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    Biden Tries to Reassure Voters on Health Care Costs Before Election

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    At an event in Southern California, the president says his administration is working to keep costs down and warns that Republicans will drive prices higher if they gain power.LOS ANGELES — President Biden on Friday tried to reassure Americans stung by high inflation that his administration was working to keep health care costs down, promising a community college audience in Southern California that he was committed to doing even more.But his remarks in Irvine, Calif. — the first of two West Coast speeches devoted to health care costs — come just days after government data revealed that overall inflation remains high as voters prepare to go to the polls for midterm elections early next month.Surveys show that Americans are deeply frustrated by the impact of sharply higher prices on their pocketbooks. They are expected to rebuke the president and his party in the elections, with most analysts predicting that Democrats will lose control of one or both chambers in Congress.Speaking to a friendly audience, Mr. Biden argued that Republicans would drive prices higher if they gained power. He noted their opposition to his efforts to allow Medicare to negotiate drug prices, which he said would force prices down for medication for millions of seniors. And he said Democrats had pushed through price caps on critical drugs like insulin.“If Republicans in Congress have their way, it’s going to mean the power we just gave Medicare to negotiate lower prescription drug prices and other costs over time goes away — gone,” Mr. Biden said, standing in front of signs that said “Lowering Costs for American Families.” “Two-thousand-dollar cap on prescription drugs goes away — gone. The $35 month cap on insulin for Medicare is gone.”The State of the 2022 Midterm ElectionsWith the primaries over, both parties are shifting their focus to the general election on Nov. 8.The Final Stretch: With less than one month until Election Day, Republicans remain favored to take over the House, but momentum in the pitched battle for the Senate has seesawed back and forth.A Surprising Battleground: New York has emerged from a haywire redistricting cycle as perhaps the most consequential congressional battleground in the country. For Democrats, the uncertainty is particularly jarring.Arizona’s Governor’s Race: Democrats are openly expressing their alarm that Katie Hobbs, the party’s nominee for governor in the state, is fumbling a chance to defeat Kari Lake in one of the most closely watched races.Herschel Walker: The Republican Senate nominee in Georgia reportedly paid for an ex-girlfriend’s abortion, but members of his party have learned to tolerate his behavior.Mr. Biden’s three-state, four-day trip is also intended to boost the fortunes of Democratic candidates by using the presidential bully pulpit to highlight the party’s accomplishments. On Wednesday in Colorado, he stood next to Michael Bennet, one of the state’s two Democratic senators, to announce a new national monument — a key campaign promise for the embattled lawmaker.In Los Angeles on Thursday, Mr. Biden hailed the use of money from his infrastructure legislation to help complete a new subway line. During his remarks, he made certain to single out Representative Karen Bass, a Democrat who had fought for a provision that directs jobs on the project to local workers.“Local workers can be first in line for these jobs thanks to Karen,” Mr. Biden said. “I really mean it, Karen. Thank you very much.”At the community college in Irvine, Mr. Biden focused his attention on health care — and on Representative Katie Porter, a two-term Democrat running for re-election in a key swing district in Orange County.Ms. Porter, who is facing Scott Baugh, a Republican former state assemblyman, pushed for the drug pricing measure. At the event on Friday, Mr. Biden singled her out, crediting the success of Democratic legislation to her efforts to fight on behalf of her constituents..css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-ok2gjs{font-size:17px;font-weight:300;line-height:25px;}.css-ok2gjs a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.“That’s why Katie’s leadership and the work of the Democrats in Congress was so consequential,” he said. “Katie, I’m not just being nice because I’m in your district. It happens to be true. No, no. I mean, you’re a fighter. You’re decent. You’re honorable and everybody respects you.”Friday’s event at the Irvine Valley Community College was an official one, not a campaign rally. But Ms. Porter used her time at the podium to assail Republicans.“Every single Republican in Washington voted against patients, against families and against taxpayers,” she said. “In the Senate, Republican politicians voted to limit how much Americans can save on prescription drugs and to prevent all patients from getting insulin. And House Republican Leader Kevin McCarthy has vowed that next term it’s his priority to return Big Pharma its unchecked power to charge patients whatever it wants.”She called that a “slap in the face” to the Californians she represents.Republicans sought to portray the president’s efforts to bolster candidates’ prospects as in vain. “Joe Biden is the last person Democrat candidates want to see on the campaign trail,” Michael McAdams, the communications director for the National Republican Campaign Committee, said after the event, noting reports that Democrats recently shifted money away from some California districts to candidates need help more.“His policies are so unpopular House Democrats are being forced to abandon spending in California districts he won by double-digits,” Mr. McAdams said.Friday evening, Mr. Biden was scheduled to fly to Portland, Ore., a liberal community where the Democratic Party would not normally need the help of the sitting president. But Mr. Biden is hoping to help boost the fortunes of Tina Kotek, the Democratic candidate for governor.Although the state has not elected a Republican leader in decades, polls suggest that Ms. Kotek is in a tight, three-way race with Christine Drazan, the Republican candidate, and Betsy Johnson, a former Democrat who is being financed by Phil Knight, the co-founder of Nike. The White House is hoping that a visit by Mr. Biden will help underscore the party’s commitment to her.Republicans predicted that the president’s trip will not prevent their party from grabbing the top electoral prize in the state.“Joe Biden’s disastrous policies continue to hurt Oregon families, and there has been no bigger fan of his out-of-touch approach,” said Kaitlin Price, a spokeswoman for the Republican Governors Association, citing Ms. Kotek, Ms. Johnson and Kate Brown, the state’s current Democratic governor.“This last-ditch effort from national Democrats is proof of their hysteria as they watch Christine Drazan take hold of once deep-blue Oregon that is desperate for change,” Ms. Price said. More

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    Inflation was much hotter than expected, bad news for the Fed.

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    Inflation rose quickly in September and a key measure accelerated to the fastest pace since 1982, underlining the persistence of price increases.Prices continued to climb at a brutally rapid pace in September, with a key inflation index increasing at the fastest rate in 40 years, bad news for the Federal Reserve as it struggles to wrestle the cost of living back under control.Overall inflation climbed 8.2 percent over the year through September, according to the latest Consumer Price Index report on Thursday, a slight moderation from August but more than what economists had expected.Even more worrisome, underlying inflation trends are headed in the wrong direction. After stripping out fuel and food — which are volatile and removed to get a better sense of the trajectory — prices climbed 6.6 percent over the year through September. That was the quickest rate since 1982.Inflation has been rapid for a year and a half now, and it is proving stubborn even as the Fed mounts its most aggressive campaign in generations to slow the economy and bring price increases under control. Fast inflation has also triggered the highest Social Security cost-of-living adjustment in decades — an 8.7 percent increase in benefits to retired and disabled Americans, a move that was announced Thursday.Central bankers have quickly raised interest rates from near zero to a range of 3 to 3.25 percent, and investors expect a fourth straight three-quarter-point rate increase at the Fed’s next meeting, which concludes on Nov. 2. After the release of Thursday’s inflation data, they began to bet on another large move at the central bank’s December meeting.“The trend is very troubling,” said Blerina Uruci, a U.S. economist at T. Rowe Price.Markets swung wildly after the report, with stocks falling sharply initially but then surging higher as investors struggled to digest what the data meant for the future. The S&P 500 index closed up 2.6 percent.Higher Fed rates are already slowing the housing market, and are expected to slowly filter through the rest of the economy as they make it more expensive to borrow money for big purchases or business expansions. But consumer demand is taking time to crack: With jobs plentiful and wages rising, Americans are still spending.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    U.S. Job Growth Eases, but Is Too Strong to Suit Investors

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    The gain of 263,000 was shy of recent monthly totals but still robust. Stocks fell on fears of a harder, longer Fed campaign to fight inflation.Job growth eased slightly in September but remained robust, indicating that the economy was maintaining momentum despite higher interest rates. But the strong showing left many investors unhappy because they saw signs that the fight against inflation may become tougher and more prolonged.Employers added 263,000 jobs on a seasonally adjusted basis, the Labor Department said Friday, a decline from 315,000 in August. The number was the lowest since April 2021 but still solid by prepandemic standards. The unemployment rate fell to 3.5 percent, equaling a five-decade low.“If I had just woken up from a really long nap and seen these numbers, I would conclude that we still have one of the strongest job markets that we’ve ever enjoyed,” said Carl Tannenbaum, chief economist at Northern Trust.Officials at the Federal Reserve have been keeping a close eye on hiring and wages as they proceed with a series of rate increases meant to combat inflation. The job data indicates that, for now, they are doing so without tipping the economy into a recession that would throw millions out of work.But it also increases the prospect that the effort to subdue price increases will be more extended. For investors, that came as bad news, since higher interest rates raise costs for companies and weigh on stock prices.The S&P 500 recorded its worst one-day performance since mid-September, falling 2.8 percent and eroding gains from earlier in the week.Fed officials have signaled in speeches this week that they remain resolute in trying to wrestle inflation lower, and that they are waiting for clear evidence that the economy is headed back toward price stability before they pull back.Wage growth has subsided somewhat, at least compared with the trend a year ago. Average hourly earnings climbed 5 percent from a year earlier, roughly matching economists’ expectations but slowing down slightly from the prior annual reading.Wages are still growing, but less rapidly in some sectorsPercent change in earnings for nonmanagers since January 2019 by sector More

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    The Fed Wants to Quash Inflation. But Can It Do It More Gently?

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    Federal Reserve officials have raised rates five times this year as they try to beat back the worst inflation in 40 years, and the past three moves have been especially rapid. That has prompted Wall Street and policymakers to contemplate when the Fed might start to slow down.Jerome H. Powell, the Fed chair, has signaled that moving less rapidly will be appropriate at some point in the future, though he has declined to put a date on when that might begin. On Thursday, Lisa D. Cook, one of the Fed’s newest governors, echoed that stance, saying that “at some point” the central bank will decide to “slow the pace of increases while we assess the effects of our cumulative tightening on the economy and inflation.”Based on the central bank’s statements and economic projections, markets are betting heavily that the pace will not step down until December. But a debate is beginning to firm up ahead of the central bank’s meeting in early November: Some officials are open to a potential slowdown as soon as the meeting next month, while others believe that the central bank needs to push ahead with very rapid policy adjustments as it races to control inflation.Mary C. Daly, president of the Federal Reserve Bank of San Francisco, said she could potentially support a half-point move at the central bank’s meeting next month. While still a larger increase than in normal times, a half-point move would be less aggressive than the three-quarter-point change the Fed made at each of its last three meetings.Ms. Daly is less aggressive than the majority of her colleagues, favoring one percentage point of further rate increases before the end of the year — less than the at least 1.25 percentage points that most people on the committee view as warranted.“I think we don’t need to signal that we’re resolute anymore; I think people really understand that we’re resolute,” Ms. Daly said during an interview with The New York Times this week. “I am very open to stepping down the pace. But the data will help me determine whether I’m supportive of 75 followed by 25, or whether I’m supportive of 50 followed by 50.”Christopher Waller, a Fed governor, said on Thursday that inflation had not shaped up the way he would want “to support a slower pace of rate hikes” than the Fed had previously projected, and argued that a few more data points were unlikely to change his mind.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Less Turnover, Smaller Raises: Hot Job Market May Be Losing Its Sizzle

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    Unemployment is low, and hiring is strong. But there are signs that frenzied turnover and rapid wage growth are abating.Last year, Klaussner Home Furnishings was so desperate for workers that it began renting billboards near its headquarters in Asheboro, N.C., to advertise job openings. The steep competition for labor drove wages for employees on the furniture maker’s production floor up 12 to 20 percent. The company began offering $1,000 signing bonuses to sweeten the deal.“Consumer demand was through the roof,” said David Cybulski, Klaussner’s president and chief executive. “We just couldn’t get enough labor fast enough.”But in recent months, Mr. Cybulski has noticed that frenzy die down.Hiring for open positions has gotten easier, he said, and fewer Klaussner workers are leaving for other jobs. The company, which has about 1,100 employees, is testing performance rewards to keep workers happy rather than racing to increase wages. The $1,000 signing bonus ended in the spring.“No one is really chasing employees to the dollar anymore,” he said.By many measures, the labor market is still extraordinarily strong even as fears of a recession loom. The unemployment rate, which stood at 3.7 percent in August, remains near a five-decade low. There are twice as many job openings as unemployed workers available to fill them. Layoffs, despite some high-profile announcements in recent weeks, are close to a record low.But there are signs that the red-hot labor market may be coming off its boiling point.Major employers such as Walmart and Amazon have announced slowdowns in hiring; others, such as FedEx, have frozen hiring altogether.Americans in July quit their jobs at the lowest rate in more than a year, a sign that the period of rapid job switching, sometimes called the Great Resignation, may be nearing its end. Wage growth, which soared as companies competed for workers, has also slowed, particularly in industries like dining and travel where the job market was particularly hot last year.More broadly, many companies around the country say they are finding it less arduous to attract and retain employees — partly because many are paring their hiring plans, and partly because the pool of available workers has grown as more people come off the economy’s sidelines.The labor force grew by more than three-quarters of a million people in August, the biggest gain since the early months of the pandemic. Some executives expect hiring to keep getting easier as the economy slows and layoffs pick up.“Not that I wish ill on any people out there from a layoff perspective or whatever else, but I think there could be an opportunity for us to ramp some of that hiring over the coming months,” Eric Hart, then the chief financial officer at Expedia, told investors on the company’s earnings call in August.Taken together, those signals point to an economic environment in which employers may be regaining some of the leverage they ceded to workers during the pandemic months.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.August Jobs Report: Job growth slowed in August but stayed solid, suggesting that the labor market recovery remains resilient, even as companies pull back on hiring.Factory Jobs: American manufacturers have now added enough jobs to regain all that they shed during the pandemic — and then some.Missing Workers: The labor market appears hot, but the supply of labor has fallen short, holding back the economy. Here is why.Black Employment: Black workers saw wages and employment rates go up in the wake of the pandemic. But as the Federal Reserve tries to tame inflation, those gains could be eroded.That is bad news for workers, particularly those at the bottom of the pay ladder who have been able to take advantage of the hot labor market to demand higher pay, more flexible schedules and other benefits. With inflation still high, weaker wage growth will mean that more workers will find their standard of living slipping.But for employers — and for policymakers at the Federal Reserve — the calculation looks different. A modest cooling would be welcome after months in which employers struggled to find enough staff to meet strong demand, and in which rapid wage growth contributed to the fastest inflation in decades.Too pronounced a slowdown, however, could lead to a sharp rise in unemployment, which would almost certainly lead to a drop in consumer demand and create a new set of problems for employers.Leila and David Manshoory have struggled for months to recruit workers for their fast-growing skin care and beauty brand, Alleyoop. In recent weeks, however, that has begun to change. They have begun to get more applications from more qualified candidates, some of whom have been laid off by other e-commerce companies. And notably, applicants aren’t demanding the sky-high salaries they were last spring.“I think the tables are turning a little bit,” Mr. Manshoory said. “There are people who need to pay their bills and are realizing there might not be a million jobs out there.”Alleyoop, too, has pared its hiring plans somewhat in preparation for a possible recession. But not too much — Mr. Manshoory said he saw this as a moment to snap up talent that the three-year-old company might struggle to hire in a different economic environment.“You kind of want to lean in when other people are pulling back,” he said. “You just have more selection. There’s a lot of, unfortunately, talented people getting let go from really large companies.”The resilience of the labor market has surprised many economists, who expected companies to pull back on hiring as growth slowed and interest rates rose. Instead, employers have continued adding jobs at a rapid clip.Klaussner Home Furnishings, which has about 1,100 employees, is testing performance rewards to keep workers happy rather than racing to increase wages.Eamon Queeney for The New York Times“There are some signs in the labor market data that there’s been a bit of cooling since the beginning of the year, or even the spring, but it’s not a lot,” said Nick Bunker, director of North American economic research for the career site Indeed. “Maybe the temperature has ticked down a degree or two, but it’s still pretty high.”But Mr. Bunker said there was evidence that the frenzy that characterized the labor market over the past year and a half had begun to die down. Job openings have fallen steadily in Indeed’s data, which is more up to date than the government’s tally.And Mr. Bunker said the decline in voluntary quits was particularly notable because so much recent wage growth had come from workers moving between jobs in search of better pay.Recent research from economists at the Federal Reserve Banks of Dallas and St. Louis found that there had been a huge increase in poaching — companies hiring workers away from other jobs — during the recent hiring boom.If companies become less willing to recruit workers from competitors, and to pay the premium that doing so requires, or if workers become less likely to hop between jobs, that could lead wage growth to ease even if layoffs don’t pick up.There are hints that could be happening. A recent survey from another career site, ZipRecruiter, found that workers had become less confident in their ability to find a job and were putting more emphasis on finding a job they considered secure.“Workers and job seekers are feeling just a little bit less bold, a little bit more concerned about the future availability of jobs, a little bit more concerned about the stability of their own jobs,” said Julia Pollak, chief economist at ZipRecruiter.Some businesses, meanwhile, are becoming a bit less frantic to hire. A survey of small businesses from the National Federation of Independent Business found that while many employers still had open positions, fewer of them expected to fill those jobs in the next three months.More clues about the strength of the labor market could come in the upcoming months, the time of year when companies, including retailers, traditionally ramp up hiring for the holiday season. Walmart said in September that this year it would hire a fraction of the workers it did during the last holiday season.The signs of a cool-down extend even to leisure and hospitality, the sector where hiring challenges have been most acute. Openings in the sector have fallen sharply from the record levels of last year, and hourly earnings growth slowed to less than 9 percent in August from a rate of more than 16 percent last year.Until recently, staffing shortages at Biggby Coffee were so severe that many of the chain’s 300-plus stores had to close early some days, or in some cases not open at all. But while hiring remains a challenge, the pressure has begun to ease, said Mike McFall, the company’s co-founder and co-chief executive. One franchisee recently told him that 22 of his 25 locations were fully staffed and that only one was experiencing a severe shortage.A Biggby Coffee store in Sterling Heights, Mich. Until recently, staffing shortages at some locations were so severe that many of the chain’s 300-plus stores had to close early some days.Sarah Rice for The New York Times“We are definitely feeling the burden is lifting in terms of getting people to take the job,” Mr. McFall said. “We’re getting more applications, we’re getting more people through training now.”The shift is a welcome one for business owners like Mr. McFall. Franchisees have had to raise wages 50 percent or more to attract and retain workers, he said — a cost increase they have offset by raising prices.“The expectation by the consumer is that you are raising prices, and so if you don’t take advantage of that moment, you are going to be in a pickle,” he said, referring to the pressure to increase wages. “So you manage it by raising prices.”So far, Mr. McFall said, higher prices haven’t deterred customers. Still, he said, the period of severe staffing shortages is not without its costs. He has seen a loss in sales, as well as a loss of efficiency and experienced workers. That will take time to rebuild, he said.“When we were in crisis, it was all we were focused on,” he said. “So now that it feels like the crisis is mitigating, that it’s getting a little better, we can now begin to focus on the culture in the stores and try to build that up again.” More

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    Inflation Has Hit Tenants Hard. What About Their Landlords?

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    Publicly traded corporate landlords are reporting some of their highest margins ever, while smaller operators say rent increases are eaten up by costs.Of all the categories driving inflation in recent months, among the largest — and most persistent — is rent.In buildings with more than 50 units, tenants in one-bedroom apartments have been handed new leases costing about 17 percent more on average than they did in March 2020, according to CoStar Group, a Washington-based real estate data company. The Labor Department’s rent indicator — which includes ongoing leases, not just renewals — has steadily risen, to 6.7 percent last month over the previous August.So while tenants absorb rent increases that often exceed their income gains, are landlords minting money? It depends on the landlord.Publicly traded owners of sprawling real estate portfolios, like Invitation Homes, have enjoyed some of their best returns over the past few quarters. Things look very different, however, for Neal Verma, whose company manages 6,000 apartments in the Houston area.Earlier this year, Mr. Verma experimented with raising rents enough to cover the cost of spiking wages, property taxes, insurance and maintenance. Turnover doubled in the properties where he tried it, as people left for nearby buildings.“It’s crushing our margins,” Mr. Verma said. “Our profits from last year have evaporated, and we’re running at break-even at a number of properties. There’s some people who think landlords must be making money. No. We’ve only gone up 12 to 14 percent, and our expenses have gone up 30 percent.”Overall, the ferocious run-up in rents has been driven by tenants’ desire for more space and location flexibility created by remote work; rising interest rates that have locked would-be buyers out of the for-sale market; and cost increases on delayed maintenance. But the one factor landlords track most closely is their customers’ ability to absorb higher rents.Higher-earning tenants, who flock to newer buildings with more amenities, have been more willing to accept rent increases. Low-income renters, while seeing faster wage growth, have borne the brunt of higher prices for necessities like groceries and gasoline, and rents in older buildings are rising at a slower rate than in newer, nicer ones.“The reality is that rents can only rise as incomes rise,” said Jay Parsons, chief economist at the real estate data firm RealPage, noting that rent averages 23 percent of the monthly incomes across the apartments that RealPage tracks. “If people can’t afford it, you can’t lease it.”Geography also matters. Even among the largest landlords, those with a presence in Sun Belt cities such as Miami, Tampa, Nashville and Phoenix saw far faster rent growth than high-cost coastal markets like San Francisco, where rents fell substantially during the pandemic lockdowns as white-collar workers fled for remote locations.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Strong Dollar Is Good for the US but Bad for the World

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    The Federal Reserve may have no choice but to wage a relentless inflation fight, but countries rich and poor are feeling the pain of plunging currencies.The Federal Reserve’s determination to crush inflation at home by raising interest rates is inflicting profound pain in other countries — pushing up prices, ballooning the size of debt payments and increasing the risk of a deep recession.Those interest rate increases are pumping up the value of the dollar — the go-to currency for much of the world’s trade and transactions — and causing economic turmoil in both rich and poor nations. In Britain and across much of the European continent, the dollar’s acceleration is helping feed stinging inflation.On Monday, the British pound touched a record low against the dollar as investors balked at a government tax cut and spending plan. And China, which tightly controls its currency, fixed the renminbi at its lowest level in two years while taking steps to manage its decline.Weakening CurrenciesHow the values of global currencies have changed against the U.S. dollar from three months ago

    Data through 3 p.m. Eastern time MondaySource: FactSetBy The New York TimesIn Nigeria and Somalia, where the risk of starvation already lurks, the strong dollar is pushing up the price of imported food, fuel and medicine. The strong dollar is nudging debt-ridden Argentina, Egypt and Kenya closer to default and threatening to discourage foreign investment in emerging markets like India and South Korea.“For the rest of the world, it’s a no-win situation,” said Eswar Prasad, an economics professor at Cornell and author of several books on currencies. At the same time, he said, the Fed has no choice but to act aggressively to control inflation: “Any delay in action could make things potentially even worse.”Policy decisions made in Washington frequently reverberate widely. The United States is a superpower with the world’s largest economy and hefty reserves of oil and natural gas. When it comes to global finance and trade, though, its influence is outsize.That is because the dollar is the world’s reserve currency — the one that multinational corporations and financial institutions, no matter where they are, most often use to price goods and settle accounts. Energy and food tend to be priced in dollars when bought and sold on the world market. So is a lot of the debt owed by developing nations. Roughly 40 percent of the world’s transactions are done in dollars, whether the United States is involved or not, according to a study done by the International Monetary Fund.And now, the value of the dollar compared with other major currencies like the Japanese yen has reached a decades-long high. The euro, used by 19 nations across Europe, reached 1-to-1 parity with the dollar in June for the first time since 2002. The dollar is clobbering other currencies as well, including the Brazilian real, the South Korean won and the Tunisian dinar.One reason is the string of crises that have rocked the globe including the coronavirus pandemic, supply chain chokeholds, Russia’s invasion of Ukraine and the series of climate disasters that have imperiled the world’s food and energy supply. In an anxious world, the dollar has traditionally been a symbol of stability and security. The worse things get, the more people buy dollars. On top of that, the economic outlook in the United States, however cloudy, is still better than in most other regions.In Britain, the pound touched a record low against the dollar.Andrew Testa for The New York TimesMillions are at risk of famine in Somalia, which is facing extreme drought and a jump in food prices.Ed Ram/Getty ImagesChina set its currency at the lowest point in two years on Monday.Mark R Cristino/EPA, via ShutterstockRising interest rates make the dollar all the more alluring to investors by ensuring a better return. That, in turn, means they are investing less in emerging markets, which puts further strains on those economies.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Central Banks Accept Pain Now, Fearing Worse Later

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    Federal Reserve officials and their counterparts around the world are trying to defeat inflation by rapidly raising interest rates. They know it will come at a cost.A day after the Federal Reserve lifted interest rates sharply and signaled more to come, central banks across Asia and Europe followed suit on Thursday, waging their own campaigns to crush an outbreak of inflation that is bedeviling consumers and worrying policymakers around the globe.Central bankers typically move slowly. That’s because their policy tools are blunt and work with a lag. The interest rate increases taking place from Washington to Jakarta will need months to filter out across the global economy and take full effect. Jerome H. Powell, the Fed chair, once likened policymaking to walking through a furnished room with the lights off: You go slowly to avoid a painful outcome.Yet officials, learning from a history that has illustrated the perils of taking too long to stamp out price increases, have decided that they no longer have the luxury of patience.Inflation has been relentlessly rapid for a year and a half now. The longer that remains the case, the greater the risk that it is going to become a permanent feature of the economy. Employment contracts might begin to factor in cost-of-living increases, companies might begin to routinely raise prices and inflation might become part of the fabric of society. Many economists think that happened in the 1970s, when the Fed tolerated out-of-control price increases for years — allowing an “inflationary psychology” to take hold that later proved excruciating to crush.But the aggressiveness of the monetary policy action now underway also pushes central banks into new and risky territory. By tightening quickly and simultaneously when growth in China and Europe is already slowing and supply chain pressures are easing, global central banks risk overdoing it, some economists warn. They may plunge economies into recessions that are deeper than necessary to curb inflation, sending unemployment significantly higher.“The margin of error now is very thin,” said Robin Brooks, chief economist at the Institute of International Finance. “A lot of this comes down to judgment, and how much emphasis to put on the 1970s scenario.”In the 1970s, Fed policymakers did lift interest rates in a bid to control inflation, but they backed off when the economy began to slow. That allowed inflation to remain elevated for years, and when oil prices spiked in 1979, it reached untenable levels. The Fed, under Paul A. Volcker, ultimately raised rates to nearly 20 percent — and sent unemployment soaring to more than 10 percent — in an effort to wrestle the price increases down.That example weighs heavily on policymakers’ minds today.“We think that a failure to restore price stability would mean far greater pain later on,” Mr. Powell said at his news conference on Wednesday, after the Fed raised rates three-quarters of a percentage point for a third straight time. The Fed expects to raise borrowing costs to 4.4 percent next year in the fastest tightening campaign since the 1980s.The Bank of England raised interest rates half a point to 2.25 percent on Thursday, even as it said the United Kingdom might already be in a recession. The European Central Bank is similarly expected to continue raising rates at its meeting in October to combat high inflation, even as Russia’s war in Ukraine throws Europe’s economy into turmoil.As the major monetary authorities lift borrowing costs, their trading partners are following suit, in some cases to avoid big moves in their currencies that could push up local import prices or cause financial instability. On Thursday, Indonesia, Taiwan, the Philippines, South Africa and Norway lifted rates, and a large move by Switzerland’s central bank ended the era of below-zero interest rates in Europe. Japan has comparatively low inflation and is keeping rates low, but it intervened in currency markets for the first time in 24 years on Thursday to prop up the yen in light of all of the action by its counterparts.The wave of central bank action is expected to have consequences, working by design to sharply slow both interconnected commerce and national economies. The Fed, for instance, sees its moves pushing U.S. unemployment to 4.4 percent in 2023, up from the current 3.7 percent.A housing development in Phoenix. Climbing interest rates are already making it more expensive to borrow money to buy a car or purchase a house in many nations.Adriana Zehbrauskas for The New York TimesAlready, the moves are beginning to have an impact. Climbing interest rates are making it more expensive to borrow money to buy a car or a house in many nations. Mortgage rates in the United States are back above 6 percent for the first time since 2008, and the housing market is cooling down. Markets have swooned this year in response to the tough talk coming from central banks, reducing the amount of capital available to big companies and cutting into household wealth.Yet the full effect could take months or even years to be felt.Rates are rising from low levels, and the latest moves have not yet had time to fully play out. In continental Europe and Britain, the war in Ukraine rather than monetary tightening is pushing economies toward recession. And in the United States, where the fallout from the war is far less severe, hiring and the job market remain strong, at least for now. Consumer spending, while slowing, is not plummeting.That is why the Fed believes it has more work to do to slow the economy — even if that increases the risk of a downturn.“We have always understood that restoring price stability while achieving a relatively modest increase in unemployment, and a soft landing, would be very challenging,” Mr. Powell said on Wednesday. “No one knows whether this process will lead to a recession, or if so, how significant that recession would be.”Many global central bankers have painted today’s inflation burst as a situation in which their credibility is on the line.“For the first time in four decades, central banks need to prove how determined they are to protect price stability,” Isabel Schnabel, an executive board member of the European Central Bank, said at a Fed conference in Wyoming last month.A FedEx worker making deliveries in Miami Beach. Consumer spending in the United States, while slowing, is not plummeting.Scott McIntyre for The New York TimesBut that does not mean that the policy path the Fed and its counterparts are carving out is unanimously agreed upon — or unambiguously the correct one. This is not the 1970s, some economists have pointed out. Inflation has not been elevated for as long, supply chains appear to be healing and measures of inflation expectations remain under control.Mr. Brooks at the Institute of International Finance sees the pace of tightening in Europe as a mistake, and thinks that the Fed, too, could overdo it at a time when supply shocks are fading and the full effects of recent policy moves have yet to play out.Maurice Obstfeld, an economist at the Peterson Institute for International Economics and a former chief economist of the International Monetary Fund, wrote in a recent analysis that there is a risk that global central banks are not paying enough attention to one another.“Central banks clearly are scrambling to raise interest rates as inflation runs at levels not seen for nearly two generations,” he wrote. “But there can be too much of a good thing. Now is the time for monetary policymakers to put their heads up and look around.”Still, at many central banks around the world — and clearly at Mr. Powell’s Fed — policymakers are treating it as their duty to remain resolute in the fight against price increases. And that is translating into forceful action now, regardless of the imminent and uncertain costs.Mr. Powell may have once warned that moving quickly in a dark room could end painfully. But now, it’s as if the room is on fire: The threat of a stubbed toe still exists, but moving slowly and cautiously risks even greater peril. More