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    The Fed’s newest governor sees America’s inflation pop as temporary.

    Christopher Waller, the newest governor on the Federal Reserve’s Washington-based board, said on Friday that he expects an unfolding acceleration in inflation — which is expected to intensify in the coming months — will prove short-lived.“I do buy into the idea that this is going to be temporary,” Mr. Waller said on CNBC, during his first television interview since President Donald J. Trump nominated him to the role and the Senate confirmed him. “Whatever temporary surge in inflation we see right now is not going to last.”Inflation data are being measured against very low readings from 12 months ago, causing a mechanical year-on-year jump, he noted. Spending tied to government stimulus and supply chain constraints will also have an effect.“We know the stimulus is going to have some impact, but once the stimulus checks are spent, they’re gone,” Mr. Waller said. “We also know that the bottlenecks that are currently there are going to go away.”The Consumer Price Index, a closely watched inflation measure, rose 2.6 percent in March from a year ago, the Labor Department said earlier this week. But it was skewed by the comparison to March 2020, when prices of some items fell as consumers pulled back spending in the face of the pandemic.While the C.P.I. and other inflation gauges are expected to rise even higher in coming months, Fed officials and most economists project that they will settle back down before long. Many officials see key measures hovering near the central bank’s 2 percent average inflation target by the end of the year.Mr. Waller said that investors themselves are not betting on “outrageous, runaway inflation” and that even if the data show a stronger pickup, the Fed stands ready to contain that and is not going to just let inflation “rip.”“I don’t think anyone would be very comfortable if it got to three, three-plus and stayed there for a while,” Mr. Waller said, noting that the bigger concern would be if inflation expectations jumped. More

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    The Biden Administration Is Quietly Keeping Tabs on Inflation

    A monthslong effort to monitor and model economic trends inside the White House and the Treasury Department found little risk of prices spiraling upward faster than the Fed can manage.WASHINGTON — Even before President Biden took office, some of his closest aides were focused on a question that risked derailing his economic agenda: Would his plans for a $1.9 trillion economic rescue package and additional government spending overheat the economy and fuel runaway inflation?To find the answer, a close circle of advisers now working at the White House and the Treasury Department projected the behaviors of shoppers, employers, stock traders and others if Mr. Biden’s plans succeeded. Officials as senior as Janet L. Yellen, the Treasury secretary, pored over the analyses in video calls and in-person meetings, looking for any hint that Mr. Biden’s plans could generate sustained price increases that could hamstring family budgets. It never appeared.Those efforts convinced Mr. Biden’s team that there is little risk of inflation spiraling out of the Federal Reserve’s control — an outcome that Wall Street analysts, a few prominent Republicans and even liberal economists like Lawrence H. Summers, the former Treasury secretary, have said could flow from the trillions being pumped into the economy.Traditional readings of price increases are beginning to turn upward as the recovery accelerates. On Tuesday, the Consumer Price Index rose 0.6 percent, its fastest monthly increase in more than a decade, while a less volatile index excluding food and energy rose a more muted 0.3 percent.But Mr. Biden’s advisers believe any price spike is likely to be temporary and not harmful, essentially a one-time event stemming from the unique nature of a pandemic recession that ruptured supply chains and continues to depress activity in key economic sectors like restaurant dining and tourism.The administration’s view mirrors the posture of top officials at the Fed, including its chairman, Jerome H. Powell, whose mandate includes maintaining price stability in the economy. Mr. Powell has said that the Fed expects any short-term price pops to be temporary, not sustained, and not the type of uptick that would prompt the central bank to raise interest rates rapidly — or anytime soon.“What we see is relatively modest increases in inflation,” Mr. Powell said in March. “But those are not permanent things.”Armed with their internal data and conclusions, administration officials have begun to push back on warnings that a stimulus-fueled surge in consumer spending could revive a 1970s-style escalation in wages and prices that could cripple the economy in the years to come.Yet they remain wary of the inflation threat and have devised the next wave of Mr. Biden’s spending plans, a $2.3 trillion infrastructure package, to dispense money gradually enough not to stoke further price increases right away. Administration officials also continue to check on real-time measures of prices across the economy, multiple times a day.“We think the likeliest outlook over the next several months is for inflation to rise modestly,” two officials at Mr. Biden’s Council of Economic Advisers, Jared Bernstein and Ernie Tedeschi, wrote on Monday in a blog post outlining some of the administration’s thinking. “We will, however, carefully monitor both actual price changes and inflation expectations for any signs of unexpected price pressures that might arise as America leaves the pandemic behind and enters the next economic expansion.”Some Republicans call that posture dangerous. Senator Rick Scott of Florida, the chairman of his party’s campaign arm for the 2022 midterm elections, has called on Mr. Biden and Mr. Powell to present plans to fight inflation now.“The president’s refusal to address this critical issue has a direct negative effect on Floridians and families across our nation, and hurts low- and fixed-income Americans the most,” Mr. Scott said in a news release last week. “It’s time for Biden to wake up from his liberal dream and realize that reckless spending has consequences, inflation is real and America’s debt crisis is growing. Inflation is rising and Americans deserve answers from Biden now.”Economic teams in recent administrations spent little time worrying about inflation, because inflationary pressures have been tame for decades. It has fallen short of the Fed’s average target of 2 percent for 10 of the last 12 years, topping out at 2.5 percent in the midst of the longest economic expansion in history.Shortly before the pandemic recession hit the United States in 2020, President Donald J. Trump’s economic team wrote that “price inflation remains low and stable” even with unemployment below 4 percent. As the economy struggled to climb out from the 2008 financial crisis under President Barack Obama, White House aides feared that prices might fall, instead of rise.“Given the economic crisis, we worried about preventing deflation rather than inflation,” said Austan Goolsbee, a chairman of the Council of Economic Advisers during Mr. Obama’s first term.The conversation has changed given the large amounts of money that the federal government is channeling into the economy, first under Mr. Trump and now under Mr. Biden. Since the pandemic took hold, Congress has approved more than $5 trillion in spending, including direct checks to individuals.Mr. Biden’s aides are sufficiently worried about the risk of that spending fueling inflation that they shaped his infrastructure proposal, which has yet to be taken up by Congress, to funnel out $2.3 trillion over eight years, which is slower than traditional stimulus.An outdoor mall in Los Angeles. Critics have warned that that a stimulus-fueled surge in consumer spending could revive a 1970s-style escalation in wages and prices that could cripple the economy in the years to come.Philip Cheung for The New York TimesEven before Mr. Summers and others raised economic concerns about Mr. Biden’s $1.9 trillion relief bill, officials were wrestling with their own worries about its inflation risks. They had internally concluded, with direction from Mr. Biden, that the biggest risk to the economy was going “too small” on the aid package — not spending enough to help vulnerable Americans survive continued stints of joblessness or lost income. But they wanted to know the risks of going “too big.”They tested whether an uptick in inflation might cause people and financial markets to expect rapid price increases in the years to come, upending decades of what economists call “well anchored” expectations for prices and potentially creating a situation where higher expectations led to higher inflation. They estimated the odds that the Fed would react to such moves by quickly and steeply raising interest rates, potentially slamming the brakes on growth and causing another recession.The informal group that initially gathered to research those questions included Mr. Bernstein; David Kamin, a deputy director of the National Economic Council; Michael Pyle, Vice President Kamala Harris’s chief economic adviser; and two Treasury officials, Nellie Liang and Ben Harris. More members have joined over time, including Mr. Tedeschi.The group reports regularly to Ms. Yellen and other senior officials including Brian Deese, who heads the N.E.C., and Cecilia Rouse, who leads the C.E.A. Its work has informed economic briefings of Mr. Biden and Ms. Harris.“The president and the vice president, their job is to deliver good economic outcomes for the American people,” Mr. Pyle said in an interview. “Part of what delivering strong economic outcomes to the American people means is ensuring that their team is fully on top of both the tailwinds to the U.S. economy but also the risks that are out there. And this is one of them.”Mr. Pyle and his colleagues looked at financial market measures of inflation expectations, including one called the five-year, five-year forward, which currently shows investors expecting lower inflation levels over the next several years than they expected in 2018.At the same time, officials at the Treasury’s Office of Economic Policy conducted a series of modeling exercises to “stress test” the virus relief package and how it might change those price and expectation measures if put in place. They considered scenarios where consumers quickly spent their aid money, which included $1,400 checks, or where they did not spend much of it at all right away. They talked with large banks about trends in customers’ cash balances and how quickly people were returning to the work force. Ms. Yellen, a former Fed chair, helped adjust the models herself.The exercises produced a wide range of possibilities for inflation. But they never suggested it would rise so rapidly that the Fed could not easily handle it by adjusting interest rates or other monetary policy tools. They saw no risk of a sharp return to recession — and no reason to pull back from spending proposals that administration officials believe will help the economy heal faster and help historically disadvantaged groups, like Black and Hispanic workers, regain jobs and income.“We’re going to see some heat in this economy,” Mr. Pyle said. “That heat is going to be good and redound to the benefit of wages and labor market conditions overall and particularly for a number of communities that have been at the margins of the labor market for too long.”If the data proves that forecast wrong, officials say privately, they will be quick to adapt. But they will not say how. If inflation were to accelerate in a sustained and surprising way, some officials suggest, the administration would trust the Fed to step in to contain it.There is no plan, as of yet, for Mr. Biden to consider inflation-fighting actions of his own. More

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    The inflation rate could jump, but there’s a simple reason not to read too much into it.

    When the government releases its latest consumer price inflation reading at 8:30 a.m. on Tuesday, Wall Street investors will be eagerly watching the data point, which is expected to jump starting this month.Inflation data matters because it gives an up-to-date snapshot of how much it costs Americans to buy the goods and services they regularly consume. And because the Federal Reserve is charged in part with keeping increases in prices contained, the data can influence its decisions — and those affect financial markets.But there’s a big reason not to read too much into the expected bounce in March and April — and it lies in so-called base effects.Inflation Is Set to Jump More

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    Fed Chief Says U.S. Economy Is at an ‘Inflection Point’ as Risks Remain

    “It’s going to be smart if people can continue to socially distance and wear masks,” Jerome Powell said on “60 Minutes.”WASHINGTON — The economy is at an “inflection point” and on the cusp of growing more quickly, the Federal Reserve chairman, Jerome H. Powell, said in an interview broadcast on Sunday night. But he warned that the crisis was not yet over.In the interview, with “60 Minutes” on CBS, Mr. Powell said that the American economy “has brightened substantially” as more people are vaccinated and businesses reopen. But he cautioned that “there really are risks out there,” specifically coronavirus flare-ups, if Americans return to normal life too quickly.“The principal risk to our economy right now really is that the disease would spread again more quickly,” he said. “And that’s troubling. It’s going to be smart if people can continue to socially distance and wear masks.”The Fed has held interest rates near zero since March 2020 and has been buying about $120 billion in government-backed bonds each month, policies meant to stoke spending by keeping borrowing cheap. Fed officials have been clear that they will continue to support the economy until it is closer to their goals of maximum employment and stable inflation — and that while the situation is improving, it is not there yet.Mr. Powell reiterated that approach on Sunday, saying that the central bank would “consider raising rates when the labor market recovery is essentially complete, and we’re back to maximum employment, and inflation is back to our 2 percent goal and is on track to move above 2 percent for some time.”But he said it would “be a while until we get to that place.”Discussing inflation, Mr. Powell once again made clear that the Fed wanted to see “sustainable” price increases before it adjusted monetary policy.“Inflation has been below 2 percent,” he said. “We want it to be just moderately above 2 percent. So that’s what we’re looking for.” “And when we get that,” he added, “that’s when we’ll raise interest rates.”Some prominent onlookers have warned that the economy has the potential overheat as the federal government pumps out trillions of dollars in stimulus aid and other spending and as the economy reopens, allowing consumers to spend more money.So far, no sustained inflation spike has materialized.Figures show the economy is recovering, albeit slowly. Employers added more than 900,000 workers to payrolls last month, but the country is still missing millions of jobs compared with February 2020, and just last week state jobless claims climbed.Mr. Powell on Sunday highlighted that while some workers were doing well, others had yet to get back to where they were before Covid-19 lockdowns, a phenomenon that will influence when the Fed reduces or removes policy support.“What you’re seeing is some parts of the economy are doing very well, have fully recovered, have even more than fully recovered in some cases,” Mr. Powell said. “And some parts haven’t recovered very much at all yet. So you do see real disparities between different parts of the economy. It’s sort of unusual for an economy like ours.”Mr. Powell also pointed to data that shows the burden is falling hardest on those least able to bear it: Lower-income service workers, who are heavily people of color and women, have been hit hard by job losses.While he expects those workers to get back to their jobs more quickly as the economy rebounds, the Fed needs to “stick with those people and support them as they try to get back to where they were in life, which was working,” he said, adding, “They were in jobs just a year ago.” More

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    As U.S. Prospects Brighten, Fed’s Powell Sees Risk in Global Vaccination Pace

    Some countries are lagging behind in vaccinations, and policymakers warned that no economy is secure until the world is safe from coronavirus variants.Jerome H. Powell, the Federal Reserve chair, and the managing director of the International Monetary Fund, Kristalina Georgieva, emphasized the economic need for worldwide vaccinations on Thursday.Pool photo by Stefani ReynoldsJerome H. Powell, the Federal Reserve chair, stressed on Thursday that even as economic prospects look brighter in the United States, getting the world vaccinated and controlling the coronavirus pandemic remain critical to the global outlook.“Viruses are no respecters of borders,” Mr. Powell said while speaking on an International Monetary Fund panel. “Until the world, really, is vaccinated, we’re all going to be at risk of new mutations and we won’t be able to really resume activity with confidence all around the world.”While some advanced economies, including the United States, are moving quickly toward widespread vaccination, many emerging market countries lag far behind: Some have administered as little as one dose per 1,000 residents.Mr. Powell joined a chorus of global policy officials in emphasizing how important it is that all nations — not just the richest ones — are able to widely protect against the coronavirus. Kristalina Georgieva, the managing director of the International Monetary Fund, said policymakers needed to remain focused on public health as the key policy priority.“This year, next year, vaccine policy is economic policy,” Ms. Georgieva said, speaking on the same panel as Mr. Powell. “It is even higher priority than the traditional tools of fiscal and monetary policy. Why? Without it we cannot turn the fate of the world economy around.”Still, she also warned against pulling back on monetary policy support prematurely, saying that clear communication from the United States is helpful and important. The Fed is arguably the world’s most critical central bank thanks to the widely used dollar, and unexpected policy changes in the United States can roil global markets and make it harder for less developed economies to recover.“Premature withdrawal of support can cut the recovery short,” she cautioned.The Fed has held interest rates near zero since March 2020 and has been buying about $120 billion in government-backed bonds per month, policies meant to stoke spending by keeping borrowing cheap. Officials have been clear that they will continue to support the economy until it is closer to their goals of maximum employment and stable inflation — and that while the situation is improving, it is not there yet.“There are a number of factors that are coming together to support a brighter outlook for the U.S. economy,” Mr. Powell said, noting that tens of millions of Americans are now fully vaccinated, so the economy should be able to fully reopen fairly soon. “The recovery though, here, remains uneven and incomplete.”Employers added more than 900,000 workers to payrolls last month, but the country is still missing millions of jobs compared with February 2020 and fresh data showed that state jobless claims climbed last week. Mr. Powell pointed out that the burden is falling heavily on those least able to bear it: Lower-income service workers, who are heavily minorities and women, have been hit hard by the job losses.When asked what keeps him awake at night, Mr. Powell said that “there’s a pretty substantial tent city” he drives past on his way home from work in Washington. “We just need to keep reminding ourselves that even though some parts of the economy are just doing great, there’s a very large group of people who are not.”Given the pandemic’s role in exacerbating inequality, both Mr. Powell and Ms. Georgieva said it was critical to support workers and make sure they can find their way into new and fitting jobs.The Fed chair said policy tended to focus too much on short-term, palliative measures and not enough on longer-term solutions that help to expand economic possibility.“I think we need to, really as a country — and I’m not talking about any particular bill — invest in things that will increase the inclusiveness of the economy and the longer-term potential of it,” Mr. Powell said. “Particularly invest in people, so that they can take part in, contribute to and benefit from the prosperity of our economy.”Those comments come as the Biden administration is pushing for an ambitious $2 trillion infrastructure package that would include provisions for labor market training, technological research and widespread broadband. The administration has proposed paying for the package by raising corporate taxes.“For quite some time, we have been in favor of more investment in infrastructure. It helps to boost productivity here in the United States,” Ms. Georgieva said, calling climate-focused and “social infrastructure” provisions positive. She said they had not had a chance to fully assess the plan, but “broadly speaking, yes, we do support it.”But the White House’s plan has already run into resistance from Republicans and some moderate Democrats, who are wary of raising taxes or engaging in another big spending package after several large stimulus bills.Some commentators have warned that besides expanding the nation’s debt load, the government’s virus spending — particularly the recent $1.9 trillion stimulus package — could cause the economy to overheat. Fed officials have been less worried. “There’s a difference between essentially a one-time increase in prices and persistent inflation,” Mr. Powell said on Thursday. “The nature of a bottleneck is that it will be resolved.”If price gains and inflation expectations moved up “materially,” he said, the Fed would react.“We don’t think that’s the most likely outcome,” he said. More

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    I.M.F. Seminar Stresses Importance of Global Vaccinations

    Whether it’s reporting on conflicts abroad and political divisions at home, or covering the latest style trends and scientific developments, Times Video journalists provide a revealing and unforgettable view of the world.Whether it’s reporting on conflicts abroad and political divisions at home, or covering the latest style trends and scientific developments, Times Video journalists provide a revealing and unforgettable view of the world. More

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    How the Stimulus Could Power a Rebound in Other Countries

    As Americans buy more, they are expected to spur trade and investment and invigorate demand for German cars, Australian wine, Mexican auto parts and French fashions.Washington’s robust spending in response to the coronavirus crisis is helping to pull the United States out of its sharpest economic slump in decades, funneling trillions of dollars to Americans’ checking accounts and to businesses.Now, the rest of the world is expected to benefit, too.Global forecasters are predicting that the United States and its record-setting stimulus spending could help haul a weakened Europe and struggling developing countries out of their own economic morass, especially when paired with a rapid vaccine rollout that has poised the U.S. economy for a faster recovery.As Americans buy more, they should spur trade and investment and invigorate demand for German cars, Australian wine, Mexican auto parts and French fashions.The anticipated economic rebound in the United States is expected to join China’s recovery, adding impetus to world output. China’s economy is forecast to expand rapidly this year, with the International Monetary Fund predicting 8.1 percent growth. That is good news for countries like Germany, which depends on Chinese demand for cars and machinery.Yet the United States is particularly important to the world economy because it has long spent more than it makes or sells, spreading dollars globally. China is one of the major beneficiaries of Washington’s largess because many Americans have spent their stimulus checks on video game consoles, exercise bicycles or other products made in China.The United States’ comparatively fast recovery was neither guaranteed nor expected: It was the result of a little bit of luck — new variants of the virus that have coursed through other countries have just begun to push infections higher in the United States — and a large policy response, including more than $5 trillion in debt-fueled pandemic relief spending passed into law over the past 12 months. Those trends, paired with the accelerating spread of effective vaccinations, seem likely to leave the American economy in a stronger position.“When the U.S. economy is strong, that strength tends to support global activity as well,” Jerome H. Powell, the chair of the Federal Reserve, said at a recent news conference.A year ago, it was not at all certain that the United States would gain the strength to help lift the global economy.The International Monetary Fund forecast last April that the U.S. economy might expand 4.7 percent this year, roughly in line with forecasts for Europe’s growth, after an expected slump of 5.9 percent in 2020. But the actual contraction in the United States was smaller, and in January, the I.M.F. upgraded the outlook for U.S. growth to 5.1 percent this year, while the euro area’s expected growth was marked down to 4.2 percent.Germany has extended its lockdown to April 18, and there is a good chance restrictions will be extended further.Lena Mucha for The New York TimesSince then, the U.S. government has passed a $1.9 trillion relief package, and the I.M.F. has signaled that the estimates for the country’s growth will be marked up further when it releases fresh forecasts on Tuesday.The recent relief package continues a trend: America has been willing to spend to combat the pandemic’s economic fallout from the start.America’s initial pandemic response spending, amounting to a little less than $3 trillion, was 50 percent larger, as a share of gross domestic product, than what the United Kingdom rolled out, and roughly three times as much as in France, Italy or Spain, based on an analysis by Christina D. Romer at the University of California, Berkeley.Among a set of advanced economies, only New Zealand has borrowed and spent as big a share of its G.D.P. as the United States has, the analysis found.In Europe, where workers in many countries were shielded from job losses and plunging income by government furlough programs, the slow pace of the European Union’s vaccination campaign will probably hurt the economy, said Ludovic Subran, the chief economist of German insurance giant Allianz.On Wednesday, France announced its third national lockdown as infected patients fill its hospitals.Mr. Subran also questioned whether the European Union can distribute stimulus financing fast enough. The money from a 750 billion-euro, or $880 billion, relief program agreed to by European governments in July has been slow to reach the businesses and people who need it because of political squabbling, creaky public administration and a court challenge in Germany.Karen Dynan, a former U.S. Treasury Department chief economist who is now at the Peterson Institute for International Economics, estimated that economic output would take at least a year longer to return to prepandemic levels in Europe than it would in the United States.“Fiscal policy has differed across countries in ways that are really shaping the experience they have now,” Ms. Dynan said.Vaccine supplies are limited in many developing economies, including Venezuela.Ariana Cubillos/Associated PressPoorer and smaller countries, facing severely limited vaccine supplies and fewer resources to support government spending, are likely to struggle to stage an economic turnaround even if the U.S. recovery increases demand for their exports. Places including Venezuela, Iraq and Namibia have administered only about 1 vaccine dose per 1,000 people, if that, based on New York Times data. In the United States, the rate is more than 400 doses per 1,000 people.Still, a booming American economy poses some hazard to other nations — and especially emerging markets — as economic fates diverge.Market-based interest rates in the United States are already climbing, as investors, sensing faster growth and quicker inflation around the corner, decide to sell bonds. That could make financing more expensive around the globe: If investors can earn higher rates on U.S. bonds, they are less likely to invest in foreign debt that offers either lower rates or higher risk.If the United States lures capital away from the rest of the world, “the rose-colored view that we are helping everyone is very much in doubt,” said Robin Brooks, chief economist at the Institute of International Finance.Philip Lane, chief economist of the European Central Bank and a member of the policymaking Governing Council, said the strength of the U.S. economy was generally good news for Europe. But, in an interview on Monday, he warned that rising market interest rates could be a burden for the eurozone economy.Imported goods at a cold storage port in China.Yao Jianfeng/Xinhua, via Associated Press“We do think it’s net positive for the European economy — positive for G.D.P., positive for inflation,” Mr. Lane said of the economic rebound in the United States. “But that’s based on the assumption that the increase in bond yields is very limited.” He noted that bond yields had so far risen faster than expected.Trans-Atlantic trade should get help from warmer relations between the United States and the European Union. The Biden administration has already moved to defuse trade tensions with Europe, which the Trump administration treated as an adversary. President Biden met online with European leaders last week.The U.S. stimulus packages “will be part of the water that lifts all boats,” said Selina Jackson, senior vice president for global government relations and public policy at Procter & Gamble, during a recent panel discussion organized by the American Chamber of Commerce to the European Union. “We are hoping for a calm slide out of this economic situation.”Keith Bradsher More