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    Inflation Cooled Just Slightly, With Worrying Details

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    WASHINGTON — Inflation has slowed from its painful 2022 peak but remains uncomfortably rapid, data released Tuesday showed, and the forces pushing prices higher are proving stubborn in ways that could make it difficult to wrestle cost increases back to the Federal Reserve’s goal.The Consumer Price Index climbed by 6.4 percent in January compared with a year earlier, faster than economists had forecast and only a slight slowdown from 6.5 percent in December. While the annual pace of increase has cooled from a peak of 9.1 percent in summer 2022, it remains more than three times as fast as was typical before the pandemic.And prices continued to increase rapidly on a monthly basis as a broad array of goods and services, including apparel, groceries, hotel rooms and rent, became more expensive. That was true even after stripping out volatile food and fuel costs.Taken as a whole, the data underlined that while the Federal Reserve has been receiving positive news that inflation is no longer accelerating relentlessly, it could be a long and bumpy road back to the 2 percent annual price gains that used to be normal. Prices for everyday purchases are still climbing at a pace that risks chipping away at economic security for many households.“We’re certainly down from the peak of inflation pressures last year, but we’re lingering at an elevated rate,” said Laura Rosner-Warburton, senior economist at MacroPolicy Perspectives. “The road back to 2 percent is going to take some time.”Stock prices sank in the hours after the report, and market expectations that the Fed will raise interest rates above 5 percent in the coming months increased slightly. Central bankers have already lifted borrowing costs from near zero a year ago to above 4.5 percent, a rapid-fire adjustment meant to slow consumer and business demand in a bid to wrestle price increases under control.Moderating price increases for goods and commodities have driven the overall inflation slowdown in recent months.Casey Steffens for The New York TimesBut the economy has so far held up in the face of the central bank’s campaign to slow it down. Growth did cool last year, with the rate-sensitive housing market pulling back and demand for big purchases like cars waning, but the job market has remained strong and wages are still climbing robustly.That could help to keep the economy chugging along into 2023. Consumption overall had shown signs of slowing meaningfully, but it may be poised for a comeback. Economists expect retail sales data scheduled for release on Wednesday to show that spending climbed 2 percent in January after falling 1.1 percent in December, based on estimates in a Bloomberg survey.Signs of continued economic momentum could combine with incoming price data to convince the Fed that it needs to do more to bring inflation fully under control, which could entail pushing rates higher than expected or leaving them elevated for longer. Central bankers have been warning that the process of wrangling cost increases might prove bumpy and difficult.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    As Biden Prepares to Tout Economy, Fed Chair Powell Takes a Cautious Tone

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    The White House has embraced signs that the economy is strong. For the Fed, that strength could prolong its fight against inflation.WASHINGTON — Jerome H. Powell, the chair of the Federal Reserve, underscored that the central bank has more work to do when it comes to slowing the economy and that officials remain determined to wrestle rapid inflation under control, even if that means pushing rates higher than expected.Mr. Powell, speaking on Tuesday in a question-and-answer session at the Economic Club of Washington, D.C., called a recent slowdown in price increases “the very early stages of disinflation.” He added that the process of getting inflation back to normal was likely to be bumpy.“There has been an expectation that it will go away quickly and painlessly — and I don’t think that’s at all guaranteed; that’s not the base case,” Mr. Powell said. “The base case for me is that it will take some time, and we’ll have to do more rate increases, and then we’ll have to look around and see whether we’ve done enough.”The Fed chair’s comments came hours before President Biden delivered the annual State of the Union address, which offered a contrasting tone.Democrats are embracing a historically strong economy with super-low unemployment and rapid wage growth, cheering a report last week that showed employers added more than half a million jobs in January. But Fed officials have met the news with more caution. The central bank is supposed to foster both full employment and stable inflation, and policymakers have been concerned that the strength of today’s job market could make it harder for them to return wage and price increases to historically normal levels.Mr. Powell said that the Fed had not expected the jobs report to be so strong, and that the robustness reinforced why the process of lowering inflation “takes a significant period of time.”While he said it was good that the disinflation so far had not come at the expense of the labor market, he also underscored that further interest rate moves would be appropriate and that borrowing costs would need to remain high for some time. And he embraced how markets have adjusted in the wake of the strong hiring numbers: Investors had previously expected the Fed to stop adjusting policy very soon, but now see rate increases in both March and May.The biggest inflation challenge facing the Fed is in the services sector of the economy, which includes restaurants, travel and health care.Jim Wilson/The New York Times“We anticipate that ongoing rate increases will be appropriate,” Mr. Powell said. He said that in the wake of the jobs report, financial conditions were “more well aligned” with that view than they had been previously.To try to slow the economy and choke off inflation, policymakers raised interest rates from near zero early last year to more than 4.5 percent at their last meeting, the quickest pace of adjustment in decades. Higher borrowing costs weigh on demand by making it more expensive to fund big purchases or business expansions. That in turn tempers hiring and wage growth, with further cools the economy. Inflation F.A.Q.Card 1 of 5What is inflation? More

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    January Jobs Report Contained Hopeful and Worrying News for the Fed

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    The Federal Reserve is tracking incoming labor figures as it decides how high interest rates need to go and how long they should stay elevated.WASHINGTON — Federal Reserve officials have said they are looking for the labor market to cool as they assess how much more they need to do to slow the economy, and the job report on Friday underscored that policymakers may still have a ways to go.Employers hired ravenously in January, adding 517,000 workers. The jobless rate dipped to a level not seen since 1969, and revisions to last year’s data showed that job growth was even stronger in 2021 and 2022 than previously understood — all signs that the demand for labor is booming.Yet at the same time, wage growth continued to moderate. Average hourly earnings climbed 4.4 percent over the year, more than forecast in a Bloomberg survey of economists but less than the 4.8 percent year-over-year increase in December. Pay growth has been decelerating for months, though it remains faster than is typical and notably quicker than the pace that Fed officials have at times suggested would be consistent with their 2 percent inflation goal.For central bankers who are trying to bring down the fastest inflation in decades, the report offered both encouraging and worrying news. On one hand, the continued slowdown in pay increases was a welcome sign that, if it persists, could pave the way for slower price increases down the road. But Fed policymakers who spoke on Friday focused more intently on the fresh evidence that demand for workers remains intense despite their efforts, suggesting that they have more work to do before they will be able to feel confident that rapid inflation will fade fully.“The biggest surprise — and the thing to take the most signal from — is the combination of the job gains over the past month and the restatement over the past year,” Thomas Barkin, the president of the Federal Reserve Bank of Richmond, said in an interview with The New York Times. “We still have more to do. Inflation is the guidepost.”Fed officials have already lifted rates from near zero a year ago to more than 4.5 percent, ushering in a quarter-point move just this week. While they have signaled more to come, investors and economists had been betting that they might stop moving after their next meeting, in March.The strong job numbers upended that expectation. Investors on Friday penciled in another rate move in May, and stocks fell in response to the jobs data as Wall Street braced for a more aggressive central bank. Higher rates weigh on demand by making it more expensive to borrow to buy a house or expand a business.The State of Jobs in the United StatesEconomists have been surprised by recent strength in the labor market, as the Federal Reserve tries to engineer a slowdown and tame inflation.Job Trends: The Labor Department reported that the nation’s demand for labor only got stronger in December, as job openings rose to 11 million.Burrito Season: Chipotle Mexican Grill, the fast-casual food chain, said that it planned to hire 15,000 workers ahead of its busiest time of year, from March to May.Retail Industry: With consumers worried about inflation in the prices of day-to-day necessities like food, retailers are playing defense and reducing their work forces.Tech Layoffs: The industry’s recent job cuts have been an awakening for a generation of workers who have never experienced a cyclical crash.Fed officials themselves underlined that further rate adjustments are coming.“The number today on the jobs report was a ‘wow’ number,” Mary C. Daly, president of the Federal Reserve Bank of San Francisco, said on Fox Business. She added that it did not change the economic narrative: It was just additional confirmation that the labor market is strong.She said the Fed’s December forecast — which called for two more quarter-point rate increases, pushing rates just above 5 percent — remained “a good indicator of where policy is at least headed,” adding that she is “prepared to do more than that if more is needed.”Wage growth is slowing along with inflationYear-over-year percentage change in earnings vs. inflation More

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    U.S. Hiring Surges With January Gain of 517,000 Jobs

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    The report defied expectations and underscored the challenges for the Federal Reserve, which is trying to cool the labor market to fight inflation.Soft landing? The American labor market is still soaring.After months of gentle but steady declines in job growth, employers unleashed an unexpected burst of hiring in January, adding 517,000 jobs on a seasonally adjusted basis, the Labor Department said on Friday.The increase was the largest since July, and it drew exclamations from economists steeped in labor market trends, who had been expecting another month of gradual cooling.“So much for moderation!” said Beth Ann Bovino, the chief U.S. economist at S&P Global Ratings. “We certainly didn’t see it in this report.”Underscoring the labor market’s extraordinary vibrancy was the unemployment rate, which fell to 3.4 percent, the lowest level since 1969.But even as businesses hired with striking zeal in January — or at least laid off fewer seasonal employees than in most years — wage growth continued to moderate. Average hourly earnings increased 0.3 percent from December, and 4.4 percent over the year, an indication that some of the pressure to lure employees with pay raises may be easing.Wage growth is slowing along with inflationYear-over-year percentage change in earnings vs. inflation More

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    Egg Shortages Are Driving Demand for Raise-at-Home Chickens

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    Which shortage came first: the chicks or the eggs?Spooked by a huge spike in egg prices, some consumers are taking steps to secure their own future supply. Demand for chicks that will grow into egg-laying chickens — which jumped at the onset of the global pandemic in 2020 — is rapid again as the 2023 selling season starts, leaving hatcheries scrambling to keep up.“Everybody wants the heavy layers,” said Ginger Stevenson, director of marketing at Murray McMurray Hatchery in Iowa. Her company has been running short on some breeds of especially prolific egg producers, partly as families try to hedge their bets against skyrocketing prices and constrained egg availability.“When we sell out, it’s not like: Well, we can make another chicken,” she said.McMurray’s experience is not unique. Hatcheries from around the country are reporting that demand is surprisingly robust this year. Many attribute the spike to high grocery prices, and particularly to rapid inflation for eggs, which in December cost 59.9 percent more than a year earlier.“We’re already sold out on a lot of breeds — most breeds — until the summer,” said Meghan Howard, who runs sales and marketing for Meyer Hatchery in northeast Ohio. “It’s those egg prices. People are really concerned about food security.”Google search interest in “raising chickens” has jumped markedly from a year ago. The shift is part of a broader phenomenon: A small but rapidly growing slice of the American population has become interested in growing and raising food at home, a trend that was nascent before the pandemic and that has been invigorated by the shortages it spurred.“As there are more and more shortages, it’s driving more people to want to raise their own food,” Ms. Stevenson observed on a January afternoon, as 242 callers to the hatchery sat on hold, presumably waiting to stock up on their own chicks and chick-adjacent accessories.The Cackle Hatchery received eggs from local farms in Missouri. Hatcheries could theoretically hatch more chicks to meet the surge in demand, but is difficult in today’s economy.Neeta Satam for The New York TimesRaising chickens for eggs takes time and upfront investment. Brown-egg-layer chicks at McMurray’s cost roughly $4 a piece, and coops can cost hundreds or thousands of dollars to construct.Mandy Croft, a 39-year-old from Macon, Ga., serves as administrator on a Facebook group for new chicken farmers and is such an enthusiastic hobbyist that family members call her the “poultry princess.” Even she warned that raising chickens may not save dabblers money, but she said her group was seeing huge traffic nonetheless.“We get hundreds of requests a day for new members, and that’s due to the rising egg cost,” she said.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Ford Follows Tesla in Cutting Electric Vehicle Prices

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    The automaker reduced the price of the Mustang Mach-E by up to $5,900 after Tesla slashed prices of its cars by as much as 20 percent.Ford Motor said on Monday that it was cutting prices on its top-selling battery-powered model, the Mustang Mach-E, and increasing production of the sport utility vehicle. It was the latest sign of intensifying competition in the electric car market.Two weeks ago, Tesla slashed prices of its electric cars by as much as 20 percent in response to softening demand around the world.The price cuts for the two most affordable versions of the Mach-E amounted to less than $1,000 each. Other models, with longer-range batteries and premium options, were reduced $3,680 to $5,900, reductions of 6 percent to 9 percent.“We want to make E.V.s more accessible, so we’re increasing production and reducing prices across the Mach-E lineup,” Ford’s chief executive, Jim Farley, said on Twitter. He added that “with higher production, we’re reducing costs, which allows us to share these savings with customers.”The lowest-priced Mustang Mach-E — a rear-wheel-drive model with a standard battery — now has a list price of $45,995, a reduction of $900. The high-performance Mach-E GT with an extended-range battery now sells for $63,995, a cut of $5,900.Tesla’s least expensive car is the Model 3, which is smaller than the Mustang Mach-E and starts at $43,990. The all-wheel-drive Model Y, a more direct competitor of the electric Mustang, starts at $53,490. An all-wheel-drive Mustang Mach-E with comparable battery range now lists for $53,995.Electric vehicles priced below $55,000 can qualify for federal tax credits of $7,500 that were made available starting Jan. 1 under the Inflation Reduction Act. Ford’s price cuts will make more versions of the Mach-E eligible for the credit.Ford said the new prices would automatically apply to customers who had placed orders and were waiting for their cars. Ford’s credit division is also offering subsidized interest rates as low as 5.34 percent on Mach E orders placed between Jan. 30 and April 3.Tesla has long dominated the electric car market, which it largely had to itself until the last couple of years, but is increasingly encountering stiff competition. Its rate of growth has slowed in China, where its is now outsold by a local manufacturer, BYD. In addition to Ford, Volkswagen, Hyundai, Kia and other automakers have introduced electric models in the United States that are selling well and are generally cheaper than Tesla’s luxury models.In 2022, Ford sold just under 40,000 Mach-Es, about 45 percent more than in 2021. That made the Mach-E the third-best-selling electric model after Tesla’s Model Y and Model 3.For much of the last two years, Tesla, Ford and other automakers raised prices of electric vehicles because demand for battery-powered cars far outstripped supply. But demand for cars and other big-ticket goods has weakened in recent months as the Federal Reserve has raised interest rates significantly. Fed policymakers are expected to slow their rate increases at their first meeting of the year on Wednesday. More

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    A Closely Watched Measure of Inflation Slowed in December

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    The Personal Consumption Expenditures price index climbed 5 percent from a year earlier, slower than the reading last month.The Federal Reserve’s preferred inflation index climbed 5 percent in the year through December, a notable slowdown from November and a continuation of a six-month downward trend.After stripping out food and fuel, the price index climbed 4.4 percent compared with a year earlier, in line with what economists in a Bloomberg survey had expected and a slowdown from 4.7 percent in November.The overall picture is one of moderating inflation — providing some long-awaited relief for consumers — but which remains unusually rapid at more than twice the 2 percent rate the Fed aims for on average over time.Central bankers are raising interest rates to make it more expensive to borrow money to make a major investment or finance a business expansion, hoping to cool demand enough that it drives price increases lower. Policymakers lifted their main policy rate from near-zero to more than 4.25 percent last year, and they are widely expected to raise it another quarter point in their decision on Feb. 1.The Fed is deciding when to stop its rate increases and how long to leave them high — decisions that it has said will be influenced by incoming data on inflation and the broader economy. That focuses attention on figures like the one released on Friday.“It will take time for supply and demand to come back into proper alignment and balance, so we must keep moving,” John C. Williams, the president of the Federal Reserve Bank of New York, said last week.The Fed is also keeping an eye on measures of economic activity, including consumer spending and the labor market. While layoffs at big technology companies have been grabbing headlines in recent weeks, jobless claims remain very low and the unemployment rate is at the lowest level in half a century.That is expected to change this year. As the Fed’s interest rate increases kick in fully, economists at the central bank and on Wall Street expect the U.S. economy to slow and for unemployment to tick higher. Officials are hoping that they can pull off the slowdown without tipping the economy into an outright recession, but there is no guarantee. More

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    Inflation Is Cooling, Leaving America Asking: What Comes Next?

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    After six months of declines, inflation seems to be turning a corner. But the road back to normal is an uncertain one.Martin Bate, a 31-year-old transportation planner in Fort Worth, spent the middle of 2022 feeling that he was “treading water” as high gas prices, climbing food costs and the prospect of a big rent increase chipped away at his finances.“I was really starting to feel financially squeezed in a way that I hadn’t felt ever before, since finishing college,” Mr. Bate said. Since then, he has received a promotion and a raise that amounted to 12 percent. Gas prices have fallen, and local housing costs have moderated enough that next month he is moving into a nicer apartment that costs less per square foot than his current place.“My personal situation has improved a good amount,” Mr. Bate said, explaining that he’s feeling cautious but hopeful about the economy. “It’s looking like it might shape out all right.”People across the country are finally experiencing some relief from what had been a relentless rise in living costs. After repeated false dawns in 2021 and early 2022 — when price increases slowed only to accelerate again — signs that inflation is genuinely turning a corner have begun to accumulate.Inflation has slowed on an annual basis for six straight months, dipping to 6.5 percent after peaking at about 9 percent last summer, partly as gas has become cheaper. But the deceleration is true even after volatile food and fuel are stripped out: So-called core consumer prices have climbed 0.3 percent or less for each of the past three months. That’s faster than the 0.2 percent month-to-month changes that were typical before the pandemic but much slower than the 0.9 percent peak in April 2021. More