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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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    Why Are People So Down About the Economy? Theories Abound.

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    Things look strong on paper, but many Americans remain unconvinced. We asked economic officials, the woman who coined “vibecession” and Charlamagne Tha God what they think is happening.The U.S. economy has been an enigma over the past few years. The job market is booming, and consumers are still spending, which is usually a sign of optimism. But if you ask Americans, many will tell you that they feel bad about the economy and are unhappy about President Biden’s economic record.Call it the vibecession. Call it a mystery. Blame TikTok, media headlines or the long shadow of the pandemic. The gloom prevails. The University of Michigan consumer confidence index, which looked a little bit sunnier this year after a substantial slowdown in inflation over 2023, has again soured. And while a measure of sentiment produced by the Conference Board improved in May, the survey showed that expectations remained shaky.The negativity could end up mattering in the 2024 presidential election. More than half of registered voters in six battleground states rated the economy as “poor” in a recent poll by The New York Times, The Philadelphia Inquirer and Siena College. And 14 percent said the political and economic system needed to be torn down entirely.What’s going on here? We asked government officials and prominent analysts from the Federal Reserve, the White House, academia and the internet commentariat about what they think is happening. Here’s a summary of what they said.Kyla Scanlon, coiner of the term ‘Vibecession’Price levels matter, and people are also getting some facts wrong.The most common explanation for why people feel bad about the economy — one that every person interviewed for this article brought up — is simple. Prices jumped a lot when inflation was really rapid in 2021 and 2022. Now they aren’t climbing as quickly, but people are left contending with the reality that rent, cheeseburgers, running shoes and day care all cost more.“Inflation is a pressure cooker,” said Kyla Scanlon, who this week is releasing a book titled “In This Economy?” that explains common economic concepts. “It hurts over time. You had a couple of years of pretty high inflation, and people are really dealing with the aftermath of that.”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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    GDP Gain in First Quarter Revised Downward in U.S.

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    Consumers eased up on spending in the face of rising prices and high interest rates, Commerce Department data shows.Economic growth slowed more sharply early this year than initially estimated, as consumers eased up on spending amid rising prices and high interest rates.U.S. gross domestic product, adjusted for inflation, grew at a 1.3 percent annual rate in the first three months of the year, the Commerce Department said on Thursday. That was down from 3.4 percent in the final quarter of 2023 and below the 1.6 percent growth rate reported last month in the government’s preliminary first-quarter estimate.The data released on Thursday reflects more complete data than the initial estimate, released just a month after the quarter ended. The government will release another revision next month.The preliminary data fell short of forecasters’ expectations, but economists at the time were largely unconcerned, arguing that the headline G.D.P. figure was skewed by big shifts in business inventories and international trade, components that often swing wildly from one quarter to the next. Measures of underlying demand were significantly stronger.The revised data may be harder to dismiss. Consumer spending rose at a 2 percent annual rate — down from 3.3 percent in the fourth quarter, and 2.5 percent in the preliminary data for the last quarter — and measures of underlying demand were also revised down. An alternative measure of economic growth, based on income rather than spending, cooled to 1.5 percent in the first quarter, from 3.6 percent at the end of 2023.Still, the new data does little to change the bigger picture: The economy has slowed but remains fundamentally sound, buoyed by consumer spending that remains resilient even after the latest revisions. That spending is supported by rising incomes and the result of a strong job market that features low unemployment and rising wages. There is still no sign that the recession that forecasters spent much of last year warning about is imminent.Business investment, a sign of confidence in the economy, was actually revised up modestly in the latest data. Income growth, too, was revised up.Inflation, however, remains stubborn. Consumer prices rose at a 3.3 percent annual rate in the first three months of the year, slightly slower than in the preliminary data but still well above the Federal Reserve’s long-run target of 2 percent.In response, policymakers have raised interest rates to their highest level in decades and have said they will keep them there until inflation cools further. The modestly slower growth reflected in Thursday’s data is unlikely to change that approach.The Fed will get a more up-to-date snapshot of the economy on Friday, when the government releases data on inflation, income and spending in April. More

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    What Trump 2.0 Could Mean for the Federal Reserve

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    A second Trump administration could shake up personnel and financial regulation at America’s central bank, people close to his campaign said.Former President Donald J. Trump relentlessly criticized the Federal Reserve and Jerome H. Powell, its chair, during his time in office. As he competes with President Biden for a second presidential term, that history has many on Wall Street wondering: What would a Trump victory mean for America’s central bank?The Trump campaign does not have detailed plans for the Fed yet, several people in its orbit said, but outside advisers have been more focused on the central bank and have been making suggestions — some minor, others extreme.While some in Mr. Trump’s circles have floated the idea of trying to limit the Fed’s ability to set interest rates independent of the White House, others have pushed back hard on that idea, and people close to the campaign said they thought such a drastic effort was unlikely. Curbing the central bank’s ability to set interest rates without direct White House influence would be legally and politically tricky, and tinkering with the Fed so overtly could roil the very stock markets that Mr. Trump has frequently used as a yardstick for his success.But other aspects of Fed policy could end up squarely in Mr. Trump’s sights, both former administration officials and conservative policy thinkers have indicated.Mr. Trump is poised to once again use public criticism to try to pressure the Fed. If elected, he would also have a chance to appoint a new Fed chair in 2026, and he has already made it clear in public comments that he plans to replace Mr. Powell, whom he elevated to the job before President Biden reappointed him.“There will be a lot of rhetorical devices thrown at the Fed,” predicted Joseph A. LaVorgna, the chief economist at SMBC Nikko Securities America, an informal adviser to the Trump campaign and the chief economist of the National Economic Council during Mr. Trump’s administration.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 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