Prices (Fares, Fees and Rates)

More stories

  • 138 Shares189 Views

    in Economy

    Inflation Fears Rise as Prices Surge for Lumber, Cars and More

    by

    Federal Reserve officials believe low and stable price expectations give them room to heal the job market. But what if outlooks change?Turn on the news, scroll through Facebook, or listen to a White House briefing these days and there’s a good chance you’ll catch the Federal Reserve’s least-favorite word: Inflation. If that bubbling popular concern about prices gets too ingrained in America’s psyche, it could spell trouble for the nation’s central bank. More

  • 63 Shares159 Views

    in Economy

    Inflation Is Here. What Now?

    by

    Prices are rising fast, in ways that seem temporary, yet this could change expectations in ways that are self-reinforcing.Rising prices for things like lumber reflect rising demand meeting a supply that cannot be immediately and easily increased.Rogelio V. Solis/Associated PressThe central fact of the American economy in mid-2021 is that demand for all sorts of goods and services has surged. But supplies are coming back slowly, with the economy acting like a creaky machine that was turned off for a year and has some rusty parts.The result, as underlined in new government data this week, is shortages and price inflation across many parts of the economy. That is putting the Biden administration and the Federal Reserve in a jam that is only partly of their own making.Higher prices and the other problems that result from an economy that reboots itself are frustrating, but should be temporary. Still, the longer that the surges in prices continue and the more parts of the economy that they encompass, the greater the chances that Americans’ psychology about prices and inflation could shift in ways that become self-sustaining.For the last few decades, companies have resisted raising prices or paying higher wages because they felt that doing so would cost them too much business. That put a damper on inflation across the economy. The question is whether current circumstances are evolving in a way that could change that.“Now the genie’s out of the bottle,” said Kristin Forbes, an economist at M.I.T. and a former official at the U.S. Treasury and the Bank of England. “If everybody else is raising prices, it becomes a lot easier for you to do that, too.”To understand the bewildering mix of forces at play, consider what’s going on at your nearest used-car lot.The price of used cars and trucks rose 10 percent in April, according to the latest federal data, one major factor in pushing the Consumer Price Index to its steepest year-over-year jump in 13 years. People in the car business say that this has not one cause, but several — each with different implications for the economy and for policy.Some involve the microeconomic decisions made by companies and consumers many months ago that are still rippling through the automobile market.Rental car companies reduced their fleets during the pandemic-induced collapse in travel, and are now struggling to rebuild their inventories — and therefore are not selling the used cars that in a normal market they would continually be unloading. New car sales fell last year during the pandemic, resulting in fewer trade-ins finding their way into the used-car market, and now new car sales are being held back by a shortage of microchips.There isn’t much that government policy can do to fix those problems, unless it involves a time machine. But government policies are part of the story.The combined $2,000 per-person stimulus checks most Americans received in the early months of the year amount to a healthy down payment for many families. Generous unemployment benefits are helping contain the number of delinquent auto loans, and in turn the supplies of repossessed cars on the market. Low interest rate policies from the Fed have made financing cheap.But let’s imagine that, in response to the problem, the Fed raised interest rates or that Congress increased taxes to claw back stimulus payments.Those actions alone wouldn’t create more microchips or let rental car companies undo decisions from a year ago. Higher interest rates or taxes might even make things worse, if the actions led suppliers to hold back on investing in new capacity for fear demand would fall in the future.The used-car market may start to stabilize late this year, but the problems are unlikely to be fully worked out until 2022, said Jessica Caldwell, an auto industry analyst with Edmunds.“The only winners here are people that have a vehicle they want to get rid of,” she said. “If you have a car to sell that you don’t need, it is bonkers what you can get for it.”At any given time, the prices for some things are rising and those for others are falling, for all kinds of idiosyncratic reasons. Policymakers generally try not to react to those moves; they are essential to how markets work. If there is a shortage of limes, their prices spike and people use more lemons.What is unusual about this moment is that prices for so many things are rising at once, albeit for different reasons. Some, like airfares, are simply returning to prepandemic levels, which shows up in inflation data as a price increase. Others, like lumber prices, reflect high demand along with supply that is fixed in the short run.And still others, like the spike in East Coast gasoline prices after a cyberattack shut down a major pipeline, are truly random events that tell us virtually nothing about underlying supply and demand or future inflation.Some other sectors seem poised to experience price rises. Restaurants, for example, are complaining of severe labor shortages that are forcing them to curtail service or sharply raise pay for line cooks and dishwashers. If they try to reflect those higher costs in their prices, it will cause the price of food away from home to start rising faster than the (already fairly high) 3.8 percent figure over the last year.Professional inflation-watchers are on close watch for signs that these forces might be unleashing a form of thinking about price dynamics unseen since the early 1980s, when prices rose in part because everyone expected them to.The Fed is betting that won’t happen — that even if there are several months of surging prices, it will be at worst a one-time adjustment, and potentially something that reverses as old spending patterns return and workers return to their jobs.“If past experience is any guide, production will rise to meet the level of goods demand before too long,” the Fed governor Lael Brainard said in a speech this week. “A limited period of pandemic-related price increases is unlikely to durably change inflation dynamics.”For now, movements in key financial markets mostly align with the Fed view.Futures contracts for major commodities like oil and copper, for example, suggest that traders expect prices to fall slightly in the years ahead, not rise further.And in the bond market, even after a surge in longer-term interest rates following the high inflation reading Wednesday, most signs point to future inflation consistent with the 2 percent the Fed aims for.Still, the level of future inflation implied by those bond prices has risen significantly in the last few weeks, meaning further moves are likely to increase worries that the inflation issues will be not-so-transitory after all. And the pattern could change abruptly if more evidence starts to arrive that the outlook for inflation is becoming unmoored.“We aren’t obviously on the way to a very high and persistent inflation outcome,” said Brian Sack, director of global economics at the hedge fund D.E. Shaw and a former senior Federal Reserve official. “But we’re at an inflection point, in that the rise in inflation expectations to date has been a policy success, but a rise from here could become a policy problem.”The Fed may believe that the evidence emerging in various corners of the economy is a one-time occurrence that will fade into memory before too long. The Biden administration is betting its agenda on the same idea.Ultimately, what matters more than whatever the bond market does is how ordinary Americans who make everyday economic decisions — demanding raises or not, paying more for a car or not — view things. Can they wait for the complex machinery of the American economy to fully crank into gear? More

  • 100 Shares179 Views

    in Economy

    Consumer Goods Are Going to Get More Expensive

    by

    #styln-signup .styln-signup-wrapper { max-width: calc(100% – 40px); width: 600px; margin: 20px auto; padding-bottom: 20px; border-bottom: 1px solid #e2e2e2; } Procter & Gamble is raising prices on items like Pampers and Tampax in September. Kimberly-Clark said in March that it will raise prices on Scott toilet paper, Huggies and Pull-Ups in June, a move that is […] More

  • 213 Shares169 Views

    in Economy

    The inflation rate could jump, but there’s a simple reason not to read too much into it.

    by

    When the government releases its latest consumer price inflation reading at 8:30 a.m. on Tuesday, Wall Street investors will be eagerly watching the data point, which is expected to jump starting this month.Inflation data matters because it gives an up-to-date snapshot of how much it costs Americans to buy the goods and services they regularly consume. And because the Federal Reserve is charged in part with keeping increases in prices contained, the data can influence its decisions — and those affect financial markets.But there’s a big reason not to read too much into the expected bounce in March and April — and it lies in so-called base effects.Inflation Is Set to Jump More

  • 125 Shares149 Views

    in Economy

    Fear of Inflation Finds a Foothold in the Bond Market

    by

    There is little evidence for a big jump in prices, but some economists and bond investors fear President Biden’s policies could lead to inflation.The so-called bond vigilantes may be back, 30 years after they led a sell-off in Treasury securities over the prospect of higher government spending by a new Democratic administration.The Federal Reserve has downplayed the risk of inflation, and many experts discount the danger of a sustained rise in prices. But there is an intense debate underway on Wall Street about the prospects for higher inflation and rising interest rates.Yields on 10-year Treasury notes have risen sharply in recent weeks, a sign that traders are taking the inflation threat more seriously. If the trend continues, it will put bond investors on a collision course with the Biden administration, which recently won passage of a $1.9 trillion stimulus bill and wants to spend trillions more on infrastructure, education and other programs.The potential confrontation made some market veterans recall the 1990s, when yields on Treasury securities lurched higher as the Clinton administration considered plans to increase spending. As a result, officials soon turned to deficit reduction as a priority.Ed Yardeni, an independent economist, coined the term bond vigilante in the 1980s to describe investors who sell bonds amid signs that fiscal deficits are getting out of hand, especially if central bankers and others don’t act as a counterweight.As bond prices fall and yields rise, borrowing becomes more expensive, which can force lawmakers to spend less.“They seem to mount up and form a posse every time inflation is making a comeback,” Mr. Yardeni said. “Clearly, they’re back in the U.S. So while it’s fine for the Fed to argue inflation will be transitory, the bond vigilantes won’t believe it till they see it.”Yields on the 10-year Treasury note hit 1.75 percent last week before falling back this week, a sharp rise from less than 1 percent at the start of the year.Not all the sellers necessarily oppose more government spending — some are simply acting on a belief that yields will move higher as economic activity picks up, or jumping on a popular trade. But the effect is the same, pushing yields higher as prices for bonds fall.Yields remain incredibly low by historical standards and even recent trading. Two years ago, the 10-year Treasury paid 2.5 percent — many bond investors would happily welcome a return to those yields given that a government note bought today pays a relative pittance in interest. And during the Clinton administration, yields on 10-year Treasurys rose to 8 percent, from 5.2 percent between October 1993 and November 1994.Still, Mr. Yardeni believes the bond market is saying something policymakers today ought to pay attention to.“The ultimate goal of the bond vigilante is to be heard, and they are blowing the whistle,” he said. “It could come back to bite Biden’s plans.”Yet evidence of inflation remains elusive. Consumer prices, excluding the volatile food and energy sectors, have been tame, as have wages. And even before the pandemic, unemployment plumbed lows not seen in decades without stoking inflation.Indeed, the bond vigilantes remain outliers. Even many economists at financial firms who expect faster growth as a result of the stimulus package are not ready to predict inflation’s return.“The inflation dynamic is not the same as it was in the past,” said Carl Tannenbaum, chief economist at Northern Trust in Chicago. “Globalization, technology and e-commerce all make it harder for firms to increase prices.”What’s more, with more than nine million jobs lost in the past year and an unemployment rate of 6.2 percent, it would seem there is plenty of slack in the economy.That’s how Alan S. Blinder, a Princeton economist who was an economic adviser to President Bill Clinton and is a former top Fed official, sees it. Even if inflation goes up slightly, Mr. Blinder believes the Fed’s target for inflation, set at 2 percent, is appropriate.“Bond traders are an excitable lot, and they go to extremes,” he said. “If they are true to form, they will overreact.”Indeed, there have been rumors of the bond vigilantes’ return before, like in 2009 as the economy began to creep out of the deep hole of the last recession and rates inched higher. But in the ensuing decade, both yields and inflation remained muted. If anything, deflation was a greater concern than rising prices.It is not just bond traders who are concerned. Some of Mr. Blinder’s colleagues from the Clinton administration are warning that the conventional economic wisdom hasn’t fully accepted the possibility of higher rates or an uptick in prices..css-yoay6m{margin:0 auto 5px;font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:1.125rem;line-height:1.3125rem;color:#121212;}@media (min-width:740px){.css-yoay6m{font-size:1.25rem;line-height:1.4375rem;}}.css-1dg6kl4{margin-top:5px;margin-bottom:15px;}.css-k59gj9{display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-flex-direction:column;-ms-flex-direction:column;flex-direction:column;width:100%;}.css-1e2usoh{font-family:inherit;display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-box-pack:justify;-webkit-justify-content:space-between;-ms-flex-pack:justify;justify-content:space-between;border-top:1px solid #ccc;padding:10px 0px 10px 0px;background-color:#fff;}.css-1jz6h6z{font-family:inherit;font-weight:bold;font-size:1rem;line-height:1.5rem;text-align:left;}.css-1t412wb{box-sizing:border-box;margin:8px 15px 0px 15px;cursor:pointer;}.css-hhzar2{-webkit-transition:-webkit-transform ease 0.5s;-webkit-transition:transform ease 0.5s;transition:transform ease 0.5s;}.css-t54hv4{-webkit-transform:rotate(180deg);-ms-transform:rotate(180deg);transform:rotate(180deg);}.css-1r2j9qz{-webkit-transform:rotate(0deg);-ms-transform:rotate(0deg);transform:rotate(0deg);}.css-e1ipqs{font-size:1rem;line-height:1.5rem;padding:0px 30px 0px 0px;}.css-e1ipqs a{color:#326891;-webkit-text-decoration:underline;text-decoration:underline;}.css-e1ipqs a:hover{-webkit-text-decoration:none;text-decoration:none;}.css-1o76pdf{visibility:show;height:100%;padding-bottom:20px;}.css-1sw9s96{visibility:hidden;height:0px;}#masthead-bar-one{display:none;}#masthead-bar-one{display:none;}.css-1cz6wm{background-color:white;border:1px solid #e2e2e2;width:calc(100% – 40px);max-width:600px;margin:1.5rem auto 1.9rem;padding:15px;box-sizing:border-box;font-family:’nyt-franklin’,arial,helvetica,sans-serif;text-align:left;}@media (min-width:740px){.css-1cz6wm{padding:20px;width:100%;}}.css-1cz6wm:focus{outline:1px solid #e2e2e2;}#NYT_BELOW_MAIN_CONTENT_REGION .css-1cz6wm{border:none;padding:20px 0 0;border-top:1px solid #121212;}Frequently Asked Questions About the New Stimulus PackageThe stimulus payments would be $1,400 for most recipients. Those who are eligible would also receive an identical payment for each of their children. To qualify for the full $1,400, a single person would need an adjusted gross income of $75,000 or below. For heads of household, adjusted gross income would need to be $112,500 or below, and for married couples filing jointly that number would need to be $150,000 or below. To be eligible for a payment, a person must have a Social Security number. Read more. Buying insurance through the government program known as COBRA would temporarily become a lot cheaper. COBRA, for the Consolidated Omnibus Budget Reconciliation Act, generally lets someone who loses a job buy coverage via the former employer. But it’s expensive: Under normal circumstances, a person may have to pay at least 102 percent of the cost of the premium. Under the relief bill, the government would pay the entire COBRA premium from April 1 through Sept. 30. A person who qualified for new, employer-based health insurance someplace else before Sept. 30 would lose eligibility for the no-cost coverage. And someone who left a job voluntarily would not be eligible, either. Read moreThis credit, which helps working families offset the cost of care for children under 13 and other dependents, would be significantly expanded for a single year. More people would be eligible, and many recipients would get a bigger break. The bill would also make the credit fully refundable, which means you could collect the money as a refund even if your tax bill was zero. “That will be helpful to people at the lower end” of the income scale, said Mark Luscombe, principal federal tax analyst at Wolters Kluwer Tax & Accounting. Read more.There would be a big one for people who already have debt. You wouldn’t have to pay income taxes on forgiven debt if you qualify for loan forgiveness or cancellation — for example, if you’ve been in an income-driven repayment plan for the requisite number of years, if your school defrauded you or if Congress or the president wipes away $10,000 of debt for large numbers of people. This would be the case for debt forgiven between Jan. 1, 2021, and the end of 2025. Read more.The bill would provide billions of dollars in rental and utility assistance to people who are struggling and in danger of being evicted from their homes. About $27 billion would go toward emergency rental assistance. The vast majority of it would replenish the so-called Coronavirus Relief Fund, created by the CARES Act and distributed through state, local and tribal governments, according to the National Low Income Housing Coalition. That’s on top of the $25 billion in assistance provided by the relief package passed in December. To receive financial assistance — which could be used for rent, utilities and other housing expenses — households would have to meet several conditions. Household income could not exceed 80 percent of the area median income, at least one household member must be at risk of homelessness or housing instability, and individuals would have to qualify for unemployment benefits or have experienced financial hardship (directly or indirectly) because of the pandemic. Assistance could be provided for up to 18 months, according to the National Low Income Housing Coalition. Lower-income families that have been unemployed for three months or more would be given priority for assistance. Read more.Robert E. Rubin, Mr. Clinton’s second Treasury secretary, echoed that concern but took pains to support the stimulus package.“There is a deep uncertainty,” Mr. Rubin said in an interview. “We needed this relief bill, and it served a lot of useful purposes. But we now have an enormous amount of stimulus, and the risks of inflation have increased materially.”Mr. Rubin acknowledged that predicting inflation was very difficult, but he said policymakers ought to be ready to fight it. “If inflationary pressures do take off, it’s important to get ahead of them quickly before they take on a life of their own.”The Federal Reserve has plenty of options. Not only is it buying up debt, which keeps yields down, but the Fed chair, Jerome H. Powell, has called for keeping monetary policy relatively loose for the foreseeable future. If higher prices do materialize, the Fed could halt asset purchases and raise rates sooner.“We’re committed to giving the economy the support that it needs to return as quickly as possible to a state of maximum employment and price stability,” Mr. Powell said at a news conference last week. That help will continue “for as long as it takes.”While most policymakers expect faster growth, falling unemployment and a rise in inflation to above 2 percent, they nonetheless expect short-term rates to stay near zero through 2023.But the Fed’s ability to control longer-term rates is more limited, said Steven Rattner, a veteran Wall Street banker and former New York Times reporter who served in the Obama administration.“At some point, if this economy takes off bigger than any one of us expect, the Fed will have to raise rates, but it’s not this year’s issue and probably not next year’s issue,” he said. “But we are in uncharted waters, and we are to some extent playing with fire.”The concerns about inflation expressed by Mr. Rattner, Mr. Rubin and others has at least a little to do with a generational angst, Mr. Rattner, 68, points out. They all vividly remember the soaring inflation of the 1970s and early 1980s that prompted the Fed to raise rates into the double digits under the leadership of Paul Volcker.The tightening brought inflation under control but caused a deep economic downturn.“People my age remember well the late 1970s and 1980s,” Mr. Rattner said. “I was there, I covered it for The Times, and lived through it. Younger people treat it like it was the Civil War.”Some younger economists, like Gregory Daco of Oxford Economics, who is 36, think these veterans of past inflation scares are indeed fighting old wars. Any rise in inflation above 2 percent is likely to be transitory, Mr. Daco said. Bond yields are up, but they are only returning to normal after the distortions caused by the pandemic.“If you have memories of high inflation and low growth in the 1970s, you may be more concerned with it popping up now,” he said. “But these are very different circumstances today.” More

  • 125 Shares189 Views

    in Economy

    Lebanon’s Financial Collapse Hits Where It Hurts: The Grocery Store

    by

    The country’s currency has sunk to a new low against the dollar, sending prices for once affordable foods soaring out of reach.BEIRUT, Lebanon — In normal times, Ziad Hassan, a grocery store manager in Beirut, would get a daily email from his chain’s management telling him which prices needed to be adjusted and by how much.But as Lebanon’s currency has collapsed, sending the economy into a tailspin, the emails have come as often as three times a day, ordering price increases across the store.“We have to change everything,” an exasperated Mr. Hassan said, adding that his employees often weren’t even able to finish marking one price increase before the next one arrived. “It’s crazy.”The country’s economic distress grew more acute last week as the Lebanese pound sank to 15,000 to the dollar on the black market — its lowest level ever — sucking value from people’s salaries as prices for once affordable goods soared out of reach. It has since rebounded to about 12,000.Lebanon has been grappling with a web of economic and political crises since late 2019 that have led to rampant unemployment, skyrocketing prices, road closures by angry protesters and a government with no clear plan to slow the descent. A catastrophic explosion in Beirut’s port in August, which killed 190 people and left a large swath of the capital in ruins, only deepened the misery.In a country where most products are imported, the currency collapse has left no sector unaffected.The catastrophic explosion at Beirut’s port in August last year has deepened the misery in Lebanon.Diego Ibarra Sanchez for The New York TimesFood prices had risen 400 percent as of December compared with a year earlier, according to government statistics, while prices for clothing and shoes had gone up 560 percent and hotels and restaurants more than 600 percent.Scores of pharmacies across the country went on strike last Friday to protest conditions that have left them without some medicines and cut into their profits. Professionals including lawyers, teachers, doctors and university professors have watched the value of their salaries shrink. Many others have been pushed into poverty.In August, the United Nations said that more than 55 percent of Lebanon’s population had become poor, nearly double the number from the year before. Extreme poverty had increased threefold to 23 percent. And the situation has worsened since.The crisis springs from the collapse of a policy by Lebanon’s central bank to keep the Lebanese pound, or lira, pegged to the dollar at a rate of about 1,500 to 1 since 1997. That allowed people to use the two currencies interchangeably and made it easy for merchants selling products in pounds to convert their profits into dollars to pay for imports.But the state’s ability to maintain the peg faltered in late 2019, when mass protests erupted over decades of political corruption and poor governance. Since then, two governments have resigned and the gap between the pound and the dollar has widened. Western and United Nations officials’ calls for reforms, which could unlock foreign aid and a potential bailout from the International Monetary Fund, have gone unheeded.For many Lebanese, the most personal element of the crisis is the grocery store, where products once considered staples have vanished and other essentials have tripled or quadrupled in price. There has been a run on staples like oil, flour, sugar and rice.“Everything is soaring,” said Suheir al-Jizini, 60, after realizing that the price of the jug of cooking oil she had bought last week was now two-thirds higher. “I’m really shocked.”Riot police standing guard in front of Lebanon’s Central Bank in Beirut last week during a demonstration over the rising cost of living and low purchasing power of the Lebanese pound.Wael Hamzeh/EPA, via ShutterstockShe had come to the store planning to also buy laundry detergent and pasta, but realized she didn’t have enough cash. She said her husband brought in 750,000 pounds per month as a driver. That used to be worth $500 but was now less than $60.The World Food Program said in November that food prices in Lebanon had increased 423 percent since October 2019, the largest jump since monitoring began in 2007. Prices have continued to rise since, putting acute pressure on the poor.Faten Haidar, 29, said she was struggling to pull together meals for her three children as food prices shot up and her husband’s earnings from his coffee stand declined. Speaking by telephone from the northern city of Tripoli, she said that she had only labneh — a strained yogurt — in the fridge and that she was already in debt to her local shop.“I don’t know how to pay them,” she said.Other essentials also depleted her funds, she said, like sanitary pads, whose price had quadrupled. That burden will increase when her 12-year-old daughter reaches puberty.“I can’t afford mine,” she said. “How can I afford hers?”The value of soldiers’ and police officers’ salaries has also fallen, heightening concerns that social unrest and crime will increase. This month, Mohammed Fahmy, the interior minister, who oversees the security forces, said those salaries had “reached rock bottom.”Stocking up at a gas station in Beirut. The price of fuel has also increased.Wael Hamzeh/EPA, via Shutterstock“Three months ago, I would have said the security situation is starting to break down,” Mr. Fahmy told a local news network. “Now, I am saying it has broken down.”Addressing military leaders, the head of the Lebanese Army, Gen. Joseph Aoun, earlier this month issued a rare public criticism of the leaders in Lebanon’s sect-based political system, warning them that his soldiers were also “suffering and going hungry.”Addressing the leaders, he asked: “Where are we going? What do you intend to do?”Parliament recently authorized a $246 million loan from the World Bank to provide cash assistance to poor families, but no significant efforts have been made to stop the wider collapse.The cabinet of the departing prime minister, Hassan Diab, resigned after the disastrous explosion in the Beirut port on Aug. 4 and has yet to be replaced. That has left the government operating in a reduced, caretaker capacity for longer than it was in power.A former prime minister, Saad Hariri, was designated in October to form a new government. But he has made little progress, despite 17 meetings to discuss political horse trading with President Michel Aoun. Last Thursday, they agreed to meet again on Monday.Jihad Sabat, 48, has watched the decline from the window of the Beirut butcher shop he has run since 1997. Over the last year, he said, the price of meat has kept rising while the number of customers has dwindled.A Beirut supermarket.Mohamed Azakir/ReutersA pound of beef now costs more than three times what it would have before the crisis, he said — more than three times what it cost before the crisis. He has also seen a rise in people wanting to buy on credit and interested in taking bones to boil for soup.“Meat has become a luxury,” he said.He accused the country’s politicians of stealing the state’s money through corrupt schemes and criticized them for failing to stabilize the economy.A friend hanging out in the shop interjected, “The problem is the people.” Mr. Sabat nodded.“That’s an essential point,” he said. “If there were elections tomorrow, the same people would be back.”In the grocery store, Mr. Hassan, the manager, said his branch sold less meat every month and more lentils, even though they, too, are imported and cost five times more than before the crisis.Fights have broken out in the aisles over staples like rice, sugar and cooking oil subsidized by the government, he said. And it is common for customers to get sticker shock in the checkout lane when they realize they can afford only a few essentials.“I don’t know how people keep going,” he said. “But it will eventually cause an explosion.” More

  • 125 Shares119 Views

    in Economy

    Inflation Fear Lurks, Even as Officials Say Not to Worry

    by

    #masthead-section-label, #masthead-bar-one { display: none }Biden’s Stimulus PlanWhat to Know About the BillSenate PassageWhat the Senate Changed$15 Minimum WageChild Tax CreditAdvertisementContinue reading the main storySupported byContinue reading the main storyInflation Fear Lurks, Even as Officials Say Not to WorryPrices have yet to show much movement, but the prospect of an unbridled economy’s surging back from the pandemic has unsettled the markets.Shoppers in Southaven, Miss. Higher spending seems almost certain in the months ahead as vaccinations prompt Americans to get out and about, deploying savings.Credit…Rory Doyle for The New York TimesNelson D. Schwartz and March 10, 2021Updated 5:46 p.m. ETWhile the Biden administration’s ambitious effort to salve the pandemic’s deep economic wounds made its way through Congress, proponents insisted that funneling $1.9 trillion to American households and businesses wouldn’t unshackle a long-vanquished monster: inflation.Officials at the Federal Reserve, responsible for balancing the job needs of Americans with price pressures that could erode their buying power, have said there is little cause for worry.Yet as the legislation moved toward the finish line, inflation prospects increasingly influenced political commentary and Wall Street trading.The worries reflect expectations of a rapid economic expansion as businesses reopen and the pandemic recedes. Millions are still unemployed, and layoffs remain high. But for workers with secure jobs, higher spending seems almost certain in the months ahead as vaccinations prompt Americans to get out and about, deploying savings built up over the last year.Jamie Dimon, chief executive of JPMorgan Chase, is among those tracking the inflation threat. “There’s a very good chance you’re going to have a gangbuster economy for the rest of this year and easily into 2022, and the question is: Does that overheat everything?” he said in an interview with Bloomberg Television last week.In addition to the $1.9 trillion about to pour forth, Mr. Dimon said, $1 trillion in savings that piled up during the pandemic remain unspent.The inflation fixation has been one driver behind a sharp sell-off in government bonds since the start of the year, pairing with a stronger growth outlook to push yields on 10-year notes up to about 1.5 percent, from below 1 percent. Bonds, like stocks, tend to lose value when inflation expectations grow, eroding asset values.“I would not buy 10-year Treasurys,” Mr. Dimon said.The volatile bond trading prompted several unnerving days on Wall Street last week. High-flying tech stocks — previously seen as a haven for those chasing market-beating yields — were particularly upended, though broad share indexes remain near record highs.“I would suspect there’s a pretty good chance you’re going to see rates going up,” Mr. Dimon said. “And people are starting to worry about that.”Rising bond yields have also caused an uptick in mortgage rates, threatening one of the brightest spots in the coronavirus economy, the housing market. Home prices have been surging, especially in the suburbs, but a sustained rise in borrowing costs would almost certainly undermine that trend.Jerome H. Powell, the Fed chair, and other central bank officials have made clear that they are not worried about the expected bounce in inflation. “There’s a difference between a one-time surge in prices and ongoing inflation,” Mr. Powell said this month, making it clear that he expected the coming increase to be transitory.The Fed earned an inflation-fighting reputation in the 1970s and 1980s, when it eventually contained runaway prices with double-digit interest rates that caused a recession. But price gains have been slow for decades, and Mr. Powell and his colleagues have been working to ensure that consumers and businesses don’t start to expect ever-lower inflation.Healthy economies tend to have gentle price increases, which give businesses room to raise wages and leave the central bank with more room to cut interest rates during times of trouble. If inflation drops too low, it risks price declines that are especially painful for debtors, whose debts stay the same even as prices and wages fall.Fed officials revised their framework for setting monetary policy last summer, saying that instead of shooting exactly for 2 percent inflation, they would aim for 2 percent on average — welcoming inflation that runs faster some of the time.Inflation is expected to increase in the coming months as prices are measured against weak readings from last year. Analysts surveyed by Bloomberg expect the Consumer Price Index to hit an annual rate of 2.9 percent from April through June, easing to 2.5 percent in the three months after that before easing gradually to year-over-year gains of 2.2 percent in 2022, based on the median projection.But those numbers are nothing like the staggering price increases of the 1970s, and evidence of renewed inflation is paltry so far.Gasoline prices rose 6.4 percent in February, the Labor Department said on Wednesday.Credit…Benjamin Rasmussen for The New York TimesOn Wednesday, the Labor Department reported that prices rose modestly in February, nudged by an increase in gasoline prices that lifted the Consumer Price Index by 0.4 percent.Excluding the volatile food and energy categories, the index rose 0.1 percent.Gasoline prices alone were up 6.4 percent in February. But over all, the data matched projections, suggesting that inflation remains under control, despite a recent rise in prices for commodities like oil and copper. Stock markets rose on the news, with the Dow Jones industrial average reaching a new high.“Outside of another buoyant advance in energy prices in February, consumer price inflation remains very tame,” said Kathy Bostjancic, chief U.S. financial economist at Oxford Economics.The inflation concerns among some investors are a turnaround from the aftermath of the 2007-9 recession, which was followed by a decade of frustratingly slow growth in the United States and Europe. For much of that time, deflation, or falling prices, was a leading cause of anxiety among investors and economic experts..css-yoay6m{margin:0 auto 5px;font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:1.125rem;line-height:1.3125rem;color:#121212;}@media (min-width:740px){.css-yoay6m{font-size:1.25rem;line-height:1.4375rem;}}.css-1dg6kl4{margin-top:5px;margin-bottom:15px;}.css-k59gj9{display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-flex-direction:column;-ms-flex-direction:column;flex-direction:column;width:100%;}.css-1e2usoh{font-family:inherit;display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-box-pack:justify;-webkit-justify-content:space-between;-ms-flex-pack:justify;justify-content:space-between;border-top:1px solid #ccc;padding:10px 0px 10px 0px;background-color:#fff;}.css-1jz6h6z{font-family:inherit;font-weight:bold;font-size:1rem;line-height:1.5rem;text-align:left;}.css-1t412wb{box-sizing:border-box;margin:8px 15px 0px 15px;cursor:pointer;}.css-hhzar2{-webkit-transition:-webkit-transform ease 0.5s;-webkit-transition:transform ease 0.5s;transition:transform ease 0.5s;}.css-t54hv4{-webkit-transform:rotate(180deg);-ms-transform:rotate(180deg);transform:rotate(180deg);}.css-1r2j9qz{-webkit-transform:rotate(0deg);-ms-transform:rotate(0deg);transform:rotate(0deg);}.css-e1ipqs{font-size:1rem;line-height:1.5rem;padding:0px 30px 0px 0px;}.css-e1ipqs a{color:#326891;-webkit-text-decoration:underline;text-decoration:underline;}.css-e1ipqs a:hover{-webkit-text-decoration:none;text-decoration:none;}.css-1o76pdf{visibility:show;height:100%;padding-bottom:20px;}.css-1sw9s96{visibility:hidden;height:0px;}#masthead-bar-one{display:none;}#masthead-bar-one{display:none;}.css-1cz6wm{background-color:white;border:1px solid #e2e2e2;width:calc(100% – 40px);max-width:600px;margin:1.5rem auto 1.9rem;padding:15px;box-sizing:border-box;font-family:’nyt-franklin’,arial,helvetica,sans-serif;text-align:left;}@media (min-width:740px){.css-1cz6wm{padding:20px;width:100%;}}.css-1cz6wm:focus{outline:1px solid #e2e2e2;}#NYT_BELOW_MAIN_CONTENT_REGION .css-1cz6wm{border:none;padding:20px 0 0;border-top:1px solid #121212;}Frequently Asked Questions About the New Stimulus PackageThe stimulus payments would be $1,400 for most recipients. Those who are eligible would also receive an identical payment for each of their children. To qualify for the full $1,400, a single person would need an adjusted gross income of $75,000 or below. For heads of household, adjusted gross income would need to be $112,500 or below, and for married couples filing jointly that number would need to be $150,000 or below. To be eligible for a payment, a person must have a Social Security number. Read more. Buying insurance through the government program known as COBRA would temporarily become a lot cheaper. COBRA, for the Consolidated Omnibus Budget Reconciliation Act, generally lets someone who loses a job buy coverage via the former employer. But it’s expensive: Under normal circumstances, a person may have to pay at least 102 percent of the cost of the premium. Under the relief bill, the government would pay the entire COBRA premium from April 1 through Sept. 30. A person who qualified for new, employer-based health insurance someplace else before Sept. 30 would lose eligibility for the no-cost coverage. And someone who left a job voluntarily would not be eligible, either. Read moreThis credit, which helps working families offset the cost of care for children under 13 and other dependents, would be significantly expanded for a single year. More people would be eligible, and many recipients would get a bigger break. The bill would also make the credit fully refundable, which means you could collect the money as a refund even if your tax bill was zero. “That will be helpful to people at the lower end” of the income scale, said Mark Luscombe, principal federal tax analyst at Wolters Kluwer Tax & Accounting. Read more.There would be a big one for people who already have debt. You wouldn’t have to pay income taxes on forgiven debt if you qualify for loan forgiveness or cancellation — for example, if you’ve been in an income-driven repayment plan for the requisite number of years, if your school defrauded you or if Congress or the president wipes away $10,000 of debt for large numbers of people. This would be the case for debt forgiven between Jan. 1, 2021, and the end of 2025. Read more.The bill would provide billions of dollars in rental and utility assistance to people who are struggling and in danger of being evicted from their homes. About $27 billion would go toward emergency rental assistance. The vast majority of it would replenish the so-called Coronavirus Relief Fund, created by the CARES Act and distributed through state, local and tribal governments, according to the National Low Income Housing Coalition. That’s on top of the $25 billion in assistance provided by the relief package passed in December. To receive financial assistance — which could be used for rent, utilities and other housing expenses — households would have to meet several conditions. Household income could not exceed 80 percent of the area median income, at least one household member must be at risk of homelessness or housing instability, and individuals would have to qualify for unemployment benefits or have experienced financial hardship (directly or indirectly) because of the pandemic. Assistance could be provided for up to 18 months, according to the National Low Income Housing Coalition. Lower-income families that have been unemployed for three months or more would be given priority for assistance. Read more.Now there is a belief that economic growth will ramp up at least temporarily, thanks to relief from Capitol Hill and increased vaccinations across the country.The about-face was noted Wednesday by the economist Bernard Baumohl in a letter to clients. “If you suddenly feel the ground shaking beneath you, it’s not because an earthquake struck,” he wrote. “What you’re experiencing is a wild stampede of Wall Street bulls trampling over their previous softer economic forecasts and now charging ahead with near frothy upward revisions to G.D.P. growth and inflation projections for 2021.”Mr. Powell, the Fed chair, has made it clear that officials will need to see the economy at full employment, inflation above 2 percent and evidence that it will stay higher for some time before they will raise their key interest rate from rock bottom.“Those are the conditions,” he said this month. “When they arrive, we will consider raising interest rates. We’re not intending to raise interest rates until we see those conditions fulfilled.”Fed officials have been less concrete about what might prod them into slowing their vast bond purchases, which they have been using to make many types of borrowing cheaper and bolster demand. Officials have said they would like to see “substantial” progress before tapering off their buying, and have repeatedly said they will signal any change far in advance.The Fed will meet in Washington next week and release a fresh set of policymakers’ economic projections next Wednesday. Although the Fed looks at the Consumer Price Index, it bases its policy on a different gauge of price trends, which tends to run slightly lower.“It is possible that participants will project higher 2021 inflation, especially if the Fed staff forecast incorporates policy effects on inflation or a reopening demand surge in select categories,” Goldman Sachs economists wrote last week. “Signaling awareness of these transient boosts to inflation in advance might make it easier for Fed officials to credibly downplay them later.”The Goldman analysts expect the Fed’s projections to suggest that it might make one rate increase in 2023. Previously, Fed officials had not penciled in any rate increases through the end of that year.Over the long term, inflation can be a concern because it hurts the value of many financial assets, especially stocks and bonds. It makes everything from milk and bread to gasoline more expensive for consumers, leaving them unable to keep up if salaries stall. And once inflation becomes entrenched, it can be hard to subdue.But most mainstream economists doubt that a sustained bout of troublesome inflation is on its way.“The inflation narrative has switched to concerns about rising prices,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. “For the Fed, price response to the economy reopening is seen as transitory and is unlikely to cause too much angst, given inflation pressures are not expected to be sustained.”And Mr. Dimon, the JPMorgan Chase chief, signaled that inflation fears needed to be put in perspective. “I would put that on the things to worry about,” he said, but “I wouldn’t worry too much about it” — certainly not compared with taming the pandemic itself.AdvertisementContinue reading the main story More