recovery we helped to generate.”Inflation has picked up around the world, but price increases have been quicker in America than in many other wealthy nations.Consumer prices were up 9.8 percent in March from a year earlier, according to a measure of inflation that strips out owner-occupied housing to make it comparable across countries. That was faster than in Germany, where prices rose 7.6 percent in the same period; the United Kingdom, where they rose 7 percent; and other European countries. Other measures similarly show U.S. inflation outpacing that of its global peers.The Rise of InflationInflation has risen worldwide in the past year, but the increase has been fastest in the United States.

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    Change in consumer prices from a year earlier
    Note: Euro area and U.K. data are Harmonised Index of Consumer Prices. U.S. data is the Consumer Price Index excluding owners’ equivalent rent.Sources: U.S. Bureau of Labor Statistics, O.E.C.D., EurostatBy The New York TimesThe comparatively large jump in prices in America owes at least partly to the nation’s ambitious spending. Research from the Federal Reserve Bank of San Francisco attributed about half of the nation’s 2021 annual price increase to the government’s spending response. The researchers estimated the number, which is imprecise, by measuring America’s inflation outcome compared with what happened in countries that spent less.“The size of the package was very large compared to any other country,” said Òscar Jordà, a co-author on the study.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: Times readers sent us their questions about rising prices. Top experts and economists weighed in.Interest Rates: As it seeks to curb inflation, the Federal Reserve announced that it was raising interest rates for the first time since 2018.How Americans Feel: We asked 2,200 people where they’ve noticed inflation. Many mentioned basic necessities, like food and gas.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.The Trump and then Biden administrations spent about $5 trillion on pandemic relief in 2020 and 2021 — far more as a share of the nation’s economy than what other advanced economies spent, based on a database compiled by the International Monetary Fund. Much of that money went directly to households in the form of stimulus checks, expanded unemployment insurance and tax credits for parents.Payments to households helped to fuel rapid consumer demand and quick economic growth — progress that has continued into 2022. A global economic outlook released by the International Monetary Fund last week showed that America’s economy is expected to expand by 3.7 percent this year, faster than the roughly 2 percent trend that prevailed before the pandemic and the 3.3 percent average expected across advanced economies this year.That comes on the heels of even more rapid 2021 growth. And as the U.S. economy has expanded so quickly, unemployment has plummeted. After spiking to 14.7 percent in early 2020, joblessness is now roughly back to the 50-year lows that prevailed prior the pandemic.That’s a victory that politicians have celebrated. “Our economy roared back faster than most predicted,” Mr. Biden said in his State of the Union address last month. A major report from the White House on April 14 noted that the United States has experienced a faster recovery than other advanced economies, as measured by gross domestic product, consumer spending and other indicators.The Rebound in SpendingConsumer spending has recovered more quickly in the United States, even after accounting for faster inflation.

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    Change in per capita household spending since fourth quarter of 2019
    Notes: Quarterly data, adjusted for inflationSource: O.E.C.D.By The New York TimesBut increasingly, at least when it comes to the job market, America’s achievement looks less unique.Unemployment in the United States jumped much higher at the outset of the pandemic in part because America’s policies did less to discourage layoffs than those in Europe. While many European governments paid companies to keep workers on their payrolls, the U.S. focused more on providing money directly to those who lost their jobs.Joblessness fell fast in the United States, too, but that was also true elsewhere. Many European countries, Canada and Australia are now back to or below their prepandemic unemployment rates, data reported by the Organization for Economic Co-operation and Development showed.And when it comes to the share of people who are actually working, the United States is lagging some of its global peers. The nation’s employment rate is hovering around 71.4 percent, still down slightly from nearly 71.8 percent before the pandemic began.By comparison, the eurozone countries, Canada and Australia have a higher employment rates than before the pandemic, and Japan’s employment rate has fully recovered.The Rebound in JobsEmployment rates fell further in the U.S. than in many peer countries, and have not yet returned to their prepandemic level.

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    Change in employment rate since fourth quarter of 2019
    Note: Quarterly data, ages 15 to 64Source: O.E.C.D.By The New York TimesEurope’s more complete employment recovery may partly reflect its different regulations and different approach to supporting workers during the pandemic, said Nick Bennenbroek, international economist at Wells Fargo. European aid programs effectively paid companies to keep people on the payroll even when they couldn’t go to work, while the United States supported workers directly through the unemployment insurance system.That relatively subtle difference had a major consequence: Because fewer Europeans were separated from employers, many flowed right back into their old jobs as the economy reopened. Meanwhile, pandemic layoffs touched off an era of soul-searching and job shuffling in the United States.“You didn’t have as much motivation to reconsider your assessment of your work-life situation,” Mr. Bennenbroek said. “What we initially saw in the U.S. was much more disruptive.”Inflation F.A.Q.Card 1 of 6What is inflation? More