Inflation (Economics)

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    One Obstacle for Trump’s Promises: This Isn’t the 2016 Economy

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    Donald J. Trump slapped tariffs on trading partners and cut taxes in his first term. But after inflation’s return, a repeat playbook would be riskier.When Donald J. Trump became president in 2017, prices had risen roughly 5 percent over the previous four years. If he were to win the race for the White House in 2024, he would be entering office at a time when they are up 20 percent and counting.That is a critically different economic backdrop for the kind of policies — tariffs and tax cuts — that the Republican contender has put at the center of his campaign.Mr. Trump regularly blames the Biden administration for the recent price surge, but inflation has been a global phenomenon since the onset of the coronavirus pandemic in 2020. Supply chain problems, shifting consumer spending patterns and other quirks related to pandemic lockdowns and their aftermath collided with stimulus-fueled demand to send costs shooting higher.The years of unusually rapid inflation that resulted have changed the nation’s economic picture in important ways. Businesses are more accustomed to adjusting prices and consumers are more used to those changes than they were before the pandemic, when costs had been quiescent for decades. Beyond that, the Federal Reserve has lifted interest rates to 5.3 percent in a bid to slow demand and wrestle the situation under control.That combination — jittery inflation expectations and higher interest rates — could make many of the ideas Mr. Trump talks about on the campaign trail either riskier or more costly than before, especially at a moment when the economy is running at full speed and unemployment is very low.Mr. Trump is suggesting tax cuts that could speed up the economy and add to the deficit, potentially boosting inflation and adding to the national debt at a time when it costs a lot for the government to borrow. He has talked about mass deportations at a moment when economists warn that losing a lot of would-be workers could cause labor shortages and push up prices. He promises to ramp up tariffs across the board — and drastically on China — in a move that might sharply increase import prices.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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    The Fed’s Preferred Inflation Measure Cools, Welcome News

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    The economy appears to be downshifting and price gains are moderating, as Federal Reserve officials creep closer to beating inflation.The Federal Reserve’s preferred inflation measure continued to cool as consumer spending grew only moderately, good news for central bankers who have been trying to weigh down demand and wrestle price increases under control.The Personal Consumption Expenditures index climbed 2.6 percent in May from a year earlier, matching what economists had forecast and down from 2.7 percent previously.After stripping out volatile food and fuel prices to give a better sense of the inflation trend, a “core” price measure was also up 2.6 percent from a year earlier, down from 2.8 percent in the April reading. And on a monthly basis, inflation was especially mild, and prices did not climb on an overall basis.The Fed is likely to watch the fresh inflation data closely as central bankers think about their next policy steps. Officials raised interest rates sharply starting in 2022 to hit the brakes on consumer and business demand, which in turn can help to slow price increases. But they have held borrowing costs steady at 5.3 percent since July as inflation has slowly come down, and have been contemplating when to begin lowering interest rates.While officials went into 2024 expecting to make several rate cuts this year, they have pushed those expectations back after inflation proved stubborn early in the year. Policymakers have suggested that they still think they could make one or two rate cuts before the end of the year, and investors now think that the first reduction could come in September.Given Friday’s fresh inflation data, the sticky inflation early in 2024 looks “more and more like a bump in the road,” Omair Sharif, founder of Inflation Insights, wrote in note after the release. “However you want to slice and dice it, we’ve made considerable progress on core inflation over the last year.”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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    Trump Eyes Bigger Trade War in Second Term

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    The former president’s past tariffs raised prices for consumers and businesses, economists say. His next plan could tax 10 times as many imports.In March 2018, a day after announcing sweeping tariffs on metals imported from America’s allies and adversaries alike, President Donald J. Trump took to social media to share one of his central economic philosophies: “Trade wars are good, and easy to win.”As president, Mr. Trump presided over the biggest increase in U.S. tariffs since the Great Depression, hitting China, Canada, the European Union, Mexico, India and other governments with stiff levies. They hit back, imposing tariffs on American soybeans, whiskey, orange juice and motorcycles. U.S. agricultural exports plummeted, prompting Mr. Trump to send $23 billion to farmers to help offset losses.Now, as he runs for president again, Mr. Trump is promising to ratchet up his trade war to a much greater degree. He has proposed “universal baseline tariffs on most foreign products,” including higher levies on certain countries that devalue their currency. In interviews, he has floated plans for a 10 percent tariff on most imports and a tariff of 60 percent or more on Chinese goods. He has also posited cutting the federal income tax and relying on tariffs for revenue instead.Mr. Trump, who once proclaimed himself “Tariff Man,” has long argued that tariffs would boost American factories, end the gap between what America imported and what it exported and increase American jobs.His first round of levies hit more than $400 billion worth of imports, including steel, solar panels, washing machines and Chinese goods like smart watches, chemicals, bicycle helmets and motors. His rationale was that import taxes would revive American manufacturing, reduce reliance on foreign goods and allow U.S. companies to better compete against cheap products from China and other countries.Economists say the tariffs did reduce imports and encouraged U.S. factory production for certain industries, including steel, semiconductors and computer equipment. But that came at a very high cost, one that most likely offset any overall gains. Studies show that the tariffs resulted in higher prices for American consumers and factories that depend on foreign inputs, and reduced U.S. exports for certain goods that were subject to retaliation.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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    Get Ready for the Debate Like an Economics Pro

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    What you need to know about the economy before Thursday’s showdown between President Biden and Donald J. Trump.President Biden.Doug Mills/The New York TimesFormer President Donald J. Trump.Haiyun Jiang for The New York TimesMany of the issues likely to dominate Thursday’s televised debate between President Biden and former President Donald J. Trump boil down to economics.Inflation, immigration, government taxing and spending, interest rates, and trade relationships could all take center stage — and both candidates could make sweeping claims about them, as they regularly do at campaign events and other public appearances.Given that, it could be handy to go into the event with an understanding of where the economic data stand now and what the latest research says. Below is a rundown of some of today’s hot-button topics and the context you need to follow along like a pro.Inflation has been high, but it’s slowing.Inflation jumped during the pandemic and its aftermath for a few reasons. The government had pumped more than $5 trillion into the economy in response to Covid, first under Mr. Trump and then under Mr. Biden.As families received stimulus checks and built up savings amid pandemic lockdowns, they began to spend their money on goods like cars and home gym equipment. That burst of demand for physical products collided with factory shutdowns around the world and snarls in shipping routes.Shortages for everything from furniture parts and bicycles to computer chips for cars began to crop up, and prices started to jump in 2021 as a lot of money chased too few goods.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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    How Inflation Has Changed: Timeline

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    “The signal that we’re taking is that it’s likely to take longer for us to gain confidence that we are on a sustainable path down to 2 percent inflation,” Mr. Powell said in May, after price increases had stalled for months. Inflation has recently cooled again, and policymakers are waiting to see if the trend […] More

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    Fact-Checking Biden’s and Trump’s Claims About the Economy

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    We fact-checked claims about inflation, jobs and tax policy from both presidential candidates.Consumer sentiment about the state of the economy could be pivotal in shaping the 2024 presidential election.President Biden is still grappling with how to address one of his biggest weaknesses: inflation, which has recently cooled but soared in his first years in office. Former President Donald J. Trump’s frequent economic boasts are undermined by the mass job losses and supply chain disruptions wrought by the pandemic.Here’s a fact check of some of their more recent claims about the economy.Both candidates misrepresented inflation.A grocery store in Queens, New York, earlier this year.Hiroko Masuike/The New York TimesWhat Was Said“They had inflation of — the real number, if you really get into the real number, it’s probably 40 percent or 50 percent when you add things up, when you don’t just put in the numbers that they want to hear.”— Mr. Trump at a campaign event in Detroit in June“I think it could be as high as 50 percent if you add everything in, when you start adding energy prices in, when you start adding interest rates.”— Mr. Trump in a June interview on Fox NewsThis is misleading. Karoline Leavitt, a spokeswoman for the Trump campaign, cited a 41 percent increase in energy prices since January 2021, and prices for specific energy costs like gasoline rising more than 50 percent during that time.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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    The Fed Holds Rates Steady and Predicts Just One Reduction This Year

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    Federal Reserve officials signaled that interest rates could stay higher this year as policymakers pause to ensure they’ve stamped out inflation.Federal Reserve officials left interest rates unchanged at their June meeting on Wednesday and predicted that they will cut borrowing costs just once before the end of 2024, taking a cautious approach as they try to avoid declaring a premature victory over inflation.While the Fed had been expected to leave rates unchanged, its projections for how interest rates may evolve surprised many economists.When Fed officials last released quarterly economic estimates in March, they anticipated cutting interest rates three times this year. Investors had expected them to revise that outlook somewhat this time, in light of stubborn inflation early in 2024, but the shift to a single cut was more drastic.Jerome H. Powell, the Fed chair, made clear in a postmeeting news conference that officials were taking a careful and conservative approach after months of bumpy inflation data.With price increases proving volatile and the job market remaining resilient, policymakers believe they have the wiggle room to hold interest rates steady to make sure they fully stamp out inflation without running too much of a risk to the economy. But the Fed chair also suggested that more rate cuts could be possible depending on economic data.“Fortunately, we have a strong economy, and we have the ability to approach this question carefully — and we will approach it carefully,” Mr. Powell said. He added that “we’re very much keeping an eye on downside economic risks, should they emerge.” More