Inflation (Economics)

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    Would a Strong Job Market Stop Fed Rate Cuts? This Official Says No.

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    Mary C. Daly, the president of the Federal Reserve Bank of San Francisco, said that the central bank shouldn’t act “out of fear.”Federal Reserve officials predicted at their last meeting that they would make two more quarter-point rate cuts before the end of 2024 as inflation continued to slow and the job market cooled further.But in the weeks since, labor data have come in stronger, opening a big question: What does it mean for the interest rate outlook if the job market does not slow from here?One Fed official suggested on Tuesday that the central bank should keep lowering interest rates as expected even if the economy is chugging along, so long as inflation continues to cool. Policymakers, she suggested, should not try to slow the economy down if evidence suggests that price increases are coming under control.“I’m very opposed to cutting off expansion out of fear,” Mary C. Daly, the president of the Federal Reserve Bank of San Francisco, said during an interview on Tuesday morning, ahead of a speech she delivered at New York University.She pointed out that back in 2019, in the year leading up to the pandemic, the job market was very strong but that it did not lead to rapid inflation. In that experience, low unemployment allowed for solid wage gains, and it pulled new people into the labor market.“We should not kill off job growth and good growth as long as it doesn’t produce inflation,” she said. “If we could get 2019 again, I’d be all for it — why not?”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 Officials Debated Whether a Big Rate Cut Was Smart in September

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    Freshly released minutes from the central bank’s September meeting show that policymakers were divided on how much to cut rates.Federal Reserve officials were divided over how much to lower interest rates in September, minutes from their last meeting showed, although most officials favored the large half-point rate cut that central bankers ultimately made.“Noting that inflation was still somewhat elevated while economic growth remained solid and unemployment remained low, some participants observed that they would have preferred” a quarter point reduction, according to the minutes from the Sept. 17 and 18 gathering released on Wednesday. And “a few others indicated that they could have supported such a decision.”While one Fed governor, Michelle Bowman, did vote against the Fed’s big rate cut in favor of a smaller move, the fresh minutes showed that she was not alone in her misgivings. They suggested that the merits of a smaller move were debated.“A few participants” thought that a smaller move “could signal a more predictable path of economic normalization,” the minutes showed.The revelation that there was a spirited discussion about how much to cut rates at the Fed’s last meeting underscores what an uncertain juncture the central bank is facing. Officials are trying to calibrate policy so that it is cooling the economy enough to wrangle inflation fully, without slowing it so much that it plunges America into a recession. But that is an inexact science.The Fed’s ultimate decision — to start of its rate-cutting campaign with a big reduction — came in response to a few economic trends. Inflation has been cooling substantially, job gains had slowed, and the unemployment rate had recently moved up. Those factors suggested that it might be time to remove the Fed’s foot from the economic brakes by lowering rates decisively.Now, though, it looks increasingly unlikely that Fed officials will make another large rate cut this year.Hiring picked up in September, data released last week showed, and the unemployment rate ticked back down. When that is combined with recent evidence of solid consumer spending and healthy household balance sheets, risks of a big economic pullback now seem less pronounced.Given the progress, Fed officials have been signaling that the economic projections that they released after their September meeting are probably a good guide for the rest of 2024. Those suggested that policymakers will cut rates at both their November and December meetings, but by only a quarter point each time.The next big question facing the Fed is when it will stop shrinking its balance sheet of bond holdings. Policymakers bought bonds in huge sums during the early part of the 2020 pandemic, swelling their holdings. They have been shrinking their balance sheet steadily by allowing securities to expire without reinvesting them.Officials appear inclined to stick with that plan, at least for now, based on the minutes.“Several participants discussed the importance of communicating that the ongoing reduction in the Federal Reserve’s balance sheet could continue for some time even as the committee reduced its target range for the federal funds rate,” the minutes showed. More

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    U.S. Employers Add 254,000 Jobs in September as Economic Growth Remains Solid

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    U.S. employers added 254,000 jobs in September, a sign that economic growth remained solid. The unemployment rate fell to 4.1 percent.Many have doubted it. Even the optimists have worried about it. But despite the hand-wringing, the American economy appears to be in remarkably good shape.Businesses added 254,000 jobs in September, the government reported on Friday, far surpassing forecasts. It was a sign that the economy, rather than stumbling into a slowdown, still has a spring in its step.The unemployment rate declined to 4.1 percent, from 4.2 percent. Reported pay gains for workers were also better than expected, at 4 percent over the previous 12 months, an uptick from the August reading. With inflation continuing to ease substantially, that is welcome news for households trying to gain financial traction.A Slight DropUnemployment rate More

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    Jobs Report Gives Kamala Harris Another Boost

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    Vice President Kamala Harris probably could not have hoped for a better run of pre-election economic data than what the United States has enjoyed over the last month.In recent weeks, key inflation indicators have fallen close to the Federal Reserve’s 2 percent target rate, after years of running hot under Ms. Harris and President Biden. Federal Reserve officials cut interest rates by a half percentage point, immediately bringing mortgage rates to their lowest level in two years. The Commerce Department confirmed that the economy has grown at a robust 3 percent clip over the last year, after adjusting for rising prices. The Census Bureau reported that the typical household’s inflation-adjusted income jumped in 2023.Those numbers had encouraged Democrats, including policymakers in the White House and close to Ms. Harris’s campaign team. Recent polls have shown Ms. Harris closing the gap, or pulling even, with former President Donald J. Trump on the question of who can best handle the economy and inflation.But it was Friday’s employment report — 254,000 jobs gained, with wages growing faster than prices — that appeared to give Harris boosters a particularly large dose of confidence. The report came less than a day after striking dockworkers agreed to return to work through the end of the year, avoiding what could have been a major economic disruption with a month to go before the election.“The combination of this great job market and easing inflation is generating solid real wage and income gains,” said Jared Bernstein, the chairman of the White House Council of Economic Advisers. “While those continue to power this expansion forward, we’re also seeing record investment in key sectors, an entrepreneurial boom and gains in worker bargaining power to help ensure that workers get their fair share of all this growth.”Even Mr. Biden, who has attempted to strike a balance between cheering the economy’s performance and acknowledging the struggles created by years of fast-rising prices, sounded more upbeat than normal on Friday. He made a surprise appearance in the White House briefing room to celebrate the jobs report and the end of the port strike, which the president and his aides helped broker.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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    A Strong Jobs Report Suggests the Economy Is More Resilient Than We Thought

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    For months, the economy has been like a jigsaw with one mismatched piece: Consumer spending has been holding up and overall growth has been solid, but the job market has looked treacherously wobbly.As of Friday, the last piece of that puzzle is finally clicking into place.Fresh employment data for September showed that hiring picked up strongly, the unemployment rate dipped and wage growth came in strong — adding to a string of recent data pointing to economic resilience.And the incoming evidence points to a clear conclusion: The economy is robust.Data revisions released last week showed that growth has been stronger and incomes have been more solid than previously understood. Retail sales data are holding up. And now, employers appear to be meeting resilient consumer demand by continuing to expand their work forces.In fact, the report reinforced that by many measures, the job market is as healthy as it has ever been.The fresh data is good news for the Federal Reserve, for the White House and for Kamala Harris’s campaign as the vice president and Democratic nominee tries to make an economic case to voters ahead of the presidential election in November.It supports the idea that the economy either is headed for or has possibly already achieved a soft landing, in which inflation comes down without spurring economic pain in the process.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. Faces Economic Turbulence Just as Recession Fears Eased

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    War in the Middle East, a strike by port workers and a devastating hurricane injected uncertainty into the U.S. economy.The United States economy is suddenly staring down new and potentially damaging crises, with tensions flaring in the Middle East and several states grappling with fallout from a devastating hurricane.The events hit just as American policymakers were gaining confidence that they had successfully tamed inflation without pushing the economy into a recession and as polls and consumer surveys suggested that Americans’ sour economic mood had begun to improve. But in just a week, new risks have emerged.The economy now faces the prospect of an oil price spike and the aftermath of a storm that could inflict more than $100 billion in damage upon large swaths of the Southeast. Economists have also been tracking potential consequences of a port workers’ strike, which was suspended on Thursday evening.“There’s new uncertainty,” said Joseph E. Gagnon, senior fellow at the Peterson Institute for International Economics. “If we lose oil output in the Middle East, if the ports are not functioning, then both are inflationary.”That uncertainty is arriving just weeks before a presidential election in which the economy — in particular, inflation — is one of the biggest factors on voters’ minds and less than a month after the Federal Reserve began cutting interest rates from more than a two-decade high. The central bank has gained confidence that inflation is coming back to its 2 percent goal, but has been wary about the labor market weakening.Even before the new risks emerged, the International Monetary Fund was projecting that the U.S. economy would slow next 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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    Powell Points to Two More Normal-Size Rate Cuts This Year

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    Jerome H. Powell, chair of the Federal Reserve, said that central bankers will lower rates as much as needed, but have forecast two more quarter-point rate cuts this year.Jerome H. Powell, the chair of the Federal Reserve, underscored on Monday that officials are likely to lower interest rates in the coming months — but that policymakers do not expect to make those rate cuts in large increments if the economy shapes up as expected.Fed officials lowered interest rates by half a percentage point, or 50 basis points, at their meeting on Sept. 18, the first reduction in more than four years. Policymakers usually cut borrowing costs in quarter-point increments, so that was an unusually large decrease.The move came as the Fed made notable progress in its fight against rapid inflation. Price increases have slowed substantially since their 2022 peak, which meant that the high interest rates the Fed had maintained since mid-2023 were no longer seen as necessary.Now, the question is how quickly central bankers will ease off in the months ahead. Speaking to business economists at a conference in Nashville on Monday, Mr. Powell pointed to economic projections that Fed officials released following their recent meeting. Those showed that policymakers thought they would lower rates by another half percentage point by the end of 2024.“That would mean two more cuts, it wouldn’t mean more 50s,” Mr. Powell said, referring to 50-basis-point cuts. “Of course, that will depend on the data. But ultimately, that’s what the baseline is.”The Fed is facing two big risks as it approaches its upcoming policy decisions in November and December.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 Gauge Cooled in August

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    Inflation has been slowing for months, which has paved the way for Federal Reserve interest rates cuts.Inflation cooled in August, the latest sign of progress in the Federal Reserve’s yearslong fight to bring rapid price increases back under control.The Personal Consumption Expenditures index climbed by 2.2 percent from a year earlier, data released Friday showed. That is down from 2.5 percent in July and slightly softer than economist forecasts. It was the slowest annual inflation reading since early 2021.After stripping out volatile food and fuel prices for a better sense of the underlying inflation trend, a “core” price index was a bit more stubborn on an annual basis. The core measure came in at 2.7 percent, up from 2.6 percent previously and in line with what economists had expected. But comparing prices from month to month, core inflation slowed to a modest 0.1 percent in August.Altogether, the report offers further proof that price increases are swiftly fading. Already, that has allowed the Fed to begin to lower interest rates from a more than two-decade high of 5.3 percent. After raising borrowing costs sharply and then holding them at a high level to slow the economy and weigh down inflation, officials voted last week to cut rates by a larger-than-usual half percentage point. Policymakers also signaled that more rate cuts are coming, as long as inflation continues to fade.The Fed’s pivot is already helping to bring down mortgage rates, and it could slowly trickle through the economy to stop the job market from slowing more markedly. Central bankers are trying to pull off a rare “soft landing,” in which they cool conditions enough to wrangle price increases without tempering them so much that unemployment spikes and the economy falls into a recession.There were some signs that the economy may be pulling back — but not crashing — in the details of Friday’s report. Consumer spending, which makes up a big part of overall economic activity, grew more slowly in August, the data showed. And personal incomes picked up less than expected.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