Latest Economy, Inflation and Business News: Live Updates

Fatima Fokina

The Federal Reserve is meeting this week. The economy is running hot, and the Fed is trying to slow it down before widespread price pressures become even more of a problem. It lifted interest rates in March for the first time since 2018, by a quarter of a percentage point, and has set the stage for an even larger increase of half a percentage point this week. The announcement is expected to come at the conclusion of the Fed’s two-day policy meeting on Wednesday afternoon.

But while the rate decision is unlikely to be a surprise, economists and investors will want to know how the Fed plans to move forward at a time when inflation is rising faster than it has in decades. The recent performance of the stock market, which in April took its biggest monthly dive in two years, is hinting at economic trouble ahead, and is the latest complication in the Fed’s fight against inflation.

The outlook for inflation is wildly uncertain. On one hand, the Fed’s small rate increase has already pushed mortgage rates sharply higher, which may start to weigh on the housing market and cool off related types of demand. Nonetheless, costs for raw materials and other key inputs continue to climb, and may keep doing so amid the war in Ukraine and lockdowns in China. Already, some companies, like the washing-machine maker Whirlpool, are seeing consumer demand wane compared with last year, though it is still higher than before the pandemic. “Historic levels of inflation, notably in raw materials, energy and logistics, will impact us throughout the year,” James W. Peters, Whirlpool’s chief financial officer, said last week in a conference call.

Americans have been feeling the pain of higher prices, even if they are spending through it. A record share of people in a Gallup poll named inflation as the top U.S. economic problem, survey data released last week showed. Officials spent much of 2021 hoping that pandemic-era cost increases would fade as supply chains returned to normal. Instead, inflation has remained too high for the Fed’s comfort for a year, and it has become broader with time. A higher-than-expected jump in wage data released Friday made a second big increase in June more likely “at the margin,” wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics.

At the same time, the stock market has had a bad year. The Fed has long said it doesn’t make decisions based on the market, but clearly the recent stock rout makes raising interest rates harder. The S&P 500 fell 8.8 percent in April, and is down more than 13 percent in 2022. The drop shows many investors are coming to the same conclusion: The economy is about to take a hit, and everywhere they look, they see trouble ahead. “There are definitely a lot of open-ended and unquantified risks looming,” said Victoria Greene, chief investment officer at G Squared Private Wealth, an advisory firm.

https://www.nytimes.com/live/2022/05/02/business/economy-news-stocks-inflation

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