Raising rates while fueling further economic growth is the latest challenge for Fed officials, who have spent the past two years coping with the coronavirus shutdown and the worst labor market shock in history.
Federal Reserve Chairman Jerome Powell warned that a war could fuel inflation and force households to cut spending. But he also pointed out that the conflict did not change the central bank’s attitude towards interest rates.
“I think it’s important to normalize interest rates to ensure that the economy continues to grow and avoid a recession,” Mark Zandi, chief economist at Moody’s Analytics, told the House Financial Services Committee on Tuesday.
According to the FedWatch Tool CME, almost all investors expect the Fed to raise rates by 0.25 percentage points at its meeting on Wednesday. This will be the first rate hike since the end of 2018, but not the oversized half-point hike that was planned before the Russian invasion.
“The main thing for low- and middle-income households is to avoid a recession,” Zandi said.
This is easier said than done. Economists at Goldman Sachs (GS) said last week that the likelihood of a recession in the United States next year has risen to 35%. The investment bank sees virtually no growth during the first three months of 2022.
Low-income households that are already struggling with high prices will be hit hard by the economic downturn.
The pandemic inflation trend began with products and services that were associated with high demand and supply chain disruption, such as cars. But higher prices soon spread throughout the economy. At the end of the year ended in February, US consumer prices rose 7.9% seasonally, the Bureau of Labor Statistics said Thursday. This was the largest increase since January 1982.
With food and gas prices rising rapidly, the Fed has no choice but to act.
McDonald’s has transformed Russia. Now he’s leaving the country
When McDonald’s first opened its doors in Moscow, it was a big deal.
It was in the middle of winter on January 31, 1990, but people still came out in droves,” says my CNN Business colleague Daniel Wiener-Bronner. Grainy CNN television footage shows lines snaking out the door and crowds of people inside tasting Big Macs for the first time.
Pushkin Square was huge, it could accommodate hundreds of people. At the time, it was the largest McDonald’s restaurant in the world. In many ways it was like any other McDonald’s of the era. But underneath the golden arches was a hammer and sickle flag, and inside there was an international theme featuring a model of London’s Big Ben in the dining room.
The arrival of McDonald’s in Moscow was about more than just Big Macs and French fries, said Darra Goldstein, Willcox B., and Harriet M. Adsit, professor emeritus of Russian at Williams College. It was the clearest example of glasnost in action, an attempt by Soviet President Mikhail Gorbechev to open his crumbling country to international relations.
“There was a really noticeable crack in the iron curtain,” she said. “It was very symbolic of the changes that were taking place.” In about two years, the Soviet Union will collapse.
After this first location opened, McDonald’s expanded its presence in the country. As of last week, about 850 outlets were operating in Russia.
But Russia’s invasion of Ukraine has prompted McDonald’s to change course, at least temporarily. On Tuesday, the company announced that it would suspend the operation of these restaurants after similar decisions by other Western firms and pressure from critics.
For Goldstein, this moment is just as symbolic, but much less reassuring.
“If the opening of McDonald’s in 1990 symbolized the beginning of a new era in Soviet life, an era of greater freedom, then the current departure of the company represents the closure not only of business, but of society as a whole,” she said.
Next
Monday: Meeting of Eurogroup Finance Ministers
Tuesday: US producer price index; OPEC report
Wednesday: the Federal Reserve’s interest rate decision; retail sales in the USA; Income from BMW, Lennar and Williams-Sonoma; IEA Monthly Report
Thursday: housing construction in the USA; initial US claims; Earnings from Dollar General, FedEx and GameStop; decision of the Bank of England on the interest rate; inflation in the EU
Friday: sales of existing homes in the US; Bank of Japan Interest Rate Decision