Inflation (Economics)

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Fed’s Preferred Inflation Number Cooled Overall in June

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The Personal Consumption Expenditures Index climbed 2.5 percent, still more than the Fed’s 2 percent target, as price increases take time to come down.The Federal Reserve’s preferred inflation measure continued to gradually cool overall in June even as a “core” inflation measure held steady, likely keeping the central bank on track for a rate cut later this year without stoking any urgency for a reduction at its meeting next week.The Personal Consumption Expenditures index was 2.5 percent higher in June than a year earlier, slower than May’s 2.6 percent and in line with economist expectations.A “core” price measure that strips out food and fuel costs for a better sense of the underlying inflation trend proved more stubborn. Yearly core inflation was 2.6 percent, matching its reading in May. And on a monthly basis, both measures of inflation climbed modestly.Overall, the report served as a reminder that inflation is substantially lower than it was at its 2022 peak, but is not yet entirely vanquished.This inflation measure peaked above 7 percent in 2022, so June’s reading is much cooler. But inflation has lingered above the Fed’s 2 percent goal for more than three years now. That long period of rapid increases has left price levels much higher than they were as recently as 2020, a reality that has caused dismay among consumers who continue to balk at heftier price tags. That in turn has been bad news for incumbent Democrats, who have struggled to take credit for a strong job market and a burst of infrastructure spending at a time when inflation is souring voters’ view of the economy.The long period of inflation has also made the Fed cautious. Policymakers have been holding interest rates at 5.3 percent for the past year, making it expensive to borrow money in a bid to weigh on consumer demand and cool the broader economy. Even though inflation is now coming down — suggesting that rates may no longer need to be so punishingly high — policymakers have not wanted to cut borrowing costs before they are sure that they have fully wrestled price increases under control.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. Economy Grew Faster Than Expected in Second Quarter, at 2.8% Rate

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    Gross domestic product rose at a 2.8 percent annual rate in the second quarter, new evidence of the economy’s resilience despite high interest rates.Economic growth picked up more than expected in the spring, as cooling inflation and a strong labor market allowed consumers to keep spending even as high interest rates weighed on their finances.Gross domestic product, adjusted for inflation, increased at a 2.8 percent annual rate in the second quarter, the Commerce Department said on Thursday. That was faster than the 1.4 percent rate recorded in the first quarter, but shy of the unexpectedly strong growth in the second half of last year.Consumer spending, the backbone of the U.S. economy, rose at a 2.3 percent annual rate in the second quarter — a solid pace, albeit much slower than in 2021, when businesses were reopening after pandemic-induced closings. Business investment in equipment rose at its fastest pace in more than two years. Inflation, which picked up unexpectedly at the start of the year, eased in the quarter.The data is preliminary and will be revised at least twice.Taken together, the findings suggest that the economy remains on track for a rare “soft landing,” in which inflation eases without triggering a recession. That is something few forecasters considered likely when the Federal Reserve began raising interest rates two years ago to combat inflation.“It’s the perfect landing,” said Sam Coffin, an economist at Morgan Stanley.Recession fears re-emerged in recent months, first when inflation briefly surged and then when the previously rock-solid job market showed signs of cracking in the spring. But recent data, including the surprisingly strong second-quarter growth figures, indicate that the expansion is on firm footing.“The economy is in a transition, but it’s in a good place,” said Ryan Sweet, chief U.S. economist at Oxford Economics. “The economy is slowing from very strong growth in the second half of last year. We’re just settling down into something that’s a little more sustainable.” More

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    U.S. Economy Grew at 2.8% Rate in Latest Quarter

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    The report on gross domestic product offered new evidence of the economy’s resilience in the face of high interest rates.Economic growth remained solid in the spring, as cooling inflation and a strong labor market allowed consumers to keep spending even as high interest rates weighed on their finances.Gross domestic product, adjusted for inflation, increased at a 2.8 percent annual rate in the second quarter, the Commerce Department said on Thursday. That was faster than both the 1.4 percent rate recorded in the first quarter and than forecasters’ expectations, but down from the unexpectedly strong growth in the second half of last year.Consumer spending, the backbone of the U.S. economy, rose at a 2.3 percent annual rate in the second quarter — a solid pace, albeit much slower than in 2021, when businesses were reopening after pandemic-induced closings. Inflation, which picked up unexpectedly at the start of the year, eased in the second quarter.The data is preliminary and will be revised at least twice.Taken together, the data suggested that the economy remains on track for a rare “soft landing,” in which inflation cools without triggering a recession. That is something few forecasters considered likely when the Federal Reserve began raising interest rates to combat inflation two years ago.“The economy is in a transition, but it’s in a good place,” said Ryan Sweet, chief U.S. economist at Oxford Economics. “The economy is slowing from very strong growth in the second half of last year. We’re just settling down into something that’s a little more sustainable.”Fed officials will meet next week to weigh when to begin lowering interest rates, which they have held at their current level, the highest in decades, for the past year. Hardly anyone expects policymakers to cut rates next week, but they could signal that such a move could come as soon as September if inflation continues to cool.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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    On Economic Policy, Harris Has Played Limited Role

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    President Biden has not given his vice president an expansive economic portfolio. But she has engaged on issues of small-business lending, help for parents and more.Shortly after the Biden administration took office in 2021, Vice President Kamala Harris started calling the chief executives of large banks, including JPMorgan Chase and Bank of America.The federal government was making hundreds of billions of dollars available for banks to lend to small businesses to keep them afloat during the pandemic recession. Ms. Harris told the executives they needed to be lending more, faster, particularly to minority-owned businesses that data suggested were struggling to gain access to the money.The calls represented one of the earliest and most visible forays Ms. Harris made in devising and carrying out the Biden administration’s economic agenda, and illustrated the sort of economic policy niche that she has filled as vice president.Current and former administration officials, progressive leaders outside the White House and allies of Ms. Harris roundly agree that the vice president, who is now the leading candidate to secure the Democratic presidential nomination, did not play a major role in the creation of the sweeping economic legislation that has defined President Biden’s time in office.Ms. Harris was rarely a loud voice in major economic debates, like the ones over how to counter soaring inflation in 2021 and 2022. She did sometimes attend economic briefings, but was not always a big contributor in them. One attendee recalled her coming to an economic briefing, but simply listening to the presentation while Mr. Biden asked questions.Other officials say Ms. Harris largely focuses her questions for economists on how certain policies affect workers and families at a personal level — a trait she shares with the president.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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    Can Kamala Harris Sell Bidenomics?

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    Much of President Biden’s agenda polls well, but voters roundly dislike his handling of the economy. That’s a campaign challenge for his vice president, as she mounts a presidential bid.President Biden has signed more major economic legislation than any other president has this century. He presided over record job growth and a recovery from pandemic recession that was the envy of the wealthy world. He crafted an ambitious, multinational industrial policy meant to help America and its allies rebuild strategic manufacturing capacity to counter China.But voters gave Mr. Biden little credit, focusing instead on the inflation surge that plagued much of Mr. Biden’s term.That shortcoming was jeopardizing Mr. Biden’s re-election chances well before he fumbled through a televised debate last month and re-inflamed questions about his age. Polls showed that the economy and prices topped voters’ issue concerns, and that they roundly preferred former President Donald J. Trump to Mr. Biden on the issue.As Mr. Biden steps away from the 2024 campaign and Vice President Kamala Harris tries to rally support for the presidential nomination, economic questions loom large over her candidacy.Will Ms. Harris, 59 and unburdened by the age questions that dogged Mr. Biden, fare any better at selling the Biden-Harris economic record — including its investments in low-emission energy, advanced manufacturing and other industries? Can she maintain Mr. Biden’s connection to certain blue-collar voters in pivotal states like Michigan and Pennsylvania, while re-engaging economically disaffected young voters who had grown disillusioned with the president?And can she overcome voter anger over inflation, which peaked at 9 percent in 2022 but has since fallen closer to the Federal Reserve’s target rate of 2 percent?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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    I.M.F. Sees Signs of Cooling in U.S. Economy

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    The International Monetary Fund warned that inflation remained stubbornly high and that protectionism posed a risk to the global economic outlook.The United States economy is growing more slowly than expected and inflation remains stubbornly high around the world, two developments that pose risks to the global economy, the International Monetary Fund said on Tuesday.The I.M.F.’s most recent World Economic Outlook report underscored the lingering vulnerabilities that could derail a so-called soft landing for the world economy — one in which a global recession is avoided despite aggressive efforts by central banks to tame rapid inflation by making it more expensive to borrow money.The new report said the I.M.F. still expected growth in global output to hold steady at 3.2 percent in 2024. That would be unchanged from its April projections. The fund also expected growth to be slightly higher next year, at 3.3 percent. However, the closely watched projections included several caveats and warned that the global economy was in a “sticky spot.”Most notable were signs of weakness in the United States, which has helped power the global recovery from the pandemic. The I.M.F. now expects the United States economy to grow more slowly than it did previously as a result of weaker consumer spending and a softening job market.The report forecast that U.S. economic growth would increase to 2.6 percent in 2024 from 2.5 percent in 2023, a slight downgrade from its previous projection of 2.7 percent. “The United States shows increasing signs of cooling, especially in the labor market, after a strong 2023,” Pierre-Olivier Gourinchas, the I.M.F.’s chief economist, said in an essay that accompanied the report.Global inflation is still expected to ease to 5.9 percent this year from 6.7 percent in 2023. But the I.M.F. noted that prices for services remained hot. That could force central banks — which have raised interest rates to their highest levels in years — to keep borrowing costs elevated longer, putting growth at risk for both advanced and developing economies.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’s Powell Welcomes Cooler Inflation but Steers Clear of Rate Cut Timing

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    Jerome H. Powell, the chair of the Federal Reserve, avoided signaling when the Fed would cut rates at a time when some economists are wondering why officials would wait.Jerome H. Powell, the chair of the Federal Reserve, avoided sending a clear signal about when the central bank would begin to cut interest rates even as he welcomed a recent cool-down in inflation.“Today I’m not going to be sending any signals one way or the other on any particular meeting,” Mr. Powell said while speaking at the Economic Club of Washington on Monday. “Just to ruin the fun right at the beginning.”The Fed’s chair was speaking after several inflation reports in a row suggested that price increases were moderating in earnest, a development that had spurred some economists to think that it could make sense for officials to cut interest rates sooner rather than later. The Fed meets at the end of July and then again in September, and investors have been largely expecting that officials will begin to lower borrowing costs at the September meeting.Economists at Goldman Sachs wrote in a research note on Monday that cutting rates this month could be appropriate, given how much inflation had come down.“If the case for a cut is clear, why wait another seven weeks before delivering it?” Jan Hatzius, Goldman’s chief economist, wrote in the note, explaining that while his team still thinks that a rate cut in September is more likely, there is a “solid rationale” for an earlier move.But Mr. Powell did little to open the door to an earlier move during his Monday remarks. While he said recent inflation reports had added to central bankers’ confidence that price increases were coming down, he avoided giving a clear signal about when officials would have enough confidence to lower borrowing costs.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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    Republican Party Rejects Free-Market Economics in Favor of Trump’s Signature Issues

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    Donald J. Trump’s presidency was a major turn away from the Republican Party’s long embrace of free-market economics. If the Republican platform is any indication, a second Trump term would be a near-complete abandonment.The 2024 platform, which was released last week and is expected to infuse the Republican National Convention that starts in Milwaukee on Monday, promises action on what have become Mr. Trump’s signature issues: It pledges to pump up tariffs, encourage American manufacturing and deport immigrants at a scale that has never been seen before.What it lacks are policy ideas that have long been dear to economic conservatives. The platform does not directly mention fiscal deficits, and, apart from curbing government spending, it does not make any clear and detailed promises to rein in the nation’s borrowing. Other policies it proposes — including cutting taxes and expanding the military — would most likely swell the nation’s debt.The Republican platform also does not mention exports or encouraging trade. And while the document insists that the party will lower inflation, long a pertinent issue for economic conservatives, it fails to lay out a realistic plan for doing that. Chapter One of the document, titled “Defeat Inflation and Quickly Bring Down All Prices,” suggests that oil-friendly policies, slashed government spending, decreased regulation, fewer immigrants and restored geopolitical stability will lower price increases. But few economists agree.In fact, many analysts have said Mr. Trump’s suggestions on the campaign trail so far could lift prices, particularly his proposals to deport immigrants en masse and apply tariffs of perhaps 10 percent on most imports and levies of 60 percent on goods from China.“Measures to reduce migration and to protect the economy through tariffs and trade blockages are all highly inflationary,” Steven Kamin, a former Fed staff official who is now at the conservative American Enterprise Institute, said in an interview last week. When it comes to both deficits and trade, he said, there is a “populist dismissal of the prescriptions of academics and elites.”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 Chair Powell Welcomes Cooling Inflation

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    Jerome H. Powell, the chair of the Federal Reserve, delivered optimistic remarks to Senators as inflation and the job market slow gently.Jerome H. Powell, the chair of the Federal Reserve, indicated on Tuesday that recent inflation data had given the central bank more confidence that price increases were returning to normal, and that continued progress along these lines would help to pave the way toward a central bank rate cut.“The Committee has stated that we do not expect it will be appropriate to reduce the target range for the federal funds rate until we have gained greater confidence that inflation is moving sustainably toward 2 percent,” Mr. Powell said.He added that data earlier this year failed to provide such confidence, but that recent inflation readings “have shown some modest further progress, and more good data would strengthen our confidence that inflation is moving sustainably toward 2 percent.”Mr. Powell delivered the remarks on Tuesday in an appearance before the Senate Banking Committee. While Mr. Powell avoided zeroing in on a specific month for when the Fed might begin to cut interest rates, he also did little to push back on growing expectations that a reduction could come in September. Fed officials meet in late July, but few economists expect a move that early.Mr. Powell said he was “not going to be sending any signals about the timing of any future actions” in response to a lawmaker question about when rate cuts might come.The chair’s congressional testimony came at a delicate moment for the central bank. Fed officials are trying to figure out when to begin cutting interest rates, which they have held at the highest rate in decades for roughly a year now. But as they weigh that choice, they must strike a careful balance: They want to keep borrowing costs high long enough to cool the economy and fully stamp out rapid inflation, but they also want to avoid overdoing it, which could crash the economy too much and cause a recession.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