Interest Rates

More stories

  • 138 Shares199 Views

    in Economy

    The Most Important Thing Biden Can Learn From the Trump Economy

    by

    AdvertisementContinue reading the main storyUpshotSupported byContinue reading the main storyThe Most Important Thing Biden Can Learn From the Trump EconomyA “hot” economy with high deficits didn’t cause runaway inflation.President Trump at a campaign rally in Dalton, Ga., this month.Credit…Erin Schaff/The New York TimesJan. 11, 2021, 5:00 a.m. ETFor all the problems that President Trump’s disdain of elite expertise has caused over the last four years, his willingness to ignore economic orthodoxy in one crucial area has been vindicated, offering a lesson for the Biden years and beyond.During Mr. Trump’s time in office, it has become clear that the United States economy can surpass what technocrats once thought were its limits: Specifically, the jobless rate can fall lower and government budget deficits can run higher than was once widely believed without setting off an inflationary spiral.Some leading liberal economists warned that Mr. Trump’s deficit-financed tax cuts would create a mere “sugar high” of a short-lived boost to growth. The Congressional Budget Office forecast that economic benefits of the president’s signature tax law would be partly offset by higher interest rates that would discourage private investment.And the Federal Reserve in 2017 and 2018 tightened the money supply to prevent the economy from getting too hot — driven by models suggesting that an improving labor market would eventually cause excessive inflation.These warnings did not come true.Before the pandemic took hold, the jobless rate was below 4 percent, inflation was low, and wages were rising at a steady clip, especially for low and middle earners. The inflation-adjusted income of the median American household rose 9 percent from 2016 to 2019.The higher interest rates from unfunded tax cuts that had been forecast did not materialize; the C.B.O. in spring 2018 had expected the 10-year Treasury bond yield to average 3.5 percent in 2019. In fact, it averaged a mere 2.1 percent, making federal borrowing more manageable.And the Fed cut interest rates starting in 2019 despite a very low jobless rate, implicitly accepting the premise that it had moved too aggressively with rate increases to prevent inflation that never arrived.Mr. Trump has sent plenty of mixed signals on both deficits and interest rate policies over the years. He has intermittently promised to eliminate the national debt, even as his policies expanded it; he supported rate increases in 2015, accusing the Fed of keeping them low to help President Obama; and some of his Federal Reserve appointees were monetary hawks (though not those who managed to win Senate confirmation).But the experience of his presidency — particularly the buoyant economy before the pandemic began — shows what is possible. It may not have been the best economy ever, as he has repeatedly claimed, but it was easily the strongest since the late 1990s, and before that you have to go back to the late 1960s to find similar conditions.If Mr. Trump was able to ignore economic orthodoxy and achieve the best economic outcomes in years, it’s worth asking how much value that orthodoxy held to begin with.Just maybe, does the success of Trumponomics tell us that we’ve been doing something wrong for decades?The not-so-great moderationAlan Blinder in 1994, the year his speech at a symposium of central bankers was criticized for being too weak on inflation.Credit…Cynthia Johnson/Getty ImagesTo understand how deeply entrenched the centrist conventional wisdom around economic policy has been over the last generation, consider a curious incident from August 1994. Alan Blinder, the newly named vice chairman of the Federal Reserve, gave a speech at an annual symposium of central bankers in Jackson Hole, Wyo., in which he described trying to reduce unemployment as an important role for the Fed.Some huffing and puffing ensued. There was talk in the hallways about Mr. Blinder’s focus on unemployment rather than on inflation prevention, which central bankers viewed as their main goal. It made its way into the news media, including some scathing attacks.“Put simply, Blinder is ‘soft’ on inflation,” wrote the Newsweek columnist Robert J. Samuelson. Without adequate anti-inflation conviction, “Blinder lacks the moral or intellectual qualities needed to lead the Fed.”“I was pilloried for suggesting that we might get below 6 percent on the unemployment rate,” Mr. Blinder, a Princeton economist, said recently.A widespread view among economic policy elites, after the runaway inflation in the 1970s and early 1980s, was that elevated unemployment was a necessary cost of keeping prices stable. Also, that the government can’t spend much more money than it takes in without crowding out private investment — leaving the economy weaker over time — and that policymakers should act pre-emptively to ward off these risks.That intellectual consensus lurked beneath many momentous decisions. Among them: the deficit-reduction agenda of the Bill Clinton administration; the interest rate increases of the Alan Greenspan Fed during George W. Bush’s second term; and the Obama administration’s determination not to increase the deficit in devising its signature health care law.This view was shaped by a reliance on the “Phillips Curve,” which describes the relationship between the jobless rate and inflation. As applied by a generation of central bankers, it was treated as a useful guide to setting policy. If the unemployment rate went too low, the logic went, inflation was inevitable, so central bankers needed to prevent that from happening.When Fed leaders raised interest rates in December 2015, for example, their consensus view was that the long-run unemployment rate — the goal they were ultimately seeking — was 4.9 percent.If the job market kept improving, then-Fed Chair Janet Yellen said at the meeting where that interest rate increase was decided, “we would want to check the pace of employment growth somewhat to reduce the risk of overheating.”Yet from spring of 2018 to the onset of the pandemic, the United States experienced a jobless rate of 4 percent or lower, with no obvious sign of inflation and many signs that less advantaged workers were able to find work. Reality turned out better than the 2015 officials thought possible.Since the 1980s, recessions have been rarer than they were in the immediate post-World War II era, but they have been followed by long, “jobless” recoveries. Much of that time has featured weak growth in workers’ wages.It turns out that when you try to choke off the economy whenever it is starting to get hot, American workers suffer. The Fed has been like a driver who aspires to cruise at the speed limit, but starts tapping the brakes whenever the car gets anywhere close to that limit — and therefore rarely attains it.From 1948 to 1969, the unemployment rate was at or below 4 percent 39 percent of the time. Since 1980, that has been the case less than 8 percent of the time.Economists have referred to the period from the early 1980s through the 2008 financial crisis as “the great moderation,” because recessions were rare and mild. But with more years of hindsight, that period looks less like a success.“There’s nothing particularly moderate or particularly great about the great moderation,” said Larry Summers, the Harvard economist and former Treasury secretary.In effect, the last four years at the Fed have made clear both how much things have changed and how much they needed to. Ms. Yellen (now President-elect Biden’s Treasury secretary nominee) started the first of a series of interest rate increases in late 2015, and the current chair, Jerome Powell, continued them.But the logic kept breaking down. Inflation kept coming in below the 2 percent target the central bank aims for, even as the jobless rate kept falling. It’s not terribly clear what was necessary about the rate increases, as President Trump’s harangues against Mr. Powell expressed vividly. Arguably, they reflected a reliance on old economic models and the same inflation-fighting muscle memory that caused the backlash against Mr. Blinder a quarter-century earlier.Mr. Trump violated decades of precedent under which presidents don’t jawbone the Fed, which seeks to maintain political independence. But that didn’t make him wrong about interest rates.Macro or micro?On March 18, 2019, a group of Mr. Trump’s economic advisers gathered in the Oval Office to show him the annual “Economic Report of the President,” a 700-page document that amounts to an official statement of the administration’s economic achievements, analysis and goals.He was particularly excited about one page of charts, said Casey Mulligan, one of the advisers. They showed that the economy had created far more jobs and had a much lower jobless rate than the C.B.O. had projected just before the 2016 election. The president called in Dan Scavino, his social media director, and fired off a tweet about the results.A central question for Mr. Biden will be: To what degree is the Trump-era economic success a result of policies that liberals disagree with, to what degree is it a result of policies that Mr. Biden might embrace, and to what degree is it just luck?Mr. Mulligan and other allies of the president emphasize the role of deregulating major industries and lowering taxes on business investment — microeconomic strategies — as crucial to the economy’s success.“The forecasts systematically overpredicted the Obama economy every year, and throughout the Trump administration, they underpredicted,” said Mr. Mulligan, an economics professor at the University of Chicago. “What nobody in the intelligentsia was paying attention to was the regulations that were holding us back.”The Biden administration and Democratic Congress will view more aggressive regulation as a core goal, aimed at preventing corporate misbehavior, protecting the environment, and more. Indeed, left-leaning economists would argue that the very policies Mr. Mulligan credits with the boom are the least durable parts of the Trump-era expansion.“It is true that the corporate giveaway aspect of the policies, cutting taxes and scaling back regulation and so forth, coincided with an unequal prosperity that lasted longer prior to Covid than I would have guessed it would,” said Mr. Summers, a prominent proponent of the “sugar high” theory of the Trump economy. “But I don’t think it had any particularly strong foundation in terms of increasing productivity or capital investment.”If you believe Mr. Mulligan and other Trump allies, the macroeconomic lessons of the Trump years — those having to do with things like deficits, inflation and interest rates — won’t be enough for the Biden administration to recreate the 2019 economy. In this view, the microeconomic details of how the president has governed will be crucial, and the policies that Mr. Biden has advocated — in areas as varied as tighter restrictions on carbon emissions and more aggressive regulation of banks — will prove counterproductive to the cause.Lessons for the next administrationJanet Yellen, former Fed chair and now the nominee for Treasury Secretary, said, “Allowing the labor market to run hot could bring substantial benefits.”Credit…Kriston Jae Bethel for The New York TimesThe people who will shape economic policy in the new administration seem eager to push for a post-pandemic economic surge reflecting the (macroeconomic) lessons of the last four years.Ms. Yellen has a background as a labor economist, and in the 1990s, as a Fed official, she urged Mr. Greenspan to raise rates pre-emptively based on the inflation risks that the Phillips Curve predicted. At that fateful meeting to increase rates in 2015, she raised an intriguing possibility. If inflation were to remain persistently low, she said, “a more radical rethinking of the economy’s productive potential would surely be in order.”That radical rethinking is now very much underway — including by Ms. Yellen.“Allowing the labor market to run hot could bring substantial benefits,” Ms. Yellen said in a speech at the Brookings Institution in 2019. She said that a high-pressure economy — one where unemployment is low and employers have to compete for workers — improves upward mobility. She added: “We’re seeing that in the current expansion. Those who are least advantaged in the labor market — those with less education and minorities — are experiencing the largest gains in wages and declines in unemployment.”Mr. Powell, who will lead the Fed for roughly the first year of Mr. Biden’s term and then will be either reappointed or replaced in February 2022, has also become a vocal enthusiast for avoiding these mistakes of the past.In the strong pre-pandemic labor market, he said in an August speech on the Fed’s new policy framework, “many who had been left behind for too long were finding jobs, benefiting their families and communities, and increasing the productive capacity of our economy.”“It is hard to overstate the benefits of sustaining a strong labor market,” he said, and the central bank’s new policy language “reflects our view that a robust job market can be sustained without causing an outbreak of inflation.”In recent years, the C.B.O., which plays a crucial role forecasting the fiscal and economic effects of different policies, has re-examined its view of future interest rates in ways that have lowered the projected cost of public debt.In early 2017 when Mr. Trump took office, for example, the C.B.O. projected that by 2020 the government would need to pay at a 3.2 percent rate to borrow money for a decade. The actual rate is now just over 1 percent, even after a surge over the past week. While that reflects the pandemic-induced downturn, even at the start of 2020 the rate was 2 percent. The C.B.O.’s most recent forecast is that it will remain below 3 percent through 2029.President-elect Biden has embraced these lessons in shaping his agenda, as he made clear in a news conference Friday where he confirmed that his plans will add up to trillions of dollars when one includes both pandemic response money and longer-term plans.“With interest rates as low as they are,” Mr. Biden said, “every major economist thinks we should be investing in deficit spending to generate economic growth.”One of the big plot twists of this era is that Mr. Biden’s plan to make the American economy great again seems to rest on applying the macroeconomic lessons of the Trump era.AdvertisementContinue reading the main story More

  • 138 Shares99 Views

    in Economy

    Fed Officials Debated Rate Liftoff in 2015, Offering Lessons for Today

    by

    #masthead-section-label, #masthead-bar-one { display: none }The Jobs CrisisCurrent Unemployment RateThe First Six MonthsPermanent LayoffsWhen a $600 Lifeline EndedAdvertisementContinue reading the main storySupported byContinue reading the main storyFed Officials Debated Rate Liftoff in 2015, Offering Lessons for TodayThe Federal Reserve raised rates from near zero in 2015. The discussion back then — and developments since — will inform their future policy.The Federal Reserve Board building in Washington. The central bank raised rates in 2015 as the unemployment rate dropped.Credit…Ting Shen for The New York TimesJan. 8, 2021Updated 2:24 p.m. ETThe Federal Reserve lifted interest rates from near zero in 2015 after years of holding them at rock bottom following the 2008 global financial crisis. Transcripts from their policy discussions, released Friday, show just how fraught that decision was.The debate that played out then is especially relevant now, when the central bank has again slashed interest rates practically to zero, this time to fight the pandemic-induced economic downturn. The concerns that officials voiced over lifting rates in 2015 — that inflation would not pick up, and that the labor market had further to heal — proved prescient in ways that will inform policy setting in the years to come.The Fed, under Chair Janet L. Yellen, raised its policy rate in 2015 as the unemployment rate dropped. Officials worried that if they waited too long to nudge borrowing costs higher, they would stoke an economic overheating that would push inflation higher and prove hard to contain.The logic, at the time, was that monetary policy works with “long and variable” lags, and that it was better to start to gently normalize policy before rapid price gains actually showed up.But even back then, not everyone on the Fed’s rate-setting Federal Open Market Committee was comfortable with the plan. When the decision to lift interest rates came in December, Governor Lael Brainard seemed to question it — arguing that the labor market still had room to expand and that inflation was coming in short of the committee’s 2 percent goal. She ultimately voted for the decision alongside Ms. Yellen and her fellow policymakers.“The recent price data give little hint that this undershooting of our target will end any time soon,” Ms. Brainard said of inflation at the time, according to the transcript. That, paired with risks from a slowdown overseas, made her place “somewhat greater weight on the possible regret associated with tightening too early than on the possible regret associated with waiting a little longer.”In explaining that she would vote for the increase anyway, Ms. Brainard said she placed “a very high premium on ensuring the credibility of monetary policy” and appreciated the thoughtful process Ms. Yellen and the staff had undergone in planning to change the policy. She suggested in 2019 that moving rates up in 2015 was a mistake, and that “a better alternative would have been to delay liftoff until we had achieved our targets.”Stanley Fischer, the vice chairman at the time, laid out a concise explanation of why the committee was moving.“Why move now?” he said. “First, as the chair has emphasized, our actions become effective with a lag. Second, there are some signs of accumulating financial stability problems. And, third, the signal we will be sending will reinforce the fact that our economic situation is continuing to normalize.”Jerome H. Powell, then a Fed governor and now the chair, said at the time that remaining room for labor market gains was “probably modest” but highly uncertain, and that the participation rate — which measures people working or looking for work — might rebound.“I’m not in any hurry to conclude that the current low level of participation reflects immutable structural factors,” Mr. Powell said. “I think it’s likely to be necessary for the economy to run above trend for some time to ensure that inflation does reach our 2 percent target.”The more reluctant stances aged comparatively well. In the time since then, many economists and analysts have viewed the Fed’s pre-emptive rate increases as possibly premature. The unemployment rate continued to drop for years, but as more workers entered the job market, wages increased only moderately. Price gains remained stable, and actually a bit softer than Fed officials were hoping.As a result, the Fed has reassessed how it sets monetary policy. Mr. Powell said last year that he and his colleagues would now focus on “shortfalls” from full employment — worrying only if the job market is coming in weak, not if it’s coming in strong, as long as inflation is contained.They no longer plan to raise interest rates to fend off inflation before it shows up, officials have said, paving the way for longer periods of lower rates.AdvertisementContinue reading the main story More

  • 125 Shares99 Views

    in Economy

    Federal Reserve Officials Fretted Over Covid Surge at December Meeting

    by

    #masthead-section-label, #masthead-bar-one { display: none }Covid-19 VaccinesVaccine QuestionsDoses Per StateDistribution DelaysHow 8 Vaccines WorkAdvertisementContinue reading the main storySupported byContinue reading the main storyFed Officials Fretted Over Virus Surge at December MeetingMinutes from the central bank’s December gathering show that the chair, Jerome H. Powell, and his colleagues were hoping for a 2021 rebound.Federal Reserve officials were warily eyeing a coronavirus surge in December, but hoped that vaccine breakthroughs might set the stage for a strong economic rebound in 2021.Credit…Alex Welsh for The New York TimesJan. 6, 2021, 3:15 p.m. ETFederal Reserve officials were warily eyeing a surge in coronavirus cases at their Dec. 15-16 meeting, but they hoped that vaccine breakthroughs might set the stage for a strong economic rebound in 2021.“With the pandemic worsening across the country, the expansion was expected to slow even further in coming months,” according to minutes from the gathering of the Federal Open Market Committee, released Wednesday. “Nevertheless, the positive vaccine news” was “viewed as favorable for the medium-term economic outlook.”Central bank officials held interest rates steady at near zero at the meeting, and committed to buying up $120 billion in bonds each month “until substantial further progress has been made toward the committee’s maximum employment and price stability goals.” They have been rapidly expanding their holdings of government and mortgage-backed debt since March to keep markets calm and many types of credit cheap.The Fed essentially sets the price of borrowed money to help to guide demand in the economy, goosing conditions when times are tough to help bolster growth and hiring. The central bank also tries to keep price increases stable at around 2 percent, though officials formally updated their policy-setting approach last year to emphasize that they would welcome slightly faster increases after years and years of weaker ones.Minutes showed that the Fed discussed the balance sheet guidance in depth at the meeting, with “a few” remarking that the new wording signaled that the Fed could ramp up bond buying “if progress toward the committee’s goals proved slower than anticipated.”Many analysts had expected that the Fed would shift its bond purchases toward longer-dated debt to try to eke out a bigger bang per buck, given that short-term rates are already very low, but the minutes suggest that there was little appetite for such a change. Only “a couple of participants indicated that they were open to” shaking up the composition of purchases.The Fed’s December meeting took place as virus cases surged after Thanksgiving. Since then, the number of new cases moderated at first but then resumed their increase..css-fk3g7a{font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:0.875rem;line-height:1.125rem;color:#121212 !important;}@media (min-width:740px){.css-fk3g7a{font-size:0.9375rem;line-height:1.25rem;}}.css-1sjr751{-webkit-text-decoration:none;text-decoration:none;}.css-1sjr751 a:hover{border-bottom:1px solid #dcdcdc;}.css-rqynmc{font-family:nyt-franklin,helvetica,arial,sans-serif;font-size:0.9375rem;line-height:1.25rem;color:#333;margin-bottom:0.78125rem;}@media (min-width:740px){.css-rqynmc{font-size:1.0625rem;line-height:1.5rem;margin-bottom:0.9375rem;}}.css-rqynmc strong{font-weight:600;}.css-rqynmc em{font-style:italic;}.css-zs9392{margin:10px auto 5px;font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:1.125rem;line-height:1.3125rem;color:#121212;}@media (min-width:740px){.css-zs9392{font-size:1.25rem;line-height:1.4375rem;}}#NYT_BELOW_MAIN_CONTENT_REGION .css-zs9392{font-family:nyt-cheltenham,georgia,’times new roman’,times,serif;font-weight:700;font-size:1.375rem;line-height:1.75rem;margin-bottom:20px;}@media (min-width:740px){#NYT_BELOW_MAIN_CONTENT_REGION .css-zs9392{font-size:1.5rem;line-height:1.875rem;}}.css-121grtr{margin:0 auto 10px;}.css-16ed7iq{width:100%;display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-align-items:center;-webkit-box-align:center;-ms-flex-align:center;align-items:center;-webkit-box-pack:center;-webkit-justify-content:center;-ms-flex-pack:center;justify-content:center;padding:10px 0;background-color:white;}.css-pmm6ed{display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-align-items:center;-webkit-box-align:center;-ms-flex-align:center;align-items:center;}.css-pmm6ed > :not(:first-child){margin-left:5px;}.css-5gimkt{font-family:nyt-franklin,helvetica,arial,sans-serif;font-size:0.8125rem;font-weight:700;-webkit-letter-spacing:0.03em;-moz-letter-spacing:0.03em;-ms-letter-spacing:0.03em;letter-spacing:0.03em;text-transform:uppercase;color:#333;}.css-5gimkt:after{content:’Collapse’;}.css-rdoyk0{-webkit-transition:all 0.5s ease;transition:all 0.5s ease;-webkit-transform:rotate(180deg);-ms-transform:rotate(180deg);transform:rotate(180deg);}.css-eb027h{max-height:5000px;-webkit-transition:max-height 0.5s ease;transition:max-height 0.5s ease;}.css-6mllg9{-webkit-transition:all 0.5s ease;transition:all 0.5s ease;position:relative;opacity:0;}.css-6mllg9:before{content:”;background-image:linear-gradient(180deg,transparent,#ffffff);background-image:-webkit-linear-gradient(270deg,rgba(255,255,255,0),#ffffff);height:80px;width:100%;position:absolute;bottom:0px;pointer-events:none;}#masthead-bar-one{display:none;}#masthead-bar-one{display:none;}.css-qmg6q8{background-color:white;margin:1.5rem auto 1.9rem;max-width:600px;}#NYT_BELOW_MAIN_CONTENT_REGION .css-qmg6q8{padding:0;width:calc(100% – 40px);max-width:600px;margin-right:auto;margin-left:auto;}.css-qmg6q8 strong{font-weight:700;}.css-qmg6q8 em{font-style:italic;}@media (min-width:740px){.css-qmg6q8{margin:40px auto;}}.css-qmg6q8:focus{outline:1px solid #e2e2e2;}.css-qmg6q8 a{color:#326891;-webkit-text-decoration:none;text-decoration:none;border-bottom:1px solid #ccd9e3;}.css-qmg6q8 a:visited{color:#333;-webkit-text-decoration:none;text-decoration:none;border-bottom:1px solid #ddd;}.css-qmg6q8 a:hover{border-bottom:none;}.css-qmg6q8[data-truncated] .css-rdoyk0{-webkit-transform:rotate(0deg);-ms-transform:rotate(0deg);transform:rotate(0deg);}.css-qmg6q8[data-truncated] .css-eb027h{max-height:300px;overflow:hidden;-webkit-transition:none;transition:none;}.css-qmg6q8[data-truncated] .css-5gimkt:after{content:’See more’;}.css-qmg6q8[data-truncated] .css-6mllg9{opacity:1;}.css-11uwurf{border:1px solid #e2e2e2;padding:15px;border-radius:0;margin:0 auto;overflow:hidden;}@media (min-width:600px){.css-11uwurf{padding:20px;}}#NYT_BELOW_MAIN_CONTENT_REGION .css-11uwurf{border-top:1px solid #121212;border-bottom:none;}Covid-19 Vaccines ›Answers to Your Vaccine QuestionsWith distribution of a coronavirus vaccine beginning in the U.S., here are answers to some questions you may be wondering about:If I live in the U.S., when can I get the vaccine? While the exact order of vaccine recipients may vary by state, most will likely put medical workers and residents of long-term care facilities first. If you want to understand how this decision is getting made, this article will help.When can I return to normal life after being vaccinated? Life will return to normal only when society as a whole gains enough protection against the coronavirus. Once countries authorize a vaccine, they’ll only be able to vaccinate a few percent of their citizens at most in the first couple months. The unvaccinated majority will still remain vulnerable to getting infected. A growing number of coronavirus vaccines are showing robust protection against becoming sick. But it’s also possible for people to spread the virus without even knowing they’re infected because they experience only mild symptoms or none at all. Scientists don’t yet know if the vaccines also block the transmission of the coronavirus. So for the time being, even vaccinated people will need to wear masks, avoid indoor crowds, and so on. Once enough people get vaccinated, it will become very difficult for the coronavirus to find vulnerable people to infect. Depending on how quickly we as a society achieve that goal, life might start approaching something like normal by the fall 2021.If I’ve been vaccinated, do I still need to wear a mask? Yes, but not forever. Here’s why. The coronavirus vaccines are injected deep into the muscles and stimulate the immune system to produce antibodies. This appears to be enough protection to keep the vaccinated person from getting ill. But what’s not clear is whether it’s possible for the virus to bloom in the nose — and be sneezed or breathed out to infect others — even as antibodies elsewhere in the body have mobilized to prevent the vaccinated person from getting sick. The vaccine clinical trials were designed to determine whether vaccinated people are protected from illness — not to find out whether they could still spread the coronavirus. Based on studies of flu vaccine and even patients infected with Covid-19, researchers have reason to be hopeful that vaccinated people won’t spread the virus, but more research is needed. In the meantime, everyone — even vaccinated people — will need to think of themselves as possible silent spreaders and keep wearing a mask. Read more here.Will it hurt? What are the side effects? The Pfizer and BioNTech vaccine is delivered as a shot in the arm, like other typical vaccines. The injection into your arm won’t feel different than any other vaccine, but the rate of short-lived side effects does appear higher than a flu shot. Tens of thousands of people have already received the vaccines, and none of them have reported any serious health problems. The side effects, which can resemble the symptoms of Covid-19, last about a day and appear more likely after the second dose. Early reports from vaccine trials suggest some people might need to take a day off from work because they feel lousy after receiving the second dose. In the Pfizer study, about half developed fatigue. Other side effects occurred in at least 25 to 33 percent of patients, sometimes more, including headaches, chills and muscle pain. While these experiences aren’t pleasant, they are a good sign that your own immune system is mounting a potent response to the vaccine that will provide long-lasting immunity.Will mRNA vaccines change my genes? No. The vaccines from Moderna and Pfizer use a genetic molecule to prime the immune system. That molecule, known as mRNA, is eventually destroyed by the body. The mRNA is packaged in an oily bubble that can fuse to a cell, allowing the molecule to slip in. The cell uses the mRNA to make proteins from the coronavirus, which can stimulate the immune system. At any moment, each of our cells may contain hundreds of thousands of mRNA molecules, which they produce in order to make proteins of their own. Once those proteins are made, our cells then shred the mRNA with special enzymes. The mRNA molecules our cells make can only survive a matter of minutes. The mRNA in vaccines is engineered to withstand the cell’s enzymes a bit longer, so that the cells can make extra virus proteins and prompt a stronger immune response. But the mRNA can only last for a few days at most before they are destroyed.Officials have been voicing hope that vaccine distribution, which has gotten off to a slow start in much of the United States, will pave the way for an economic rebound in the latter half of 2021. They have been clear that their outlook hinges on the success of that process and the path of the pandemic.“The second half of the year looks much more promising because of vaccinations,” Loretta Mester, president of the Federal Reserve Bank of Cleveland, said on a call with reporters this week.But even if the rebound is remarkable, officials have been clear that they are likely to remain patient in taking support away from the economy.Ms. Mester, who has a history of favoring higher rates than many of her colleagues, has said she probably would not be worried about 2.5 percent inflation. Her colleague Charles Evans, who is president of the Federal Reserve Bank of Chicago and a monetary policy voter this year, said during an event on Tuesday that a 3 percent price gain pace “would not be so bad.”Presidents at 11 of the Fed’s 12 regional banks share rotating votes on monetary policy. The Federal Reserve Bank of New York president and members of the Board of Governors in Washington hold a constant vote on interest rates.In the near term, economic weakening — rather than navigating a rapid rebound — is likely to be the main challenge confronting the Fed. Private payrolls contracted by 123,000 jobs between November and December, data from ADP showed on Wednesday. The government’s official employment report on Friday is expected to show either a marked slowing in job gains or a return to outright losses.According to the December minutes, “Participants saw increased challenges for the economy in the coming months, as the ongoing surge of Covid-19 cases and the related mandatory and voluntary measures prompted greater social distancing and damped spending, especially on services requiring in-person contact.”The Fed’s December meeting took place before two significant developments that could affect the economy in the short term. Late last month, Congress agreed to provide additional support to the American economy in the form of a $900 billion relief bill.And Democrats appeared on the cusp of retaking the Senate, which could pave the way for easier passage of the priorities of President-elect Joseph R. Biden Jr., which could include additional fiscal help for firms and families.“The Fed will welcome greater prospects of fiscal support, which most officials believe is better targeted to address challenges unique to the Covid cycle than monetary policy,” economists at Evercore ISI wrote in a research note on Wednesday.AdvertisementContinue reading the main story More

  • 75 Shares189 Views

    in Economy

    The Year the Fed Changed Forever

    by

    #masthead-section-label, #masthead-bar-one { display: none }The Coronavirus OutbreakliveLatest UpdatesMaps and CasesThe Stimulus DealThe Latest Vaccine InformationF.A.Q.Jerome H. Powell, the Federal Reserve chair, has faced some of the most trying months in the central bank’s history.Credit…Nate Palmer for The New York TimesSkip to contentSkip to site indexThe Year the Fed Changed ForeverJerome H. Powell’s central bank slashed rates, bought bonds in huge sums and rolled out never-before-tried loan programs that shifted its identity. The backlash is already beginning.Jerome H. Powell, the Federal Reserve chair, has faced some of the most trying months in the central bank’s history.Credit…Nate Palmer for The New York TimesSupported byContinue reading the main storyDec. 23, 2020Updated 4:04 p.m. ETWASHINGTON — As Jerome H. Powell, the Federal Reserve chair, rang in 2020 in Florida, where he was celebrating his son’s wedding, his work life seemed to be entering a period of relative calm. President Trump’s public attacks on the central bank had eased up after 18 months of steady criticism, and the trade war with China seemed to be cooling, brightening the outlook for markets and the economy.Yet the earliest signs of a new — and far more dangerous — crisis were surfacing some 8,000 miles away. The novel coronavirus had been detected in Wuhan, China. Mr. Powell and his colleagues were about to face some of the most trying months in Fed history.By mid-March, as markets were crashing, the Fed had cut interest rates to near zero to protect the economy. By March 23, to avert a full-blown financial crisis, the Fed had rolled out nearly its entire 2008 menu of emergency loan programs, while teaming up with the Treasury Department to announce programs that had never been tried — including plans to support lending to small and medium-size businesses and buy corporate debt. In early April, it tacked on a plan to get credit flowing to states.“We crossed a lot of red lines that had not been crossed before,” Mr. Powell said at an event in May.The Fed’s job in normal times is to help the economy operate at an even keel — to keep prices stable and jobs plentiful. Its sweeping pandemic response pushed its powers into new territory. The central bank restored calm to markets and helped keep credit available to consumers and businesses. It also led Republicans to try to limit the vast tool set of the politically independent and unelected institution. The Fed’s emergency loan programs became a sticking point in the negotiations over the government spending package Congress approved this week.But even amid the backlash, the Fed’s work in salvaging a pandemic-stricken economy remains unfinished, with millions of people out of jobs and businesses suffering.The Fed is likely to keep rates at rock bottom for years, guided by a new approach to setting monetary policy adopted this summer that aims for slightly higher inflation and tests how low unemployment can fall.And the Fed’s extraordinary actions in 2020 weren’t aimed only at keeping credit flowing. Mr. Powell and other top Fed officials pushed for more government spending to help businesses and households, an uncharacteristically bold stance for an institution that tries mightily to avoid politics. As the Fed took a more expansive view of its mission, it weighed in on climate change, racial equity and other issues its leaders had typically avoided.“We’ve often relegated racial equity, inequality, climate change to simply social issues,” Mary C. Daly, president of the Federal Reserve Bank of San Francisco, said in an interview. “That’s a mistake. They are economic issues.”In Washington, reactions to the Fed’s bigger role have been swift and divided. Democrats want the Fed to do more, portraying the attention to climate-related financial risks as a welcome step but just a beginning. They have also pushed the Fed to use its emergency lending powers to funnel cheap credit to state and local governments and small businesses.The Fed’s sweeping pandemic response pushed its powers into new territory.Credit…Ting Shen for The New York TimesRepublicans have worked to restrict the Fed to ensure that the role it has played in this pandemic does not outlast the crisis.Patrick J. Toomey, a Republican senator from Pennsylvania, spearheaded the effort to insert language into the relief package that could have forced future Fed emergency lending programs to stick to soothing Wall Street instead of trying to also directly support Main Street, as the Fed has done in the current downturn.Republicans worry that the Fed could use its power to support partisan goals — by invoking its regulatory power over banks, for instance, to treat oil and gas companies as financial risks, or by propping up financially troubled municipal governments.“Fiscal and social policy is the rightful realm of the people who are accountable to the American people, and that’s us, that’s Congress,” Mr. Toomey, who could be the next banking committee chairman and thus one of Mr. Powell’s most important overseers, said last week from the Senate floor.Mr. Toomey’s proposal was watered down during congressional negotiations, clearing the way for a broader relief deal: Congress barred the central bank from re-establishing the exact facilities used in 2020, but it did not cut off its power to help states and companies in the future.The Coronavirus Outbreak More

  • 125 Shares149 Views

    in Economy

    Fed Leaves Rates Unchanged and Commits to Ongoing Bond Purchases

    by

    #masthead-section-label, #masthead-bar-one { display: none }The Coronavirus OutbreakliveLatest UpdatesMaps and CasesThe Latest Vaccine InformationU.S. Deaths Surpass 300,000F.A.Q.AdvertisementContinue reading the main storySupported byContinue reading the main storyFed Leaves Rates Unchanged and Commits to Ongoing Bond PurchasesCentral bank officials left rates near-zero at their December meeting and tied bond buying to their employment and price goals.Jerome H. Powell, the Federal Reserve Chair, said Wednesday that the central bank will keep interest rates near zero to support the economy as coronavirus cases surge nationwide, adding that “a full economic recovery is unlikely until people are confident that it is safe to re-engage in a broad range of activities.”CreditCredit…Al Drago for The New York TimesDec. 16, 2020Updated 5:26 p.m. ETWASHINGTON — Federal Reserve officials pledged to help the economy through the painful pandemic era, making clear at their final meeting of the year that the central bank would continue cushioning businesses and households by keeping interest rates at rock bottom and buying government-backed debt for the foreseeable future.The Fed’s chair, Jerome H. Powell, said at a news conference after the meeting that the central bank would keep its effort to bolster demand going “for some time,” adding that the “the next few months are likely to be very challenging.”The Fed cut interest rates to near-zero in March and has been buying about $120 billion in government-backed debt each month to soothe markets and help shore up growth. The central bank explicitly tied its bond-buying program to its goals of full employment and stable inflation in its December policy statement. The move suggested that the Fed expected to continue its purchases for some time, given how far the economy is from meeting those goals.The committee said the Fed would continue to increase its holdings of Treasury securities at the current pace “until substantial further progress has been made toward the committee’s maximum employment and price stability goals.”Mr. Powell said the policy decisions were intended to show that the Fed would “deliver powerful support to the economy until the recovery is complete.”He used his post-meeting remarks to paint a picture of a bifurcated economy, one in which many businesses and households face acute economic pain in the near-term, coupled with the expectation that the economy would snap back once vaccines were widely available — a development that he guessed could come about as soon as midyear.The United States could then see a long period of unbroken growth, Mr. Powell predicted, signaling that he and his colleagues were prepared to leave rates low for years on end as they try to return the labor market and broader economy to full strength.Government policies are “trying to work together to try to create a bridge across this economic chasm that was created by the pandemic, and for many Americans, that bridge is there, and they’re across it,” he said.“But there’s a group for which they don’t have a bridge yet,” Mr. Powell added, suggesting later that more help from Congress is needed to help fill the gap. “It’s the 10 million people who lost their jobs, it’s the people who may lose their homes. You see the many, many millions of Americans who are waiting in food lines in their cars these days.”He said the economy would need the Fed’s support for some time because while officials expect it to grow at a healthy clip starting in the middle of next year, “it is going to be a while before we really are back to the levels of labor market conditions that we had early this year.”The central bank’s summary of economic projections, released Wednesday, underlined Mr. Powell’s patient point. They showed that Fed officials had a slightly more optimistic outlook for growth and unemployment at the end of 2020 and in coming years than they had been in September. The central official now sees unemployment declining to 5 percent in 2021, versus a previous prediction of 5.5 percent, and sees gross domestic product coming in at 4.2 percent versus 4 percent.Despite that upgrade, the median Fed official continued to project interest rates near-zero through the end of 2023, demonstrating the central bank’s plan to move glacially coming out of the crisis.While the Fed promised to do what it could to help the economy, Mr. Powell also stressed its limitations. He repeated his call for more fiscal stimulus, saying that the continuing rise in virus cases and the lapse in funding for several programs that were helping households and businesses stay afloat posed challenges.The Coronavirus Outbreak More

  • 100 Shares129 Views

    in Economy

    A Trump Fed Pick Squeaks Through Senate Confirmation

    by

    AdvertisementContinue reading the main storySupported byContinue reading the main storyA Trump Fed Pick Squeaks Through Senate ConfirmationChristopher Waller will be the fifth Trump pick on the Fed’s seven-member Board of Governors.Christopher Waller was the more conventional of President Trump’s two pending picks for the Fed board; the other has increasingly faint hopes for approval.Credit…Erin Schaff/The New York TimesBy More