Whether it’s reporting on conflicts abroad and political divisions at home, or covering the latest style trends and scientific developments, Times Video journalists provide a revealing and unforgettable view of the world.Whether it’s reporting on conflicts abroad and political divisions at home, or covering the latest style trends and scientific developments, Times Video journalists provide a revealing and unforgettable view of the world. More
President Biden’s decision to renominate Jerome H. Powell to head the Federal Reserve reflects the president’s belief that despite high inflation, America’s economy still has a long way to go to deliver strong gains to women, Black and Hispanic Americans and low-wage workers trying to climb into the middle class.Mr. Biden made clear during a White House appearance that he believes Mr. Powell is philosophically aligned with his vision that the central bank needs to keep interest rates low and continue supporting the economy until it reaches maximum employment.“That’s an economy where companies have to compete to attract workers, instead of workers competing with each other for jobs, where American workers get steady wage increases after decades of stagnation, and where the benefits of economic growth are broadly shared by everyone in the country, not just concentrated for those at the top,” Mr. Biden said Monday.The president’s decision is also based on his belief that Mr. Powell and Lael Brainard, the Fed governor whom Mr. Biden nominated for vice chair on Monday, share his views on stabilizing inflation while being careful not to snuff out the recovery before the labor market heals.It is a gamble on several fronts for the president. He is betting that Mr. Powell will be more aligned with his views on the economy than he is with Republicans in the Senate who have decried rising inflation for months and demanded action from the Fed. Many of those Republicans endorsed Mr. Powell quickly on Monday, expressing hope that he would act swiftly to combat inflation.The president is also betting that his team is correct in its economic diagnosis that the inflation risk is fading and marginalized groups of workers still need help to reap the full gains of economic growth.Mr. Biden and his aides view the recent burst of inflation, which surged to its highest levels in three decades last month, as largely the product of crimps in global supply chains — and not a function of monetary policy that necessitates quick rate increases from the central bank.The decision to renominate Mr. Powell and to elevate Ms. Brainard is the sum of a wide range of political and economic calculations. Chief among them was choosing the chair with the desire, and bipartisan support, to pursue full employment.But administration officials say other considerations also favored Mr. Powell’s reappointment, like the need to maintain central bank stability in the midst of the economic disruption of a pandemic and the record of independence that Mr. Powell built over a four-year term that included withering criticism from former President Donald J. Trump, who appointed him to the chairmanship.Mr. Powell also appears to have defused, in the eyes of the president and his aides, liberal Democrats’ concerns that on his watch the Fed has not regulated big banks and other financial institutions stringently enough. In conversations with Mr. Biden leading up to the decision, Mr. Powell convinced the president he would follow the lead of the Fed’s vice president for supervision — an open position that Mr. Biden has yet to fill — in determining the central bank’s policies on financial regulations.Mr. Biden is expected to announce his pick for that job early next month, and Democrats expect him to nominate someone who will take a hard line on banks, a key demand of Senator Elizabeth Warren of Massachusetts, a progressive who opposes Mr. Powell’s renomination and has called him “dangerous.” Mr. Biden recently discussed his Fed picks with Ms. Warren, and he has been in regular contact with Senator Sherrod Brown of Ohio, the Democrat who leads the banking committee. More
Senator Elizabeth Warren, the Massachusetts Democrat, said on Monday that she would not vote to confirm Jerome H. Powell for a second term as chair of the Federal Reserve, citing “failures on regulation, climate and ethics.”Ms. Warren, who has called Mr. Powell “a dangerous man,” had been pushing for President Biden to name Lael Brainard as the next chair of the central bank. Mr. Biden’s decision to name Ms. Brainard to the No. 2 spot at the Fed drew Ms. Warren’s support but she said she would continue to push for additional governors who support aggressive financial regulation.“It’s no secret I oppose Chair Jerome Powell’s renomination, and I will vote against him,” Ms. Warren said in a statement.Other powerful Democrats, along with Republican lawmakers expressed. support for Mr. Biden’s decision, saying it would keep the central bank on a steady course and protect its political independence at a time of inflation and economic uncertainty for the country.Senator Sherrod Brown, Democrat of Ohio and the chair of the Senate Banking Committee, which oversees the Fed, praised Mr. Powell’s role in helping the labor market heal from the pandemic downturn and giving workers greater bargaining power in terms of higher wages.“The Federal Reserve must continue to help steer our economic recovery in the right direction — toward full employment and an economy that empowers workers and their families,” Mr. Brown said. “I look forward to working with Powell to stand up to Wall Street and stand up for workers, so that they share in the prosperity they create.”Senator Jon Tester, a Montana Democrat, said on Twitter that the decision “a smart move.”Mr. Biden’s decision to reappoint Mr. Powell, who was first appointed by former President Donald J. Trump, returns the country to a long tradition in which presidents of both parties have embraced the Fed chairs selected by their predecessors, in an expression of support for the central bank’s political independence. Mr. Trump bucked the tradition, replacing Janet L. Yellen with Mr. Powell in 2018.Some progressive Democrats had urged Mr. Biden to also break with tradition and appoint someone else to the role. In addition to Ms. Warren, Senators Sheldon Whitehouse of Rhode Island and Jeff Merkley of Oregon had called for Mr. Powell to be replaced, citing his views on climate change, financial regulation and an ethics scandal at the central bank.Mr. Whitehouse said in a statement on Monday that he was “disappointed” in the decision, adding that Mr. Powell had done too little to address climate change.“Our Fed Chair must devote immediate and thorough attention to the climate threat before it is too late,” Mr. Whitehouse said in the statement. “I sincerely hope that, if confirmed, Powell will reassess his past opposition to utilizing the Fed’s regulatory tools to minimize climate-related risks to the financial sector.”Americans for Financial Reform, a coalition of community, labor and civil rights groups, called the decision “a major disappointment to those of us who have fought for tougher regulation of Wall Street.”Mr. Biden’s decision to nominate Ms. Brainard for vice chair could help mollify some of those concerns. Some progressive groups had been pushing for Ms. Brainard to lead the central bank, in part because of her views on climate change and financial regulation.Mr. Whitehouse applauded Ms. Brainard’s nomination in his statement, saying “she clearly recognizes the gravity of the climate-related financial and economic risks facing our nation and will push the Fed to fully utilize its regulatory authorities in this space.”Other groups that have been critical of the Fed expressed support for the picks, particularly Ms. Brainard.The Fed Up Campaign, which advocates more accommodative monetary policies and full employment, said the Fed needed “to continue pro-employment, pro-wage growth, pro-racial justice macroeconomic policies for as long as economic conditions allow.”“Governor Brainard is a strong choice for Vice Chair, and we are expecting Biden to continue to name truly bold and pro-worker choices to the vacant governor seats,” the group said.Lawmakers also expressed support for the move, though some Republicans expressed concerns about Ms. Brainard, who has pushed for tougher financial regulations.Senator Patrick J. Toomey of Pennsylvania, the ranking member on the Senate Banking Committee, said that he disagreed with some of Mr. Powell’s decisions during the crisis, but that he would support his nomination.“When the pandemic hit in 2020, Chairman Powell acted swiftly and took extraordinary and necessary steps to help stabilize financial markets and the economy,” Mr. Toomey said in a statement.The senator expressed “concerns about regulatory policies that Governor Brainard would support as Vice Chair,” but said looked forward to discussing those issues.Both Mr. Powell and Ms. Brainard must win 60 votes in order to be confirmed by the Senate. More
Millions of employees remain on the job market’s sidelines and are only slowly trickling back — posing a serious challenge for the Federal Reserve as its policymakers try to assess how far the United States economy remains from their full employment goal.The labor force participation rate, a measure of how many people work or are actively looking for jobs, has been holding steady for months at 61.6 percent, down 1.7 percentage points from its February 2020 level.Participation of people in their prime working years is ticking up gradually, rising to 81.7 percent in October from 81.6 percent in September, but that too remains depressed compared with the rate before the pandemic. In February 2020, 82.9 percent of those 25 to 54 years old were in the labor force.Prime-age labor force participation improved slightly.Share of those ages 25 to 54 who are in the labor force (employed, unemployed but looking for work or on temporary layoff) More
The Federal Reserve is dealing with high inflation at a time when millions of workers remain on the job market’s sidelines. Wednesday’s announcement that it will slow bond purchases is a step toward more normal monetary policy.Jerome H. Powell, the Federal Reserve chair, laid out a plan to slow the asset-buying program as the economy continued to heal from pandemic disruptions and inflation remained sharply elevated.Sarahbeth Maney/The New York TimesThe Federal Reserve on Wednesday took its first step toward withdrawing support for the American economy, saying that it would begin to wind down a stimulus program that’s been in place since early in the pandemic as the economy heals and prices climb at an uncomfortably rapid pace.Central bank policymakers struck a slightly more wary tone about inflation, which has jumped this year amid booming consumer demand for goods and supply snarls. While officials still expect quick cost increases to fade, how quickly that will happen is unclear.Fed officials want to be prepared for any outcome at a time when the economy’s trajectory is marked by grave uncertainty. They are not sure when prices will begin to calm down, to what extent the labor market will recover the millions of jobs still missing after last year’s economic slump, or when they will begin to raise interest rates — which remain at rock-bottom to keep borrowing and spending cheap and easy.So the central bank’s decision to dial back its other policy tool, large-scale bond purchases that keep money flowing through financial markets, was meant to give the Fed flexibility it might need to react to a shifting situation. Officials on Wednesday laid out a plan to slow their $120 billion in monthly Treasury bond and mortgage-backed security purchases by $15 billion a month starting in November. The purchases can lower long term interest rates and prod investors into investments that would spur growth.Assuming that pace holds, the bond buying would stop altogether around the time of the central bank’s meeting next June — potentially putting the Fed in a position to lift interest rates by the middle of next year.The Fed is not yet saying that higher rates, a powerful tool that can swiftly slow demand and work to offset inflation, are imminent. Policymakers would prefer to leave them low for some time to allow the labor market to heal as much as possible.But the move announced on Wednesday will leave them more nimble to react if inflation remains sharply elevated into 2022 instead of beginning to moderate. Many officials would not want to lift interest rates while they are still buying bonds, because doing so would mean that one tool was stoking the economy while the other was restraining it.“We think we can be patient,” Jerome H. Powell, the Fed’s chair, said of the path ahead for interest rates. “If a response is called for, we will not hesitate.”Congress has given the Fed two jobs: achieving and maintaining stable prices and maximum employment.Those are tricky tasks in 2021. Twenty months into the global coronavirus pandemic, inflation has shot higher, with prices climbing 4.4 percent in the year through September. That is well above the 2 percent price gains the Fed aims for on average over time.At the same time, far fewer people are working than did before the pandemic. About five million jobs are missing compared to February 2020. But that shortfall is hard to interpret, because businesses across the country are struggling to fill open positions and wages are quickly rising, hallmarks of a strong job market.For now, the Fed is betting that inflation will fade and the labor market will lure back workers, who might be lingering on the sidelines to avoid catching the coronavirus or because they have child care or other issues that are keeping them at home.“There’s room for a whole lot of humility here,” Mr. Powell said, explaining that it was hard to assess how quickly the employment rate might recover. “It’s a complicated situation.”Officials have already been surprised this year by how much inflation has surged and how long that pop has lasted. They had expected some run-up in prices as the cost of dining out and air travel bounced back from pandemic-lockdown lows, but the severity of the supply chain disruptions and the continued strength of consumer demand has caught Fed officials and many economists by surprise.In their November policy statement, Fed officials predicted that this burst of inflation would fade, but they toned down their confidence on that view. They said previously that factors causing elevated inflation were transitory, but they updated that language on Wednesday to say that the drivers were “expected to be” transitory, acknowledging growing uncertainty.“Supply and demand imbalances related to the pandemic and the reopening of the economy have contributed to sizable price increases in some sectors,” the statement added.The Fed is willing to tolerate a temporary bout of quick inflation as the economy reopens from the pandemic, but if consumers and businesses come to expect persistently higher prices, that could spell trouble. High and erratic inflation that persists would make it hard for businesses to plan and might eat away at wage increases for workers who lack bargaining power.“We have to be aware of the risks — particularly now the risk of significantly higher inflation,” Mr. Powell said. “And we have to be in position to address that risk should it create a threat of more-persistent, longer-term inflation.”Understand the Supply Chain CrisisCard 1 of 5Covid’s impact on the supply chain continues. More
Whether it’s reporting on conflicts abroad and political divisions at home, or covering the latest style trends and scientific developments, Times Video journalists provide a revealing and unforgettable view of the world.Whether it’s reporting on conflicts abroad and political divisions at home, or covering the latest style trends and scientific developments, Times Video journalists provide a revealing and unforgettable view of the world. More
He said high inflation was mostly a result of pandemic effects like supply network disruptions, a problem he thinks the Fed can’t fix.The real news out of the Federal Reserve on Wednesday was not in what it did, but in what Chair Jerome Powell didn’t do.The thing that the Fed’s policy committee did — announce that the central bank would gradually wind down its economy-stimulating program of buying bonds — was highly telegraphed and comfortably in line with investors’ expectations.The thing that Mr. Powell didn’t do was give any hint that persistently high inflation in recent months was leading him to rethink his patient approach to raising the Fed’s interest rate target. Rather, he repeated his longstanding belief that high inflation was mostly caused by disruptions in global supply networks and other ripple effects of the pandemic — problems that the Fed can’t do much about.It is a delicate moment. President Biden must decide whether to reappoint Mr. Powell to a second term leading the Fed. High inflation is causing economic discontent for Americans, according to surveys, and helping to drag down the president’s approval ratings. Global bond markets have been gyrating amid uncertainty about whether the era of ultralow interest rates may be coming to an end.On interest rates, Mr. Powell rejected the thinking of leaders at several other leading central banks and of a handful of his own colleagues. They think that excess demand in the economy is a big part of the inflation problem and that rate increases would help address it — and that current high inflation could become ingrained in economic decision-making, with long-lasting consequences.If he had expressed more alarm about those inflationary pressures, it would have been a signal that the Fed might act to raise rates more abruptly than it once planned. The Bank of Canada, the Reserve Bank of Australia and the Bank of England have recently done just that. Several Eastern European central banks are going a step further, aggressively raising rates to try to combat inflation (including a 0.75-percentage-point rate increase by the Polish central bank on Wednesday).Mr. Powell himself has essentially conceded in recent appearances that surging prices due to supply disruptions are on track to last longer than he expected. He said in late September that it was frustrating that supply chain bottlenecks weren’t improving and might be getting worse, and said this would hold inflation higher for longer than the Fed had thought.But he was steadfast on Wednesday in not suggesting that those developments were a reason to accelerate the Fed’s interest rate hike plans. He suggested those would need to wait until the tapering of bond purchases was complete and until Fed officials concluded the economy had achieved maximum employment.“We understand the difficulties that high inflation poses for individuals and families,” Mr. Powell said Wednesday. But he continued: “Our tools cannot ease supply constraints. Like most forecasters, we continue to believe that our dynamic economy will adjust to the supply and demand imbalances, and that, as it does, inflation will decline to levels much closer to our 2 percent longer-run goal.”With language like that, he was declining to embrace the use of “open-mouth policy,” or of essentially trying to assuage inflation fears by using more specific language to suggest the Fed had a hair-trigger readiness to take immediate action to head off higher prices.He appeared to be applying the lessons of the 2010s labor market in setting the central bank’s course. Over that decade, unemployment kept falling lower, with participation in the work force rising higher than many analysts had thought plausible. With hindsight, the Fed may have erred by raising interest rates prematurely, slowing that process of labor market improvement.In a 2021 context, that means allowing more post-pandemic healing of the labor market before assuming, for example, that many of the Americans who currently say they are not in the labor force will return as public health conditions improve.“There’s room for a whole lot of humility here as we try to think about what maximum employment would be,” Mr. Powell said. The last economic cycle, he said, showed that “over time you can get to places that didn’t look possible.”Understand the Supply Chain CrisisCard 1 of 5Covid’s impact on the supply chain continues. More
The Federal Reserve is expected to announce a plan to taper off its bond buying. With inflation surging, economists’ eyes are already turning to rates.Jerome H. Powell, the Federal Reserve chair, is on the cusp of accomplishing something that would have seemed like a victory a year ago: Central bankers are expected to announce a plan to wean the economy off their asset-buying program on Wednesday without roiling markets, a delicate maneuver that was in no way assured.Instead, Mr. Powell and his colleagues face pressing questions about their next steps.Inflation is running at its fastest pace in roughly three decades, and hopes that the jump in prices will quickly fade have dimmed as supply chain snarls deepen and fuel costs rise. Wages are increasing swiftly, and consumers and businesses are coming to expect faster price increases, pumping up the risk that high inflation will become a fixture as employers and workers adjust their behavior.Though the Fed is expected to announce this week that it will slow the $120 billion in asset purchases it has been carrying out each month to support the economy, Wall Street economists have already turned their attention to how worried the central bank is about brisk inflation and whether — and when — it might start raising interest rates in response.“The question in the mind of the market is 100 percent what comes next,” said Roberto Perli, a former Fed economist who is now head of global policy at Cornerstone Macro.Slowing bond buying could lead to slightly higher long-term borrowing costs and take pressure off the economy at the margin. But raising interest rates would likely have a more powerful effect when it comes to cooling off the economy. A higher federal funds rate would cause the cost of buying a car, a house or a piece of equipment to rise and would slow consumer and business demand. That could tamp down price gains by allowing supply to catch up to spending, but it would slow growth and weigh on hiring in the process.The Fed has signaled that bond buying could wrap up completely by the middle of next year. Economists increasingly expect the Fed to move its policy rate up from near-zero, where it has been since March 2020, as soon as next summer.Goldman Sachs economists now expect a rate increase to come in July 2022, a full year earlier than they had previously anticipated. Deutsche Bank recently pulled its forecast forward to December 2022. Investors as a whole now put better than 50 percent odds on a rate increase by the Fed’s June 2022 meeting, based on a CME Group tool that tracks market pricing.But raising rates poses a risky trade-off for Fed policymakers. If inflation moderates as the economy gets back to normal and pandemic-related disruptions smooth out, higher borrowing costs could leave fewer people employed for little reason. And with a smaller number of paychecks going out each month, demand would likely weaken over the longer run, which could drag inflation back to the uncomfortably low levels that prevailed before the start of the pandemic.“The risk is not really about the Fed beginning its rate hikes behind the curve,” said Skanda Amarnath, executive director of Employ America, a group focused on encouraging policies that help the work force. “The risk is that the Fed overreacts to this.”That markets are penciling in rate increases more quickly could suggest that they are optimistic about the economy’s chances, said Neil Dutta, head of U.S. economics at Renaissance Macro. The Fed has said that before lifting rates, it wants to see the economy return to full employment and inflation that exceeds its 2 percent target and is on track to average it over time. Investors might think those targets will be met by the middle of next year.“If it was a problem, why aren’t stocks falling?” Mr. Dutta said of the earlier rate increase expectations. “The economy has done better than anticipated.”Still, millions of jobs remain missing from the labor market, and employment growth has slowed sharply. Payrolls expanded by just 194,000 jobs in September, and while fresh hiring data due on Friday is expected to show that companies added 450,000 workers in October, the trajectory is anything but certain.If workers take a long time to come back to the job market, either because they lack child care or fear contracting the coronavirus, it could be the case that the Fed finds itself in a conundrum where inflation is high but full employment remains elusive. Mr. Powell has signaled that such a situation, in which the Fed’s goals are in conflict, is a risk. But he has also said the economy is not there yet.The future of Jerome H. Powell as the Fed chair is being debated within the Biden administration, complicating the decision on rates.Stefani Reynolds for The New York Times“I do think it’s time to taper,” Mr. Powell said at a recent virtual conference. “I don’t think it’s time to raise rates.”Understand the Supply Chain CrisisCard 1 of 5Covid’s impact on the supply chain continues. More
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