Inflation (Economics)

More stories

  • 138 Shares139 Views

    in Economy

    Russia Raises Interest Rate to 21 Percent, Its Highest in Decades

    by

    Military spending and recruitment are causing the country’s economy to overheat, leaving regulators in a struggle to rein in rising prices.Russia’s central bank raised the cost of borrowing in the country to its highest level in more than two decades on Friday in an effort to slow inflation that is being fueled by record military spending and recruitment.The central bank raised Russia’s benchmark interest rate to 21 percent during its regular monetary policy meeting. That makes borrowing in the country even more expensive than at the start of Russia’s invasion of Ukraine in February 2022, when the central bank sharply increased interest rates to calm the economy. The effective cost of borrowing in Russia is now the highest since 2003.It was the third increase in a row, and Elvira Nabiullina, the central bank’s president, said that interest rates could rise further later this year.“We don’t see inflationary pressures slowing down,” Ms. Nabiullina, who maintains some policy independence from the Kremlin, told reporters after announcing the new rate.The increase underscores the challenges that Ms. Nabiullina faces as she tries to cool inflation, which she forecasts will average 8.8 percent this year. At that level, prices are rising more than twice as quickly as the central bank considers healthy for the Russian economy.Ms. Nabiullina implicitly blamed Russia’s war in Ukraine for the continued price increases. She said the Kremlin’s decision to raise spending by $15.5 billion next year, mostly to cover war-related costs, was overheating the economy and feeding inflation.In particular, she said, high government spending blunts the central bank’s main tool for controlling inflation — setting interest rates. This is because companies that receive military contracts are willing to take out loans at any cost to meet production deadlines.Labor shortages resulting from military recruitment during the war have also fueled inflation.The war has left hundreds of thousands of Russian men dead or seriously injured, according to Western intelligence agencies. Hundreds of thousands more have left the country to avoid being called up. And hundreds of thousands of others have joined the army to benefit from ever-rising payouts, leaving the civilian economy deprived of workers.“Spare hands no longer exist in the economy,” Ms. Nabiullina said, which leaves companies competing for workers by offering them higher wages.In turn, those rising wages spur consumer spending, further contributing to inflation.Military spending has caused a boom in the Russian economy: The International Monetary Fund said this week that Russia’s economy would grow 3.6 percent this year, 0.4 percentage points higher than its previous forecast. But economists say that the situation is breaking the balance between supply and demand, with potential long-term consequences for the country’s financial stability.Yet the Kremlin is showing no signs of letting up on war spending.“Our main priority are the goals of the special military operation,” Finance Minister Anton Siluanov told RBC, a business newspaper, this week, referring to the war in Ukraine. “We will spend as much money as we need on the battlefield, on the victory.”Oleg Matsnev More

  • 150 Shares199 Views

    in Economy

    I.M.F. Says Inflation Fight Is Largely Over but Warns of New Threats

    by

    The International Monetary Fund said protectionism and new trade wars could weigh on growth.The global economy has managed to avoid falling into a recession even though the world’s central banks have raised interest rates to their highest levels in years to try to tame rapid inflation, the International Monetary Fund said on Tuesday.But the I.M.F., in a new report, also cautioned that escalating violence in the Middle East and the prospect of a new round of trade wars stemming from political developments in the United States remain significant threats.New economic forecasts released by the fund on Tuesday showed that the global fight against soaring prices has largely been won: Global output is expected to hold steady at 3.2 percent this year and next. Fears of a widespread post-pandemic contraction have been averted, but the fund warned that many countries still face a challenging mix of high debt and sluggish growth.The report was released as finance ministers and central bank governors from around the world convened in Washington for the annual meetings of the I.M.F. and the World Bank. The gathering is taking place two weeks ahead of a presidential election in the United States that could result in a major shift toward protectionism and tariffs if former President Donald J. Trump is elected.Mr. Trump has threatened to impose across-the-board tariffs of as much as 50 percent, most likely setting off retaliation and trade wars. Economists think that could fuel price increases and slow growth, possibly leading to a recession.“Fear of a Trump presidency will loudly reverberate behind the scenes,” said Mark Sobel, a former Treasury official who is now the U.S. chairman of the Official Monetary and Financial Institutions Forum. Mr. Sobel said global policymakers would probably be wondering what another Trump presidency would “mean for the future of multilateralism, international cooperation, U.S.-China stresses and their worldwide ripples, and global trade and finance, among others.”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

  • 150 Shares139 Views

    in Economy

    The Best Books About the Economy to Read Before the 2024 Election

    by

    Voters are forever worried about the economy — the price of homes and groceries, the rise and fall of the stock market, and, of course, taxes — but the economic policies that affect these things often seem unapproachable. Donald Trump wants to cut taxes and raise tariffs. Kamala Harris wants to raise taxes on high-income households and expand the social safety net. But what does that mean? And what are they hoping to achieve?Part of what makes economic policy difficult is the need to understand not just the direct impact of a change but also its many indirect effects. A tax credit to buy houses, for example, might end up benefiting home sellers more than home purchasers if a surge in demand drives up prices.The mathematics and jargon that economists use in journals facilitate precise scientific communication, which has the indirect effect of excluding everyone else. Meanwhile, the “economists” you see on TV or hear on the radio are more often telling you (usually incorrectly) whether the economy will go into recession without explaining why.But some authors do a good job of walking the line between accessibility and expertise. Here are five books to help you crack the nut on the economy before Election Day.The Little Book of EconomicsBy Greg IpThe best way to understand things like the causes of recessions and inflation and the consequences of public debt is to take an introductory economics course and do all the problem sets. The second-best way? Read “The Little Book of Economics.” Don’t be fooled by its compact form and breezy writing: This book, by the Wall Street Journal chief economics commentator Greg Ip, manages to pack in just about everything you wanted to know but were afraid to ask about the gross domestic product.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

  • 163 Shares169 Views

    in Economy

    How Is the Economy for Black Voters? A Complex Question Takes Center Stage.

    by

    The 2024 election could be won or lost on the strength of the Black vote, which could in turn be won or lost based on the strength of the American economy. So it is no surprise that candidates are paying a lot of attention — and lip service — to which of the past two administrations did more to improve the lives of Black workers.Former President Donald J. Trump, the Republican candidate, makes big claims about the gains Black workers made under his watch, saying that he had the “lowest African American unemployment rate” and “the lowest African American poverty rate ever recorded.” But those measures improved even more under the Biden administration, with joblessness touching a record low and poverty falling even further.“Currently, Black workers are doing better than they were in 2019,” said Valerie Wilson, a labor economist whose work focuses on racial disparities at the liberal-leaning advocacy organization EPI Action.That may sound like an unambiguous victory for Vice President Kamala Harris, the Democratic nominee, especially when paired with a recent increase in homeownership rates for Black families and the fact that the Black unemployment rate dipped in September.But even with those notable wins, the economy has not been uniformly good for all Black Americans. Rapid inflation has been tough on many families, chipping away at solid wage growth. Although the labor market for Black workers was the strongest ever recorded for much of 2022 and 2023, the long shadow of big price increases may be keeping people from feeling like they are getting ahead.In fact, nearly three in four Black respondents rated the economy as fair or poor, a recent New York Times/Siena College poll of Black likely voters found. And that is notable, because Black voters do tend to prioritize economic issues — not just for themselves, but also for the overall welfare of Black people — when they are thinking about whether and how to vote.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

  • 125 Shares119 Views

    in Economy

    Trump’s Tariff Plans Would Fuel Inflation, Janet Yellen Will Warn

    by

    The Treasury secretary plans to criticize former President Donald J. Trump’s economic proposals in a speech.Treasury Secretary Janet L. Yellen plans to warn in a speech on Thursday that the economic policies being proposed by former President Donald J. Trump would fuel inflation and harm businesses, raising alarm about the risks of blanket tariffs.The critique, which is set to be delivered in remarks to the Council on Foreign Relations, comes less than a month before the presidential election. Mr. Trump and Vice President Kamala Harris have outlined starkly different views about how they see America’s role in the global economy. Although Ms. Yellen is not expected to mention Mr. Trump by name, she will argue that the broad tariffs the former president and some Republicans in Congress support would damage the U.S. economy.“Calls for walling America off with high tariffs on friends and competitors alike or by treating even our closest allies as transactional partners are deeply misguided,” Ms. Yellen plans to say in her speech, which was obtained by The New York Times. “Sweeping, untargeted tariffs would raise prices for American families and make our businesses less competitive.”Mr. Trump imposed tariffs on hundreds of billions of dollars of foreign products during his presidency, but his plans if he is re-elected would dwarf those moves. On previous occasions, Mr. Trump suggested imposing tariffs of 10 to 20 percent on most foreign items, as well as a tariff of 60 percent or more on goods from China, in addition to other levies.This week, Mr. Trump suggested he might impose across-the-board tariffs of as much as 50 percent to force foreign companies to produce in the United States to avoid the levies.“The most beautiful word in the dictionary is tariff,” Mr. Trump said, adding, “It’s my favorite word.”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

  • 163 Shares199 Views

    in Economy

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

    by

    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

  • 150 Shares119 Views

    in Economy

    Fed Officials Debated Whether a Big Rate Cut Was Smart in September

    by

    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

  • 150 Shares169 Views

    in Economy

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

    by

    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