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    The Personal Consumption Expenditure Index Climed 6.4 Percent in February

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    Inflation continued to run at the fastest pace in 40 years in February, fresh data released on Thursday showed, at a moment when war in Ukraine and continued supply chain disruptions tied to the coronavirus promise to keep prices rising.Prices, as measured by the Personal Consumption Expenditures Index, rose by 6.4 percent in the year through February, the fastest inflation rate since 1982. They climbed 5.4 percent after stripping out food and fuel costs, which can be volatile, the data showed.That pace of increase is far faster than the 2 percent annual inflation that the Federal Reserve targets. While central bankers expect today’s rapid inflation to cool by the end of the year, falling to 4.3 percent by the final three months of 2022, that pace of increase would still be too quick for comfort.Central bankers began raising interest rates earlier this month, lifting them by a quarter percentage point, and have signaled more to come as they begin to wage an assault on rising prices. By making borrowing more expensive, the Fed can weigh on demand, allowing supply to catch up and eventually temper price increases.“There is an obvious need to move expeditiously to return the stance of monetary policy to a more neutral level, and then to move to more restrictive levels if that is what is required to restore price stability,” Jerome H. Powell, the Fed chair, said during a recent speech.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 Personal Consumption Expenditures figures follow a more timely inflation release — the Consumer Price Index — and tend to be easy to forecast, so they do not come as a surprise to Wall Street. But because the gauge is the Fed’s preferred inflation measure, the fresh figures reinforce the challenge that economic officials face.While policymakers are watching for any sign that inflation is slowing down or is about to cool off, so far there is little to suggest a meaningful pullback. Supply chains remained stressed, and recent shutdowns in China could pose further strain. Apartment rents are climbing, elevating housing costs. Workers are in short supply and wages are rising, which could bolster inflation in other service categories.Russia’s invasion of Ukraine pushed up oil and gas prices, along with other commodity costs, which is likely to further elevate inflation when March data are released. While a few days of gas price increases happened in February, the bulk of them came this month.Companies are trying to navigate the complicated moment, gauging whether input cost increases will continue for a second year — and whether and how to pass that on to consumers.Chewy, the pet goods retailer, recently signed a new freight contract that will cost it more this year; and in the final quarter of 2021, it also faced higher labor costs. But it is hoping that those trends do not last, or that it can offset the climbing expenses through efficiencies.“As we close the book on 2021 and move forward in 2022, we are already seeing improvements in labor availability, inbound shipping costs and pricing, while out-of-stock levels and outbound shipping costs remain elevated,” Sumit Singh, the firm’s chief executive officer, said on an earnings call this week. “Ultimately, we believe most of these challenges are not permanent in nature.”Inflation F.A.Q.Card 1 of 6What is inflation? More

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    The Fed Bets on a ‘Soft Landing,’ but Recession Risk Looms

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    Central bankers have been clear that they will do what it takes to control inflation. They are betting on a soft landing, but a bumpy one is possible.Jerome H. Powell, the Federal Reserve chair, emphasized this week that the central bank he leads could succeed in its quest to tame rapid inflation without causing unemployment to rise or setting off a recession. But he also acknowledged that such a benign outcome was not certain.“The historical record provides some grounds for optimism,” Mr. Powell said.That “some” is worth noting: While there may be hope, there is also reason to worry, given the Fed’s track record when it is in inflation-fighting mode.The Fed has at times managed to raise interest rates to cool down demand and weaken inflation without meaningfully harming the economy — Mr. Powell highlighted examples in 1965, 1984 and 1994. But those instances came amid much lower inflation, and without the ongoing shocks of a global pandemic and a war in Ukraine.The part Fed officials avoid saying out loud is that the central bank’s tools work by slowing down the economy, and weakening growth always comes with a risk of overdoing it. And while the Fed ushered in its first rate increase this month, some economists — and at least one Fed official — think it was too slow to start taking its foot off the gas. Some warn that the delay increases the chance it might have to overcorrect.The Fed has touched off recessions with past rate increases: It happened in the early 1980s, when Paul Volcker raised rates in a campaign to bring down very rapid inflation and sent unemployment rocketing painfully higher in the process.“There is no guarantee that there will be a recession, but you have high inflation, and if you’re serious about bringing it down quickly, you have to hike a lot,” said Roberto Perli, the head of global policy at Piper Sandler, an investment bank, and a former Fed economist. “The economy doesn’t like that. I think the risk is substantial.”It is no surprise that it can be difficult to cool down inflation while sustaining an economic expansion. Higher borrowing costs trickle through the economy by slowing the housing market, discouraging big purchases and prompting companies to cut expansion plans and hire fewer workers. That broad pullback weakens the labor market and slows wage growth, helping inflation to moderate. But the chain reaction plays out gradually, and its results can be seen only with a delay, so it is easy to lay on the brakes too hard.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.“No one expects that bringing about a soft landing will be straightforward in the current context — very little is straightforward in the current context,” Mr. Powell acknowledged during his remarks this week, adding, “My colleagues and I will do our very best to succeed in this challenging task.”Six of the eight Fed-rate-increase cycles since the early 1980s have ended in recession, though some of those were caused by external shocks — like the pandemic — and some by asset bubble implosions, including the 2007 housing crisis and the collapse in internet stocks in the early 2000s.Fed officials are hoping that today’s strong economy will help them avoid a rough landing. They point to the fact that labor markets are booming and consumer demand is solid, so lifting rates and tempering voracious buying might help supply to catch up and chill the economy without giving it freezer burn. Mr. Powell has argued that with so many open jobs per unemployed worker, the Fed might be able to slow down the labor market a bit without pushing the unemployment rate up.Loretta J. Mester, the president of the Federal Reserve Bank of Cleveland, said the Fed was not at a point where it had to decide between fighting inflation or pummeling growth.“Given where the economy is now, and where the risks are, to my mind the major economic challenge is inflation,” Ms. Mester told reporters on a call Wednesday. “I don’t see it as being a trade-off at this point.”James Bullard, the president of the Federal Reserve Bank of St. Louis, said in an interview that he thought the fact that the central bank had credibility as an inflation fighter — and was raising rates to defend that credibility — could allow it to adjust policy in a way that allowed demand to moderate without causing major economic disruptions.A FedEx worker picked up packages in New York this month. After a year of rapid inflation, there is no guarantee that longer-term inflation expectations will stay in check.DeSean McClinton-Holland for The New York TimesIn the 1980s, when Mr. Volcker was the Fed chair, the central bank had to convince the world that it was prepared to wrestle inflation under control after more than a decade of rapid price gains.“Do whatever it takes — I guess that’s the mantra of the day. I do think inflation is our No. 1 concern,” Mr. Bullard said. “I don’t think, however, that it is a Volcker-like situation.”Near-term consumer and market inflation expectations have shot higher over the past year as inflation has hit a 40-year high and continued to accelerate, but longer-term price growth expectations have nudged only slightly higher.If consumers and businesses anticipated rapid price increases year after year, that would be a troubling sign. Such expectations could become self-fulfilling if companies felt comfortable raising prices and consumers accepted those higher costs but asked for bigger paychecks to cover their rising expenses.Inflation F.A.Q.Card 1 of 6What is inflation? More

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    Mortgage Rates Hit 4 Percent for First Time in 3 Years

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    Mortgage rates topped 4 percent this week for the first time in nearly three years — and are expected to keep climbing.The rate on 30-year fixed-rate mortgages averaged 4.16 percent for the week through Thursday, the first time it exceeded 4 percent since May 2019, according to Freddie Mac. That was up from 3.85 percent a week earlier and 3.09 percent a year ago.Rates have been ticking up thanks to a 40-year high in inflation, which the Federal Reserve is attempting to rein in by raising interest rates. On Wednesday, the Fed raised its benchmark rate by a quarter of a percentage point, the first increase since 2018, and it signaled that six more similarly sized increases were on the way.Mortgage rates don’t move in lock step with the Fed benchmark — they instead track the yield on 10-year Treasury bonds. That figure is influenced by a variety of factors, including the inflation rate, the Fed’s actions and how investors react to them.“The Federal Reserve raising short-term rates and signaling further increases means mortgage rates should continue to rise over the course of the year,” Sam Khater, Freddie Mac’s chief economist, said in a statement.“While home purchase demand has moderated, it remains competitive due to low existing inventory, suggesting high house price pressures will continue during the spring home-buying season,” he added.The average rate on 30-year fixed mortgages dropped as low as 2.65 percent in January 2021. More

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    Why Is the Fed Raising Interest Rates?

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    Prices for groceries, couches and rent are all climbing rapidly, and Federal Reserve officials have been warily eyeing that trend. On Wednesday, they are expected to take their biggest step yet toward counteracting it.Central bank officials — who have been signaling for months that they are preparing to pull back economic support — are expected to raise their policy interest rate by a quarter percentage point. That small change will carry with it a major signal. Policymakers are telling markets and the public that they have fully pivoted to inflation-fighting mode and will do what is necessary to make sure price gains do not remain hot for months and years to come.The Fed will release its decision at 2 p.m., and Jerome H. Powell, the central bank’s chair, will hold a news conference at 2:30 p.m.The Fed is acting at a tense moment for many consumers, when people are worrying about rising day-to-day expenses and trying to think through what higher interest rates could mean for their finances. Here’s a rundown of what is happening, why it is happening and what it is likely to mean for markets and the economy.The Fed is taking its foot off the accelerator. More

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    Biden Withdraws Sarah Bloom Raskin as Nominee for Fed’s Top Bank Cop

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    President Biden will withdraw his nomination of Sarah Bloom Raskin to serve as the Federal Reserve’s top bank regulator on Tuesday, after a Democratic senator said he would join Republicans in voting against her, most likely dooming her chances of confirmation.Ms. Raskin earlier on Tuesday sent a letter to the White House asking to withdraw her name from consideration to be the Fed’s vice chair for supervision, according to two people familiar with the decision. The New Yorker earlier reported the existence of the letter.“Sarah was subject to baseless attacks from industry and conservative interest groups,” Mr. Biden said in a statement released on Tuesday afternoon.While the end of Ms. Raskin’s candidacy will leave the Biden administration without the regulatory voice it was hoping for at the Fed Board, which oversees the nation’s largest banks, it could pave the way toward confirmation for the White House’s other Fed picks. Republicans had been stonewalling Ms. Raskin’s nomination, and in the process they were holding up the White House’s four other Fed nominees, including Jerome H. Powell, who is seeking confirmation to a second term as Fed chair.Besides Mr. Powell, Mr. Biden has nominated Lael Brainard to be the Fed’s vice chair and two academic economists — Philip N. Jefferson and Lisa D. Cook — to serve as governors.“I urge the Senate Banking Committee to move swiftly to confirm the four eminently qualified nominees for the Board of Governors,” Mr. Biden wrote in his statement.Ms. Raskin almost certainly lacked sufficient support to pass the Senate. Republicans opposed her nomination to be vice chair for bank supervision and Senator Joe Manchin III, Democrat of West Virginia, said on Monday that he would not vote to confirm her.In deciding to withhold support for Ms. Raskin, Mr. Manchin essentially doomed her chances in an evenly divided Senate. Democrats most likely needed all 50 lawmakers who caucus with their party to vote for Ms. Raskin, with Vice President Kamala Harris able to break ties.Republicans had shown little appetite for placing a supporter of tougher bank regulation into a powerful regulatory role at the Fed and had also boycotted her nomination over her work in the private sector. Lawmakers refused to show up to a key committee vote to advance her nomination to the full Senate.They had also seized on Ms. Raskin’s writings, saying her statements showed that she would be too aggressive in policing climate risks within the financial system and would overstep the unelected central bank’s boundaries.“President Biden was literally asking for senators to support a central banker who wanted to usurp the Senate’s policymaking power for herself,” Senator Mitch McConnell of Kentucky, the minority leader, said on Tuesday. He added: “It is past time the White House admit their mistake and send us someone suitable.”Senator Joe Manchin III, Democrat of West Virginia, cited Ms. Raskin’s past comments on the role that financial regulation should play in fighting climate change for his opposition.Jim Lo Scalzo/EPA, via ShutterstockMr. Manchin, who represents a coal state and has close ties to the fossil fuel industry, cited Ms. Raskin’s climate comments in explaining his opposition.Ms. Raskin had written an opinion piece in September 2021 arguing that “U.S. regulators can — and should — be looking at their existing powers and considering how they might be brought to bear on efforts to mitigate climate risk.”She did not argue that the Fed push beyond its legal boundaries, and the fierce backlash underlined that the issue of climate-related regulation is politically fraught territory in the United States.The White House “may want to take some time, lick their wounds, and make sure they carefully think about who to nominate next,” said Ian Katz, a managing director at Capital Alpha Partners. He noted that he would expect the White House to name a new nominee before the midterm elections in November. “They’re not having success with candidates who do not sit well with moderate Democrats.”Saule Omarova, a Cornell Law School professor whom critics painted as a communist after Mr. Biden picked her to lead the Office of the Comptroller of the Currency, withdrew her candidacy late last year.Opponents to Ms. Raskin’s confirmation targeted more than just her climate views. They also took issue with work she did in the private sector — and the way she answered questions about that work.Republicans had specifically cited concerns about Ms. Raskin’s time on the board of directors of a financial technology firm. The company, Reserve Trust, secured a coveted account with the Fed — giving it access to services that it now prominently advertises — after Ms. Raskin reportedly called a central bank official to intervene on its behalf.It is unclear how much Ms. Raskin’s involvement actually helped. But the episode raised questions because she previously worked at the Fed and because she made about $1.5 million from the stock she earned for her Reserve Trust work. Democrats regularly denounce the revolving door between regulators and financial firms.Republicans had demanded that Ms. Raskin provide more details about what happened while she was on the company’s board, but she had largely said she could not remember. Senator Patrick J. Toomey of Pennsylvania, the top Republican on the committee, led his colleagues in refusing to show up to vote on Ms. Raskin and the other Fed nominees until she provided more answers.Mr. Toomey signaled on Monday that he would favor allowing the other Fed nominees to proceed.Sherrod Brown, Democrat from Ohio and the chairman of the Senate Banking Committee, said in a statement on Tuesday that he would hold a markup for the other nominees, and later told reporters that he might move them as soon as this week.“Sadly, the American people will be denied a thoughtful, experienced public servant who was ready to fight inflation, stand up to Wall Street and corporate special interests, and protect our economy from foreign cyberattacks and climate change,” Mr. Brown said in his statement.Several more progressive Democrats expressed disappointment that Ms. Raskin would not be confirmed.“The lobbyists have power on Capitol Hill, and when they see their power threatened, they fight back hard — Sarah Bloom Raskin is just the latest casualty,” Senator Elizabeth Warren, Democrat of Massachusetts, said in response to the news.Michael D. 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    As Fed Prepares to Raise Rates, Global Economy Sinks Deeper Into Turmoil 

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    Federal Reserve officials are set to raise interest rates to control inflation, but the return to normal they had hoped to see remains painfully elusive.WASHINGTON — When Federal Reserve officials raise interest rates on Wednesday, they will do so amid an unfortunate economic reality: Many of the inflationary pressures they had long assumed would dissipate have instead lingered, and some are getting worse.Central bankers have consistently underestimated how high inflation would rise, and how long it would last, as the economy has surged back from pandemic shutdowns. They will release a fresh set of quarterly economic projections Wednesday, in which they are likely to raise their inflation forecasts for the fifth time in a row.Like many private sector forecasters, the Fed misjudged how strong American demand would be for goods and how long that demand would help to keep global supply chains running behind schedule, forces that have combined to push up consumer prices.Officials spent much of the past year expecting a relatively quick return to some pandemic-infused version of normality, but backlogged factories, crowded ports and overburdened trucking companies are still failing to catch up. Repeated waves of the virus have exacerbated the problems, which along with rising wages and services prices have sent inflation higher. Consumer price gains hit a new 40-year high in February, pushed up by rising prices for food, rent and gas.Now, as Fed officials prepare to begin a series of interest rate increases to try to bring inflation under control, they again appear to be aiming at a moving target. Supply chains that showed signs of improvement in January and February are being thrown further into disarray by the Russian invasion of Ukraine and sweeping lockdowns in China, developments that promise to lengthen delivery times and add to prices.The war, at the nexus of Europe and Asia, has scrambled flights and ocean shipments; threatened supplies of palladium, nickel and wheat; and sent energy prices soaring, further fueling inflation. Automakers have shuttered factories because of a shortage of parts, and Russia has answered back to sweeping sanctions imposed by the West by announcing its own plans for export controls.In recent days, Chinese cities and provinces have imposed extensive lockdowns to try to stop the spread of the Omicron variant. Shenzhen, a hub of electronics manufacturing and a vital port that is home to 17 million people, announced a lockdown on Sunday night for seven days. Foxconn, a Taiwanese electronics firm that supplies Apple from factories there, said it would suspend operations. Further restrictions in China, home to more than a quarter of global manufacturing, are likely to reverberate through already-tangled supply chains and exacerbate inflation.“The question is whether this is going to be bad or very bad,” Phil Levy, chief economist at the logistics company FlexPort, said of the Chinese shutdowns in particular. He noted that this disruption came when shipping delays were already extreme.“If things get gummed up there, it will reverberate through the whole system,” he said, adding that it matters how long and how sweeping the shutdown proves. “These problems just build.”Mary Lovely, a senior fellow at the Peterson Institute for International Economics, said it was “hard to overstate” the importance of Shenzhen and its surrounding area for electronics, as well as for other industries, like metals, furniture and paper products.“I think it’s definitely going to have effect on supply chains,” she said. She added that she expected those pressures to translate more readily into increased prices than they did earlier in the pandemic.“Now we’re in a period with higher inflation, I think that suppliers may find it easier to pass those costs along, or take this opportunity to raise prices,” Ms. Lovely said.Fed officials have held interest rates near zero since March 2020 and are expected to raise them for the first time since 2018 on Wednesday. By making money more expensive to borrow and spend, the Fed is hoping to cool down demand and beat back inflation — helping conditions to even out when a return to “normal” has been painfully, and consistently, elusive.Quarantine workers in Shanghai on Monday. Further restrictions in China, home to more than a quarter of global manufacturing, are likely to exacerbate inflation and tangled supply chains.Qilai Shen for The New York TimesFed policymakers and Wall Street researchers alike thought that prices would fade as consumers began shifting their spending from imported goods back to movies, vacations and restaurants. That shift would help factories and shipping routes catch up with surging demand, as used car prices — which spiked last year — moderated. Those trends either haven’t happened, or they have been canceled out by increases in the prices of other products and services.Jason Furman, an economist at Harvard University, said many forecasters had been doing what investors sometimes refer to as “pricing to perfection”: assuming that everything is going to go well, even if that is not the most likely outcome.“You can look at the individual items: There’s been a lot of: What if inflation in X, Y, Z goes down?” he said. “And not: What if inflation in A, B, C goes up?”Many of the factors prompting economists to mark up their inflation forecasts now are not even tied to supply chains.Matthew Luzzetti, chief U.S. economist at Deutsche Bank, recently revised up his inflation projections because rent costs are rising so rapidly in the Consumer Price Index. Between that and wage growth, he thinks, high inflation will last unless the Fed intervenes.“For a while, inflation forecasters had been anticipating that the goods side of things would return to more normal dynamics” just as service prices, like rent, began to increase, he said. Services prices have indeed picked up, but normalization in good prices keeps getting “pushed out.”Consumers continue to spend a bigger share of their budgets on goods instead of services — purchases like travel and manicures — compared with before the pandemic. That has meant global producers are still struggling to keep up with demand. Even potentially short-lived disruptions, like the ones taking place in China, can add to a snowball of delays and shortages.Data released this month showed that the U.S. trade deficit hit a record in January, the height of the Omicron wave, in part because of surging imports of cars and energy. The average time to ship a container from a Chinese factory to a U.S. warehouse had stretched to 82 days in February, according to Freightos, a logistics platform, up from 45 days two years before.In many ways, the events of the past few years have been so unusual that few if any forecasters correctly predicted all of them. And Fed officials have acknowledged that they misjudged inflation last year, partly because they expected supply chains to recover more quickly.They are now striking a more wary tone.Jerome H. Powell, the Fed chair, told Congress this month that the war in Ukraine was “not going to help at all with supply chains.”“We haven’t seen much relief on the supply side,” he noted, explaining that he and his colleagues had been waiting for the strains to ease.Mr. Powell predicted that as the Fed raised interest rates this year, it would help cool off demand for car loans and mortgages, weakening spending in the economy and giving companies some room to catch up with demand. Central bankers are hoping that at the same time, the economy is “going back to normal” in terms of supply chains and the breakdown between goods and services, he said.Even so, he acknowledged that the Fed stood ready to act more aggressively if that didn’t happen.“We hope we’re getting help on the inflation front from a bunch of things,” Mr. Powell said. “In any case, we do have the responsibility to generate price stability, and we will use our tools to do that, over time.” More

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    Could Inflation Prompt Powell to Act Like Volcker?

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    The Federal Reserve is facing the fastest inflation most Americans have ever seen. Its chair says policymakers will do what it takes to tame prices.To Jerome H. Powell, the chair of the Federal Reserve, Paul Volcker is more than a predecessor. He is one of his professional heroes.“I knew Paul Volcker,” Mr. Powell said during congressional testimony this month. “I think he was one of the great public servants of the era — the greatest economic public servant of the era.”Now, if rapid inflation proves more stubborn than policymakers expect, Mr. Powell could find himself in a situation in which he must follow Mr. Volcker’s lead. The towering former Fed chair is best remembered for waging an aggressive — and painful — assault on the swift price increases that plagued America in the early 1980s.Mr. Volcker’s Fed rolled out policies that pushed a key short-term interest rate to nearly 20 percent and sent unemployment soaring to nearly 11 percent in 1981. Car dealers mailed the Fed keys from unsold vehicles, builders sent two-by-fours from unbuilt houses and farmers drove tractors around the Fed building in Washington in protest. But the approach worked, killing off the rapid price inflation that had festered throughout the 1970s.Mr. Powell was asked this month if the Fed was prepared to do whatever it took to control inflation — even if it meant harming growth, as Mr. Volcker did.“I hope that history will record that the answer to your question is yes,” the Fed chair replied.Few, if any, economists think that the 2022 Fed will need to repeat Mr. Volcker’s policies to the same degree, in part because the central bank is taking action much more quickly. The Fed is expected to begin raising interest rates from near zero at its meeting this week, and is likely to signal that it expects to make a series of moves this year as it tries to cool down the economy and control inflation.Price increases had run high for more than a decade by the time Mr. Volcker became chair in 1979, making them a part of everyday lives. Shoppers expected prices to go up, businesses knew that, and both acted accordingly.This time, inflation has been anemic for years (until recently), and most consumers and investors still expect costs to return to lower levels before long, survey and market data show. While inflation has been rapid for the past year, that is a comparatively short period and one that may not fuel the same kind of expectations for higher prices that bedeviled Mr. Volcker’s era.And while today’s inflation is taking a bite out of household budgets, it is slower than in previous periods: While it rose to 7.9 percent in February, the fastest pace since 1982, it is still well below a peak of 14.6 percent in 1980. Economists expect price gains to begin moderating this year, rather than climbing to such high levels.But in other ways, the backdrop Mr. Powell faces is beginning to look eerily similar to the one Mr. Volcker confronted.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.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.Wages are increasing rapidly, and employers report raising prices to cover their bigger labor bills, posing the possibility of a more muted version of the wage-price spiral that helped keep inflation high during Mr. Volcker’s years.President Ronald Reagan with Paul A. Volcker, the Fed chair, in 1981.Scott Applewhite/Associated PressOil prices are climbing as Russia wages war on Ukraine, mirroring oil price shocks that rocked the economy in the years before Mr. Volcker’s ascent to the chair. The Arab oil embargo of 1973-74 and the Iranian revolution of 1979 both curtailed supply and sharply pushed up pump prices.And geopolitical instability is fueling uncertainty about what will happen next, much as it did in the 1970s, when war raged in Vietnam.“That’s the proper historical reference for what we’re trying not to replicate,” Mr. Powell said of the 1970s during separate remarks to Congress this month. “One of the things that is different now is that central banks — including the Fed — very squarely take responsibility for inflation.”When inflation was taking off in the 1960s and 1970s, Fed officials bickered about how high to raise rates as they worried about hurting the labor market too much. Many economic historians now think that their reluctance to act more quickly allowed those price gains to become locked in until they required a more draconian response.“The one really big difference — huge difference, consequential difference — is that the Fed, and the country, lived through the 1970s,” Donald Kohn, a former Fed vice chair, said in an interview. “I think the Fed is determined not to let us get there.”The inflation challenge facing Mr. Powell, who was renominated by President Biden for a second term as chair and is awaiting Senate confirmation, is the latest economic test that he has had to contend with during his tenure.Mr. Powell, 69, began his first four years as Fed chair in early 2018. By that Christmas, the central bank’s campaign of steady rate increases intended to fend off inflation had collided with President Donald J. Trump’s trade war to send markets plummeting.In 2019, Mr. Trump publicly pushed for lower rates and accosted Mr. Powell — whom the president had chosen to lead the central bank — in interviews and on Twitter, calling him a “bonehead,” an “enemy” and a golfer who could not putt.Then came the onset of the pandemic in 2020, and Mr. Powell and his colleagues crossed red lines and upended norms to rescue markets and the economy. They averted a financial crisis, but 2021 brought with it a new challenge: rapid inflation.Now, critics are questioning whether the monetary help that Mr. Powell’s Fed unleashed to protect the pandemic-stricken economy — lowering rates to near zero and buying trillions of dollars in government bonds — combined with huge fiscal stimulus to supercharge demand and release an inflationary genie that could prove hard to trap.The Fed has already begun removing some of that support, stopping bond purchases and communicating plans to raise interest rates by a quarter-point this month and steadily throughout the rest of the year. Mortgage rates have already begun climbing in anticipation of those actions.But some are asking whether the Fed, which wanted to see full employment return before paring back its support, has been too slow to react to changing conditions.This moment “represents a decade of economic experience in the late 1960s and 1970s, compressed into a year,” said Lawrence H. Summers, a former Treasury secretary who spent last year warning that inflation was going to take off as the government overstimulated the economy.Inflation F.A.Q.Card 1 of 6What is inflation? More