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    What Forecasters Say About Interest Rates (and Why They Disagree)

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    Hopes for a steep drop in borrowing costs for consumers and businesses have been dashed. But some experts predict modest reductions in coming months.How soon is soon? Or exactly how much later is later?As the year started, there was a widespread view among economists and on Wall Street that the Federal Reserve would lower interest rates in the first half of the year. Maybe in March, maybe in May, but sooner rather than later.That long-awaited moment, two years after the Fed began ratcheting up rates to their highest level in decades, held the prospect of brightening consumer sentiment, increasing company valuations and improving corporate financing opportunities. It was called “the pivot party,” and everyone was invited.But three months of hotter-than-expected inflation data followed. Financial markets then projected that the Fed would lower rates once, near the end of the year, or not at all — based on a view that the central bank will see little merit in such a move as long as inflation remains a bit elevated and employment is growing.Interest rates for home and car loans tilted up again. And it seems the pivot party has been canceled. But some experts argue that it has only been postponed, leaving forecasters divided about what the rest of the year will bring.Camp 1: Inflation Is Coming Under ControlSome market analysts and bank economists are making the case that rate cuts are still on the table. The April jobs report, which implied a cooling labor market and softer wage growth, gave them some fodder.These analysts generally contend that current measures of inflation are overstated because of lagging indicators, reflecting cost pressures from over a year ago, that will ebb in summer. And they believe that while the diffuse process of stabilizing prices, formally called disinflation, may face setbacks (especially any oil shock), it is on track.After a wild ride, inflation has dropped back to lower levels, according to the Fed’s preferred measure.The annual percent change in the Personal Consumption Expenditures price index

    Source: U.S. Bureau of Economic Analysis By The New York TimesA measure of U.S. inflation that excludes an estimate of homeownership costs suggests that price increases are less rapid.The annual percentage change in the Consumer Price Index compared with the change in the Harmonized Index of Consumer Prices. H.I.C.P. is an inflation measure commonly used in other countries that excludes “owners’ equivalent rent,” an estimate of how much it may cost homeowners to rent a similar home.

    Source: Eurostat and Bureau of Labor StatisticsBy The New York TimesWe 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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    Why Higher Fed Rates Are Not Totally Off the Table

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    Fed officials still think their next move will be to cut rates, but they are not entirely ruling out the possibility that they might have to raise them.Investors do not expect the Federal Reserve to raise interest rates again, and officials have made it clear that they see further increases as unlikely. But one important takeaway from recent Fed commentary is that unlikely and inconceivable are not the same thing.After the central bank held rates steady at 5.3 percent last week, the Fed’s chair, Jerome H. Powell, delivered a news conference where what he didn’t say mattered.Asked whether officials might raise interest rates again, he said he thought they probably would not — but he also avoided fully ruling out the possibility. And when asked, twice, whether he thought rates were high enough to bring inflation fully under control, he twice tiptoed around the question.“We believe it is restrictive, and we believe over time it will be sufficiently restrictive,” Mr. Powell said, but he tacked on a critical caveat: “That will be a question that the data will have to answer.”There was a message in that dodge. While officials are most inclined to keep interest rates at their current levels for a long time in order to tame inflation, policymakers could be open to higher interest rates if inflation were to pick back up. And Fed officials have made that clear in interviews and public comments over the past several days.Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said on Tuesday that he was wary about a scenario in which inflation gets stuck at its current level, and hinted that it was possible that rates could rise more.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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    Walmart Introduces a New Store Brand for ‘Quality Food’

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    The Better Goods store brand will carry plant-based, gluten-free and higher-end food and could help the retailer attract more affluent shoppers.When prices for grocery staples surged in 2021 and 2022, some Americans who had not regularly shopped at Walmart increasingly turned to the retailer, which is known for its affordable prices. Now, the company is trying to keep those new customers and attract others with a new selection of plant-based, gluten-free and deluxe culinary fare.On Tuesday, the retailer unveiled a new store brand that it said would make “quality food accessible.” Executives described the brand, Better Goods, as its largest foray into the private-label food business in 20 years.Better Goods items will include oat-milk frozen desserts, plant-based macaroni and cheese, and frozen appetizers like chicken curry empanadas and Brie Phyllo Blossoms. More than 70 percent of the products will cost less than $5, the retailer said.“All of our research tells us that the customer expects these types of goods,” said Scott Morris, a senior vice president of private food and consumables brands at Walmart. “They expect to have these elevated ingredients and offerings that we provide, and they are also looking for those healthier options.”The retailer says it is seeing growth in its store brands across all demographics, particularly shoppers from Generation Z, a group that includes people born in the late 1990s and early 2000s.Analysts are eager to find out if, as inflation eases, the retailer can retain higher-income individuals who started shopping at Walmart in the last few years. The company is taking a number of steps to make itself more attractive to customers. Walmart has said it plans to open new stores and to remodel existing ones. It has also changed signs, displays and other visual merchandising in ways that analysts say should make stores more appealing to affluent shoppers.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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    High Fed Rates Are Not Crushing Growth. Wealthier People Help Explain Why.

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    High rates usually pull down asset prices and hurt the housing market. Those channels are muted now, possibly making policy slower to work.More than two years after the Federal Reserve started lifting interest rates to restrain growth and weigh on inflation, businesses continue to hire, consumers continue to spend and policymakers are questioning why their increases haven’t had a more aggressive bite.The answer probably lies in part in a simple reality: High interest rates are not really pinching Americans who own assets like houses and stocks as much as many economists might have expected.Some people are feeling the squeeze of Fed policy. Credit card rates have skyrocketed, and rising delinquencies on auto loans suggest that people with lower incomes are struggling under their weight.But for many people in middle and upper income groups — especially those who own their homes outright or who locked in cheap mortgages when rates were at rock bottom — this is a fairly sunny economic moment. Their house values are mostly holding up in spite of higher rates, stock indexes are hovering near record highs, and they can make meaningful interest on their savings for the first time in decades.Because many Americans feel good about their personal finances, they have also continued opening their wallets for vacations, concert tickets, holiday gifts, and other goods and services. Consumption has remained surprisingly strong, even two years into the Fed’s campaign to cool down the economy. And that means the Fed’s interest rate moves, which always take time to play out, seem to be even slower to work this time around.“Household finances broadly still look pretty good, though there is a group feeling the pain of high interest rates,” said Karen Dynan, an economist at Harvard and a former chief economist at the Treasury Department. “There are a lot of households in the middle and upper part of the distribution that still have a lot of wherewithal to spend.”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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    Inflation Is Stubborn. Is the Federal Budget Deficit Making It Worse?

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    Economists are divided over whether the growing amount of federal borrowing is fueling demand and driving up prices.A crucial question is hanging over the American economy and the fall presidential election: Why are consumer prices still growing uncomfortably fast, even after a sustained campaign by the Federal Reserve to slow the economy by raising interest rates?Economists and policy experts have offered several explanations. Some are essentially quirks of the current economic moment, like a delayed, post-pandemic surge in the cost of home and auto insurance. Others are long-running structural issues, like a lack of affordable housing that has pushed up rents in big cities like New York as would-be tenants compete for units.But some economists, including top officials at the International Monetary Fund, said that the federal government bore some of the blame because it had continued to pump large amounts of borrowed money into the economy at a time when the economy did not need a fiscal boost.That borrowing is a result of a federal budget deficit that has been elevated by tax cuts and spending increases. It is helping to fuel demand for goods and services by channeling money to companies and people who then go out and spend it.I.M.F. officials warned that the deficit was also increasing prices. In a report earlier this month, they wrote that while America’s recent economic performance was impressive, it was fueled in part by a pace of borrowing “that is out of line with long-term fiscal sustainability.”The I.M.F. said that U.S. fiscal policies were adding about a half a percentage point to the national inflation rate and raising “short-term risks to the disinflation process” — essentially saying that the government was working at cross-purposes with the Fed.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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    How High Wall Street Thinks the Fed Will Keep Interest Rates

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    Stubborn inflation has led traders to forecast far fewer rate cuts by the Federal Reserve than just a few months ago.At the start of 2024, investors expected the Federal Reserve to cut interest rates substantially this year as inflation cooled. But price increases have been surprisingly stubborn, and that is forcing a rethink on Wall Street.Investors and economists are questioning when and how much Fed policymakers will manage to cut rates — and some are increasingly dubious that Fed officials will manage to lower them at all this year.Inflation was coming down steadily in 2023, but that progress has stalled out in 2024. The Fed’s preferred inflation index climbed 2.8 percent in March from a year earlier, after stripping out volatile food and fuel costs, data on Friday showed. While that is down substantially from a 2022 peak, it is still well above the central bank’s 2 percent goal.Inflation’s stickiness has prompted Fed officials to signal that it may take longer to reduce interest rates than they had previously expected. Policymakers raised interest rates to 5.33 percent between March 2022 and last summer, and have held them there since. Investors who went into the year expecting a first rate cut by March have pushed back those expectations to September or later.Some analysts are even beginning to question whether the Fed’s next move might be to raise rates, which would be a huge reversal after months in which Wall Street overwhelmingly expected the Fed’s next step to be a cut.But most economists think that it would take a lot for the Fed to switch gears that drastically.“It’s certainly a possible outcome, but it would require an outright acceleration in the inflation rate,” said Matthew Luzzetti, chief U.S. economist at Deutsche Bank. More

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    U.S. Economy Grew at 1.6% Rate in First-Quarter Slowdown

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    Gross domestic product, adjusted for inflation, increased at a 1.6 percent annual rate in the first three months of the year.The U.S. economy remained resilient early this year, with a strong job market fueling robust consumer spending. The trouble is that inflation was resilient, too.Gross domestic product, adjusted for inflation, increased at a 1.6 percent annual rate in the first three months of the year, the Commerce Department said on Thursday. That was down sharply from the 3.4 percent growth rate at the end of 2023 and fell well short of forecasters’ expectations.Economists were largely unconcerned by the slowdown, which stemmed mostly from 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, offering no hint of the recession that forecasters spent much of last year warning was on the way.“It would suggest some moderation in growth but still a solid economy,” said Michael Gapen, chief U.S. economist at Bank of America. He said the report contained “few signs of weakness overall.”But the solid growth figures were accompanied by an unexpectedly rapid acceleration in inflation. Consumer prices rose at a 3.4 percent annual rate in the first quarter, up from 1.8 percent in the final quarter of last year. Excluding the volatile food and energy categories, prices rose at a 3.7 percent annual rate.Taken together, the first-quarter data was the latest evidence that the Federal Reserve’s efforts to tame inflation have stalled — and that the celebration in financial markets over an apparent “soft landing” or gentle slowdown for the economy had been premature.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    A Bill to Limit Canada’s Trade Negotiators on Farm Goods Edges Nearer to Law

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    The measure from a member of the Bloc Québécois would ban changes to the supply management system for dairy, poultry and eggs.Private members’ bills, particularly those from members of the Bloc Québécois, rarely make their way through the parliamentary process. But after passing the House of Commons with strong support from members of all parties, a bill from Yves Perron, who speaks for the Bloc on farming, handily passed a second vote in the unelected Senate on Tuesday.Supply management brings stability, but at a price.Ian Austen/The New York TimesAnd perhaps even more surprising, it deals with a contentious issue: Canada’s supply management system, which controls production and sets minimum prices for dairy and poultry products as well as eggs.Many free-market economists and politicians cast supply management as a legalized price cartel that increases Canadians’ grocery bills. And in negotiations for every one of Canada’s major trade agreements in recent decades, the supply management system has emerged as one of the final sticking points.[Read from 2016: Safe for Now, Canadian Dairy Farmers Fret Over E.U. Trade Deal]If Mr. Perron’s bill makes it past the few remaining legislative hurdles and becomes law, it will bar Canada’s trade negotiators from offering any changes to supply management during future trade talks.Under the system, to avoid price-killing oversupply, farmers are assigned a production quota — effectively a license to produce milk, chicken, turkey or eggs — that they cannot exceed. Until recently, imports were effectively banned through eye-wateringly high import duties.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