Inflation (Economics)

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      Inflation Fears Stalk Presidential Politics and the Markets

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      Lawmakers on Capitol Hill are set to grill Jay Powell, the Fed chair, about interest rates and the economy, topics that are top of mind for voters and investors alike.Jay Powell, the Fed chair, will begin two days of testimony on Capitol Hill with inflation a hot topic for voters and markets.Richard Drew/Associated PressInflationary pressure and presidential politics President Biden and Donald Trump dominated Super Tuesday, setting the stage for a rematch of the 2020 election. One topic that’s high on the agenda for voters: Inflation.That means all eyes will be on Jay Powell, as the Fed chair makes a two-day appearance on Capitol Hill this week, for any sign of what’s next on rate cuts.Inflation is kryptonite for any politician, and especially for Biden. Trump again pounded the president on high prices, an issue that’s lifting the Republican in polls even as a range of indicators show that the economy is performing strongly.(The White House is putting the blame on corporations that “try to rip off Americans.” Watch for that theme at Thursday’s State of the Union address.)Powell will appear before the House on Wednesday and before the Senate on Thursday. Data published in recent weeks shows that jobs are plentiful, wages are rising and consumers are still spending. Analysts have upgraded their economic forecasts, raising hopes that a soft landing is likely.But market pros see warning signs. Concerns remain that inflation will stick above the Fed’s 2 percent target, forcing the central bank to put the brakes on interest rate cuts that traders expect to begin in June. The futures market on Wednesday is forecasting three to four cuts this year — down from nearly seven just weeks ago — and the more cautious sentiment has helped drag the S&P 500 lower this week.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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      The F.T.C. Boosts Biden’s Fight Against Inflation

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      The regulator’s move to block Kroger’s $25 billion bid for Albertsons could win the president points with voters squeezed by rising prices.Kroger’s “low prices” promise has come under fire after the F.T.C. and a number of states sued to block the supermarket giant’s $25 billion bid to buy Albertsons.Rogelio V. Solis/Associated PressKroger, Albertsons and the politics of inflation A paradox at the heart of the U.S. economy is that consumers are feeling squeezed even as growth indicators look strong — and are taking it out on President Biden’s approval ratings.So the White House probably cheered a move by the F.T.C. and several states on Monday to block Kroger’s $25 billion bid to buy Albertsons, arguing that the biggest supermarket merger in U.S. history would raise prices and hit union workers’ bargaining power.The Biden administration has little influence over inflation, but it’s still getting heat. Consumers are spending the highest proportion of their income on food in 30 years, and an internal White House analysis found that grocery prices had the biggest impact on consumer sentiment.The Fed has jacked up interest rates to a 20-year-high in an effort to cool inflation, but progress on that has slowed in recent months.Biden is blaming big business. In a video released on Super Bowl Sunday, he went after “shrinkflation,” lashing out at companies for reducing packaging sizes and food portions without cutting prices. Biden is expected to reiterate that view in his State of the Union address next month.The president could point to the F.T.C.’s tough approach to M.&A. The agency operates independently, but Lina Khan, the F.T.C.’s chair, has taken the most aggressive and expansive antitrust enforcement stance in decades. That may help Biden’s message with voters that he’s fighting for their interests.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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      Rents Are Falling. So Why Isn’t That Showing Up in Inflation Data?

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      Pandemic disruptions may have muddled the measurement of home prices in government data. That could complicate the Fed’s course on interest rates.The Federal Reserve may have a housing problem. At the very least, it has a housing riddle.Overall inflation has eased substantially over the past year. But housing has proved a tenacious — and surprising — exception. The cost of shelter was up 6 percent in January from a year earlier, and rose faster on a monthly basis than in December, according to the Labor Department. That acceleration was a big reason for the pickup in overall consumer prices last month.The persistence of housing inflation poses a problem for Fed officials as they consider when to roll back interest rates. Housing is by far the biggest monthly expense for most families, which means it weighs heavily on inflation calculations. Unless housing costs cool, it will be hard for inflation as a whole to return sustainably to the central bank’s target of 2 percent.“If you want to know where inflation is going, you need to know where housing inflation is going,” said Mark Franceski, managing director at Zelman & Associates, a housing research firm. Housing inflation, he added, “is not slowing at the rate that we expected or anyone expected.”Those expectations were based on private-sector data from real estate websites like Zillow and Apartment List and other private companies showing that rents have barely been rising recently and have been falling outright in some markets.For home buyers, the combination of rising prices and high interest rates has made housing increasingly unaffordable. Many existing homeowners, on the other hand, have been partly insulated from rising prices because they have fixed-rate mortgages with payments that don’t change from month to month.Housing prices and mortgage rates don’t directly show up in inflation data, however. That’s because buying a home is an investment, not just a consumer purchase like groceries. Instead, inflation data is based on rents. And with private data showing rents moderating, economists have been looking for the slowdown to appear in the government’s data, as well.The Housing ConundrumHousing costs, as measured in the Consumer Price Index, are still rising faster than before the pandemic, even as overall inflation has eased.

      Source: Labor DepartmentBy The New York TimesA Wider GapAfter surging in 2021 and 2022, rent growth has moderated. But the slowdown has been more gradual for single-family homes than for apartments.

      Notes: Data is shown as a 12-month change in a three-month moving average. “Houses” include both attached and detached single-family homes.Source: ZillowBy The New York TimesWe are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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      Biden Targets a New Economic Villain: Shrinkflation

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      Liberals prodded the president for years to blame big corporations for price increases. He is finally doing so, in the grocery aisle.On Super Bowl Sunday, the White House released a short video in which a smiling President Biden, sitting next to a table stocked with chips, cookies and sports drinks, slammed companies for reducing the package size and portions of popular foods without an accompanying reduction in price.“I’ve had enough of what they call shrinkflation,” Mr. Biden declared.The video lit up social media and delighted a consumer advocate named Edgar Dworsky, who has studied “shrinkflation” trends for more than a decade. He has twice briefed Mr. Biden’s economic aides, first in early 2023 and again a few days before the video aired. The first briefing seemed to lead nowhere. The second clearly informed Mr. Biden’s new favorite economic argument — that companies have used a rapid run-up in prices to pad their pockets by keeping those prices high while giving consumers less.The products arrayed in the president’s video, like Oreos and Wheat Thins, were all examples of the shrinkflation that Mr. Dworsky had documented on his Consumer World website.While inflation is moderating, shoppers remain furious over the high price of groceries. Mr. Biden, who has seen his approval ratings suffer amid rising prices, has found a blame-shifting message he loves in the midst of his re-election campaign: skewering companies for shrinking the size of candy bars, ice cream cartons and other food items, while raising prices or holding them steady, even as the companies’ profit margins remain high.The president has begun accusing companies of “ripping off” Americans with those tactics and is considering new executive actions to crack down on the practice, administration officials and other allies say, though they will not specify the steps he might take. He is also likely to criticize shrinkflation during his State of the Union address next week.Mr. Biden could also embrace new legislation seeking to empower the Federal Trade Commission to more aggressively investigate and punish corporate price gouging, including in grocery stories.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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      Will Food Prices Stop Rising Quickly? Many Companies Say Yes.

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      Food companies are talking about smaller price increases this year, good news for grocery shoppers, restaurant diners and the White House.Few prices are as visible to Americans as the ones they encounter at the grocery store or drive-through window, which is why two years of rapid food inflation have been a major drag for U.S. households and the Biden administration.Shoppers have only slowly regained confidence in the state of the economy as they pay more to fill up their carts, and President Biden has made a habit of shaming food companies — even filming a Super Bowl Sunday video criticizing snack producers for their “rip off” prices.But now, the trend in grocery and restaurant inflation appears to be on the cusp of changing.After months of rapid increase, the cost of food at home climbed at a notably slower clip in January. And from packaged food providers to restaurant chains, companies across the food business are reporting that they are no longer raising prices as steeply. In some cases that’s because consumers are finally pushing back against price increases after years of spending through them. In others, it’s because the prices that companies pay for inputs like packaging and labor are no longer rising as sharply.

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      Year-over-year change in consumer price indexes
      Source: Bureau of Labor StatisticsBy The New York TimesEven if food inflation cools, it does not mean that your grocery bill or restaurant check will get smaller: It just means it will stop climbing so quickly. Most companies are planning smaller price increases rather than outright price cuts. Still, when it comes to the question of whether rapid jumps in grocery and restaurant prices are behind us, what executives are telling investors offer some reason for hope.Some, but not all, consumers are saying no.Executives have found in recent months that they can raise prices only so high before consumers cut back.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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      A Hot CPI Report Forces a Rethink of Chances of a Soft Landing

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      Worries of higher-for-longer interest rates have grown since Tuesday’s Consumer Price Index report.A hotter-than-expected inflation report has stoked new concerns that a “soft landing” may be out of reach.Michael M. Santiago/Getty Images“No landing” Markets are still on edge after Tuesday’s hot inflation report, as Wall Street suddenly and sharply discounted the odds of imminent interest rate cuts.It has also poured cold water on the belief among many investors that the U.S. economy will achieve a “soft landing.”Why so gloomy? The Consumer Price Index report, which came in above economists’ forecasts, is a stark reminder of the challenges that the Fed faces in bringing down inflation to its 2 percent target. Even after excluding volatile energy and food prices, inflation is holding roughly steady and is well above where the central bank feels comfortable.Shelter costs, including rents, also rose above expectations, and “supercore inflation,” a measure the Fed closely follows that includes common “services” expenditures — like haircuts and lawyer fees — rose 4.3 year-on-year, its highest level since May, according to Deutsche Bank data.Markets responded with a jolt. Investors dumped Treasury notes on Tuesday amid concerns that the Fed will keep borrowing costs higher for longer. That pushed the Russell 2000 down nearly 4 percent, its worst slide in 20 months. (That said, S&P 500 futures were rebounding slightly on Wednesday morning as dip-buyers returned, and Britain reported milder-than-expected inflation data that pushed up stocks in London.)The futures market on Wednesday is pricing in three to four interest rate cuts this year, down from the six to seven projected at the start of the year and all but silencing rate-cut bulls. Such predictions “made no sense in our view,” Mohit Kumar, an economist at Jefferies, wrote in a research note.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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      Stocks Sink as Stubborn Inflation Resets Fed Rate Forecasts

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      Stock markets tumbled on Tuesday as investors slashed their bets on the Federal Reserve taking the brakes off the economy in the coming months, after hotter-than-expected inflation data led traders to expect interest rates will remain higher for longer.The benchmark S&P 500 stock index fell over 1 percent in early trading. The index has only suffered such a large loss on one other day this year, with bullishness about the resilience of the economy and corporate profits continually pushing stocks to new highs.Investors still expect the Fed to pull inflation back to manageable levels without inflicting too much pain on the broader economy. But that forecast was put under pressure on Tuesday by a consumer inflation report that showed prices rising more quickly than had been forecast.The consumer data “came in stronger than either the Fed or the market wanted or expected,” said Greg Wilensky, head of U.S. fixed income at Janus Henderson Investors.The longer inflation remains elevated, the longer the Fed is likely to push off rate cuts, turning the screws on an economy that is already starting to show some signs of weakness, and tempering enthusiasm on Wall Street.Stuart Keiser, an equity analyst at Citi, said the inflation data was “not a game-changer” but that it was likely to drive a short-term retrenchment in the stock market as investors dial back hopes for rate cuts. “Today’s print was clearly not a good one,” he said.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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      Latest CPI Report Is a Crucial Inflation Report Card

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      Investors and the White House will pore over the latest Consumer Price Index report for clues on prices — and potential interest rate cuts.Wall Street and the White House will be looking for inflation clues as they tune in to today’s Consumer Price Index report.Spencer Platt/Getty ImagesInflation back in the spotlight An S&P 500 on a five-week winning streak. A growing economy. Solid wage gains. And growing consumer and business optimism. These are the ingredients for an emerging Goldilocks scenario for the U.S. economy.What would help complete that recipe? Cooling inflation, which would stoke investor hopes that the Fed would soon lower borrowing costs. (That said, Fed officials continue to warn that it’s still too early to talk rate cuts.)The prospects of that economic ideal will be tested on Tuesday with the release of fresh Consumer Price Index data.Here’s what to expect: Economists have forecast a headline C.P.I. reading of 2.9 percent for January on an annualized basis, its smallest gain since April 2021. Core C.P.I., which strips out food and fuel prices, is expected to come in at 3.7 percent on an annualized basis, down from 5.6 percent in January 2023 — strong progress, but well above the Fed’s 2 percent target.There are reasons for caution, however. The slowdown has been driven by goods disinflation and lower energy prices. But economists are closely monitoring how attacks by Houthi rebels on ship traffic in the Red Sea could affect commerce costs and push up oil prices.The cost of crude oil has climbed since the start of the year, though it remains well below the levels hit in the aftermath of the Hamas-led attacks Oct. 7.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More