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Jerome Powell Races to Catch Up with Inflation

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Jerome Powell Races to Catch Up with Inflation

After last Friday’s inflation shocker—the Labor Department announced that consumer prices rose 8.6 per cent in the twelve months to May—it was likely that Jerome Powell and his colleagues at the Federal Reserve would react. On Wednesday, they did—raising the federal funds rate by three-quarters of a percentage point, the biggest one-off increase in nearly thirty years. “We thought strong action was warranted, and today we delivered that,” Powell said at a press conference.

In addition to raising the rate, Powell indicated that another three-quarter-point hike is possible at the Fed’s next meeting, in July. The members of its policymaking committee also raised their predictions for where the federal funds rate will be at the end of this year and next year—to 3.4 per cent and 3.8 per cent, respectively. “We anticipate that ongoing rate increases will be appropriate,” Powell said.

This past December, the Fed committee members predicted that the federal funds rate, which they had reduced almost to zero at the start of the pandemic, would stand at just 0.9 per cent at the end of 2022. In March, after Russia invaded Ukraine and energy prices spiked, they dramatically upped their prediction to 1.9 per cent, and now they have raised it another one and a half percentage points, roughly.

In the slow-moving world of monetary policy, these changes represent a huge adjustment, and Powell didn’t try to disguise the fact that recent events have put the Fed in catch-up mode. “By this point, we had actually expected to see clear signs of at least inflation flattening out,” he conceded in response to a reporter’s question. In response to another’s, he said, “The environment has become more difficult, clearly, in the last four or five months, and hence the need for the policy actions we took today.”

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It’s easy to feel sympathy for Powell, a wealthy Republican investment banker, whom Donald Trump appointed to his current role in 2018. Despite his background in the rentier class, Powell has taken seriously the Fed’s dual mandate of maximizing employment and maintaining price stability. At the press conference, he said the Fed’s goal was to return the labor market to where it was before the start of the pandemic, when unemployment was at historic lows, inflation was much lower, and workers with lower incomes were enjoying sizable wage increases for the first time in decades. “That’s where we want to get back to,” Powell said.

When inflation began to rise last year, Powell resisted calls from some quarters—yes, that’s you, Larry Summers—for the Fed to hit the monetary brakes, describing the rise in prices as “transitory.” He dropped this term late last year, in time for the economy to be hit by the Omicron variant, Vladimir Putin’s invasion of Ukraine, and a fresh lockdown in China—each of which carried a further inflationary shock. In retrospect, the Fed made an error by not starting to raise rates sooner, although, given that inflation is a global problem—it’s running ​​at 8.1 per cent in the eurozone and 7.8 per cent in the United Kingdom—it’s not clear how much of a difference a quicker policy reversal in the U.S. would have made.

In any case, the big question now is whether the Fed can raise rates at a more rapid pace than it previously anticipated, and bring inflation down, without knocking the economy into an outright recession. According to a new survey conducted by the Financial Times and the University of Chicago, which was published on Sunday, more than two-thirds of academic economists think that Powell won’t pull it off: they are predicting that a recession will start next year.

On the upside, the forecasting record of academic economists is no better than that of the Fed, and Powell insists that all isn’t lost. Asked about a new report that indicated retail sales slipped back a bit last month, he said that over-all spending remained strong and there was no sign yet of a broader slowdown in the economy. The Fed’s newest projections do show G.D.P. growth slowing sharply—from an annual rate of 5.7 per cent in 2021 to 1.7 per cent this year and the same next year. They also forecast the unemployment rate rising from its current rate of 3.6 per cent to 3.9 per cent in the final quarter of 2023, as inflation, measured by the Fed’s favorite index, falls back dramatically, to 2.6 per cent.

Given where things stand now, Powell was right to say that such an outcome could be judged a success and would qualify as a “softish landing” for the economy, a phrase he introduced last month.“There’s a path for us to get there,” he said. “It’s not getting easier. It’s getting more challenging because of these external forces.” There was perhaps a bit of blame-shifting in that answer, but also a good deal of truth. ♦

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Mishael Morgan becomes first Black artist to win Best Actress Daytime Emmy

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Mishael Morgan becomes first Black artist to win Best Actress Daytime Emmy

Mishael Morgan becomes first Black artist to win Best Actress Daytime Emmy

Mishael Morgan won the Best Lead Actress Daytime Emmy Award on Friday. Photo courtesy of CBS

June 25 (UPI) — The Young & the Restless star Mishael Morgan became the first Black artist to win a Daytime Emmy Award in the Best Lead Actress category in Pasadena Friday night.

“I was born on a tiny island in the Caribbean, and I’m now standing on an international stage and I am being honored regardless of the color of my skin, regardless of my passport, for being the best at what I do,” Morgan said as she accepted her statuette.

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“Now there are little girls around the world and no matter what the industry, the vocation … they can strive to be the best.”

The actress also thanked viewers for their support since she joined the soap opera in 2013.

“I am so immensely proud of our generation,” she said. “We are breaking glass ceilings left right and center and I am so honored to be a vessel and to experience this moment. Everybody out there today, we can do this thing called equality and unity together.”

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BTS’ ‘Proof’ tops U.S. album chart

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BTS’ ‘Proof’ tops U.S. album chart

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BTS' 'Proof' tops U.S. album chart

BTS’ “Proof” is No. 1 on the Billboard 200 album chart. File Photo by Oliver Contreras/UPI | License Photo

June 25 (UPI) — K-pop group BTS’ Proof is the No. 1 album in the United States this week.

Coming in at No. 2 on the Billboard 200 chart dated Saturday is Bad Bunny’s Un Verano Sin Ti, followed by Harry Styles’ Harry’s House at No. 3, Post Malone’s Twelve Carat Toothache at No. 4 and Future’s I Never Liked You at No. 5.

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Rounding out the top tier are Morgan Wallen’s Dangerous: The Double Album at No. 6, Kendrick Lamar’s Mr. Morale & The Big Steppers at No. 7, Olivia Rodrigo’s Sour at No. 8, SZA’s Ctrl at No. 9 and Carrie Underwood’s Denim & Rhinestones at No. 10.

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Shooting at Oslo, Norway, gay bar leaves 2 dead

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Shooting at Oslo, Norway, gay bar leaves 2 dead

Shooting at Oslo, Norway, gay bar leaves 2 dead

Police investigate the scene after several shots were fired outside the London Pub in the center of Oslo, Norway, on Saturday. Photo by Javad Parsa/EPA-EFE

June 25 (UPI) — Oslo, Norway, canceled its gay pride parade and raised its terror threat to the highest level Saturday after a shooting at an LGBTQ nightclub left two people dead and 21 injured, authorities said.

The shooting took place at 1:14 a.m. Saturday at the London Pub, a second bar and a fast-food restaurant. Police arrested a suspected gunman who they believe acted alone.

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Of those injured, 10 were in serious condition.

Police haven’t identified the suspected shooter, but described him as being a 42-year-old Norwegian citizen of Iranian descent, according to Norwegian newspaper Aftenposten. CNN reported he was “known to police” and had minor previous convictions.

Authorities said they seized two weapons from him upon the arrest.

Roger Berg, the head of Norway’s domestic intelligence and security service, said the shooting was being investigated as an act of “extreme Islamist terror,” according to The Washington Post.

The suspect was being held on charges of murder, attempted murder and terrorism, police official Christian Hatlo said.

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The attack happened hours before the city’s planned gay pride parade. Organizers said pride events scheduled for Saturday have been canceled upon police advice.

Despite the cancellation, thousands of people joined an impromptu parade outside the nightclubs where the shooting took place. Many waved gay pride flags, while others shouted slogans of support for gay rights.

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