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    What to Watch as the Fed Meets

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

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    Fed Is in No Rush to Cut Rates as Economy Holds Up

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    Federal Reserve officials are expected to leave interest rates unchanged at their meeting this week. They will also release a fresh set of economic projections.Federal Reserve officials are entering an uncertain summer. They are not sure how quickly inflation will cool, how much the economy is likely to slow or just how long interest rates need to stay high in order to make sure that quick price increases are fully vanquished.What they do know is that, for now, the job market and broader economy are holding up even in the face of higher borrowing costs. And given that, the Fed has a safe play: Do nothing.That is the message central bankers are likely to send at their two-day meeting this week, which concludes on Wednesday. Officials are expected to leave interest rates unchanged while avoiding any firm commitment about when they will cut them.Policymakers will release a fresh set of economic projections, and those could show that central bankers now expect to make just two interest rate cuts in 2024, down from three when they last released forecasts in March. Economists think that there is a small chance that officials could even predict just one cut this year. But whatever they forecast, officials are likely to avoid giving a clear signal of when rate reductions will begin.Investors do not expect a rate cut at the Fed’s next meeting in July, after which policymakers will not meet again until September. That gives officials several months of data and plenty of time to think about their next move. And because the economy is holding up, central bankers have the wiggle room to keep rates unchanged as they wait to see if inflation will decelerate without worrying that they are on the brink of plunging the economy into a sharp downturn.“They’ll continue to suggest that rate cuts are coming later this year,” said Gennadiy Goldberg, head of U.S. rates strategy at TD Securities. He said that he expected a reduction in September, and that he did not think the Fed would give any hint at timing this week.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    U.S. Adds 272,000 Jobs in May, an Unexpectedly Strong Pace of Hiring

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    Hiring was unexpectedly robust in May, with a gain of 272,000 jobs, but it wasn’t all good news: The unemployment rate ticked up, to 4 percent.The U.S. economy keeps throwing curveballs, and the May employment report is the latest example.Employers added 272,000 jobs last month, the Labor Department reported on Friday, well above what economists had expected as hiring had gradually slowed. That’s an increase from the 232,000-job average over the previous 12 months, scrambling the picture of an economy that’s relaxing into a more sustainable pace.Most concerning for the Federal Reserve, which meets next week and again in July, wages rose 4.1 percent from a year ago — a sign that inflation might not yet be vanquished.“For those who may have thought they would see a July rate cut, that door has largely been shut,” said Beth Ann Bovino, chief U.S. economist for U.S. Bank. Although wage gains are good for workers, she noted, persistent price increases undermine their spending power.Stocks fell shortly after the report was published, then recovered most of their losses by the end of the day. Government bond yields, which track expectations for Fed rate moves, rose sharply and remained elevated through the trading day.Wage growth ticked up in MayYear-over-year percentage change in earnings vs. inflation More

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    Fed Minutes Show Officials Were Wary About Inflation at May Meeting

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

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

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

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    Inside the Rent Inflation Measure That Economics Nerds Love to Hate

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    There’s a three-letter abbreviation that economists have started pronouncing with the energy of a four-letter word: “O.E.R.”It stands for owner’s equivalent rent, and it has been used to measure American housing inflation since the 1980s. As its name suggests, it uses a combination of surveys and market data to estimate how much it would cost homeowners to rent the house they live in.But three years into America’s price pop, it has become almost cliché for economists to hate on the housing measure. Detractors blast if for being so slow-moving that it does not reflect up-to-date conditions in the economy. Critics argue that it uses convoluted statistical methods that make little sense. The most intense haters insist that it is giving a false impression about where inflation stands.“It’s just not adding anything to our understanding of inflation,” said Mark Zandi, chief economist of Moody’s Analytics and a frequent adviser to the Biden administration. Full disclosure: The New York Times called Mr. Zandi for this article because he has been one of the many economists grousing about O.E.R. on social media. He said he was “not a fan.”What has this one nerdy inflation component done to earn so much vitriol?It is preventing an economic happy ending, more or less. Housing inflation measures have been surprisingly sticky over the past year, and they are now a major barrier keeping price increases overall from returning to normal. That has knock-on effects: Because of inflation’s staying power, the Federal Reserve is keeping interest rates at a more than two-decade high to try to wrestle prices under control by slowing the economy.But while there’s no denying that O.E.R. has become a main character in America’s inflationary tale, not everyone thinks it is the bad guy. Some economists think it is a valid and reasonable way to measure an important part of the consumer experience. Ahead of a fresh Consumer Price Index report set for release on Wednesday morning, there are a few key facts to understand about how housing inflation is calculated, what it means and what it might do next.Housing Inflation Remains Stubbornly HighEconomists had expected two measures of rental inflation to fade in 2023 and 2024, but that process is taking time to play out.

    Note: Inflation measures are shown as rates of annual change.Source: The Bureau of Labor StatisticsBy The New York TimesConsumer Price Index Inflation Remains HotterThe Consumer Price Index is climbing faster than the Personal Consumption Expenditures index, in large part because it weights housing more heavily.

    Note: Indexes are shown as annual change.Sources: Bureau of Labor Statistics and Commerce DepartmentBy The New York TimesWe are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    High Interest Rates Are Hitting Poorer Americans the Hardest

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    The economy as a whole has proved resilient amid the highest rates in decades. But beneath the surface, many low- and moderate-income families are struggling.High interest rates haven’t crashed the financial system, set off a wave of bankruptcies or caused the recession that many economists feared.But for millions of low- and moderate-income families, high rates are taking a toll.More Americans are falling behind on payments on credit card and auto loans, even as many are taking on more debt than ever before. Monthly interest expenses have soared since the Federal Reserve began raising interest rates two years ago. For families already strained by high prices, dwindling savings and slowing wage growth, increased borrowing costs are pushing them closer to the financial edge.“It’s crazy,” said Ora Dorsey, a 43-year-old Army veteran in Clarksville, Tenn. “It does make it hard to get out of debt. It seems like you’re only paying the interest.”Ms. Dorsey has been working for years to chip away at the debts she accrued when a series of health issues left her temporarily out of work. Now she is juggling three jobs to try to pay off thousands of dollars in credit card balances and other debts. She is making progress, but high rates aren’t helping.“How am I supposed to retire?” she asked. “I’m not able to save, have that rainy-day fund, because I’m trying to take down the debt that I have.”Ms. Dorsey isn’t likely to get relief soon. Fed officials have indicated that they expect to keep interest rates at their current level, the highest in decades, for months. And while policymakers still say they are likely to cut rates eventually, assuming inflation slows down as expected, they could consider raising them further if prices begin rising faster again. The latest evidence will come on Wednesday when the Labor Department releases data showing whether inflation cooled in April, or remained uncomfortably hot for a fourth straight month.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More