Business
Fed Chair Jerome Powell Shows Little Urgency to Lower Rates
Jerome H. Powell, chair of the Federal Reserve, signaled little urgency to lower interest rates with the economy sturdy and inflation still too high in a hearing with lawmakers on Tuesday.
Mr. Powell, who testified before the Senate Banking Committee, confronts an economic and political landscape that is far different from what it was when he last appeared before Congress in July. The Fed has paused its rate-cutting plans with inflation still above its target, and questions are swirling about how it will navigate the economic and institutional ramifications of tariffs and other policies that President Trump has put at the center of his presidency.
“We do not need to be in a hurry to adjust our policy stance,” Mr. Powell told lawmakers.
The semiannual hearings, which will continue on Wednesday before the House Financial Services Committee, follow the Fed’s move into a new phase in its yearslong effort to tame price pressures. After lowering rates by a full percentage point last year, the Fed is in a holding pattern as it assesses how quickly to release its grip on the economy and ease borrowing costs.
Mr. Powell emphasized that conditions across the labor market “remain solid and appear to have stabilized.” That has given the central bank latitude to be patient about its next steps, especially since progress toward its 2 percent inflation goal has recently been bumpy.
“If the economy remains strong, and inflation does not continue to move sustainably toward 2 percent, we can maintain policy restraint for longer,” Mr. Powell said. “If the labor market were to weaken unexpectedly or inflation were to fall more quickly than anticipated, we can ease policy accordingly.”
The incoming inflation data has been slightly more reassuring, with price gains finally moderating in key sectors like housing. But sweeping proposals put forward by Mr. Trump that would affect immigration, tariffs and taxes have made the Fed’s job much more difficult.
The Fed, during Mr. Trump’s first trade war, did not respond to what it generally perceived as a one-off jump in prices stemming from tariffs. Instead, central bankers focused on souring business sentiment and a pullback in global demand, prompting it to lower rates in 2019 to shore up the economy.
The Fed could follow that same playbook this time. But much will depend on whether consumer and business expectations of future inflation remain in check. Because the backdrop is so different from 2018 — when inflation was too low — the fear is that Americans emerging from the worst shock to prices in decades will be more sensitive to additional increases.
Mr. Powell said the Fed’s job was not to comment on tariff policy, but to “try to react to it in a thoughtful, sensible way.” He later added that it would be “unwise to speculate” about the economic impact but said the Fed would be focused on the “net effect” of what Mr. Trump planned to pursue with regard to deportations, fiscal spending and taxes as well.
Already there are signs that people are bracing for higher inflation. Expectations about what will happen in the year ahead have risen sharply, according to a preliminary survey published by the University of Michigan on Friday.
Short-term metrics like that tend to bounce around a bit, so Fed officials focus on longer-term expectations. A new measure released by the Federal Reserve Bank of New York on Monday showed year-ahead inflation expectations steadying in January, while those over a five-year horizon rose slightly.
Mr. Powell expressed no concern on Tuesday about Americans’ expectations about future inflation and said that “policy is well positioned to deal with the risks and uncertainties that we face.”
The rules and regulations that govern Wall Street are also in focus for lawmakers, given the numerous changes since Mr. Powell last testified. The central bank has paused any “major rulemakings” after its top Wall Street cop, Michael Barr, decided a month ago to step down as vice chair for supervision. He said he was relinquishing that role, but not his Fed governorship, to avoid a lengthy legal battle with Mr. Trump that he feared could damage the Fed.
Mr. Barr had faced intense resistance from Wall Street and some of his own colleagues for seeking to impose stricter rules on big banks. He was eventually forced to scrap his initial proposal and issue a new one with significantly less onerous requirements. Mr. Powell said on Tuesday that the level of capital at the largest banks was “about right,” but acknowledged that having a global standard for regulations, known as “Basel III endgame,” was “good” for both U.S. banks and the economy.
Mr. Powell faced a number of questions from Republican senators about “debanking,” which refers to the closing of customer accounts for politically motivated reasons. The Fed chair said that he was “troubled by the quantity of these reports” and that it was “fair to take a fresh look” at the practice.
Mr. Powell confirmed that the Fed had removed language in a manual for its regional reserve banks regarding master accounts, which give financial companies access to the Fed’s payment systems. It had previously said reserve banks should “consider the conduct of the institution and its leadership” and the prospects of “undue reputational risks” before proceeding. One focal point was whether the institution engaged in “controversial commentary or activities.”
The Fed’s chair also came under fire for changes set to be made on the yearly stress tests it runs on the country’s largest banks to gauge their ability to withstand big economic and financial market shocks. Banking lobbyist groups sued the institution over the issue in December.
In a letter sent to Mr. Powell ahead of the hearings, Senator Elizabeth Warren of Massachusetts joined Representative Maxine Waters of California in calling on the Fed to resist making those changes or risk allowing banks to “game the stress tests” in a way that could ultimately undermine the stability of the financial system.
“The changes sought by big banks — like previous rollbacks of banking rules — will come back to haunt families, small businesses and the economy, increasing the likelihood of another Wall Street-driven economic collapse,” said the letter, which was seen by The New York Times.
Ms. Warren, the ranking Democrat on the Banking Committee, and Ms. Waters, who serves in a parallel role on the Financial Services Committee, also made the case that the banks’ legal arguments “do not have merit” and suggested that they would not hold up if the Fed would “vigorously defend its clear legality in court.”
The confrontation comes amid apprehension about how the Fed is handling directives from the White House. The central bank operates independently of the executive branch and prizes above all its ability to make decisions on interest rates without interference.
“We are concerned that, instead of fighting against the banks in courts and elsewhere, the Fed is now — in the wake of President Trump’s election — seeking new avenues for premature surrender,” Ms. Warren and Ms. Waters said in their letter to Mr. Powell.
The issue of policy independence reared up during Mr. Trump’s first term as he consistently attacked Mr. Powell for resisting his demands to lower interest rates speedily enough. He has been more circumspect so far in his second term, even saying the Fed’s decision to pause rate cuts in January “was the right thing to do.”
Asked about what he would do if Mr. Trump tried to remove a member of the Fed’s policymaking Board of Governors, Mr. Powell said, “It’s pretty clearly not allowed under the law.”
On issues apart from its policy independence, the Fed has shown a clear willingness to align with the White House when it deems it is appropriate and lawful. Most recently, the Fed voluntarily complied with Mr. Trump’s executive order to halt hiring. The Fed has also scaled back on its diversity, equity and inclusion programs as well as public initiatives related to climate change — areas the Trump administration has railed against.
Still, Mr. Trump’s imprint on the Fed so far pales next to what other agencies have experienced. The Consumer Financial Protection Bureau, the federal government’s financial industry watchdog, was effectively shut down over the weekend, with its acting director, Russell Vought, ordering employees to cease working.
Mr. Vought, who leads the Office of Management and Budget, also cut off the consumer bureau’s funding, which originates from requests to the Fed. The central bank last transferred $245 million in January to cover a portion of the agency’s 2025 budget of around $800 million.
Mr. Powell was pressed repeatedly by Democrats on Tuesday about the potential impact on consumers if the bureau ceases operations. He conceded that the Fed had limited jurisdiction and agreed that there would be a gap in terms of enforcement.
Mr. Powell was also asked about the Treasury Department’s payments system, which channels about 90 percent of the payments for the government and has been a source of concern after Elon Musk’s team recently gained access to it. Mr. Powell confirmed that the Fed’s sole role is to execute the payments directed by Treasury and that the central bank’s capacity to carry out those duties was “safe.”
The highest gas prices in the country are making it tougher for some gig drivers to make a living.
Gas prices have shot up amid the war in the Middle East. On average, California gas prices are the most expensive in the United States, according to data from the American Automobile Assn. The average price of regular gas in California is almost $6. The national average is a little above $4.
While Uber and Lyft drivers have concocted clever ways to cut gas consumption, they say that without some relief they will be forced to leave the ride-hailing business.
John Mejia was already struggling to make money as a part-time Lyft driver when soaring gas prices made his side hustle even harder.
“Unfortunately, it’s the economics of paying less to drivers and gas prices,” he said. “It actually is pulling people out of the business.”
Guests at The Westin St. Francis hotel get into an Uber.
(Jess Lynn Goss / For The Times)
Gig work offers drivers the freedom to work for themselves and more flexibility, but being independent contractors also means they must shoulder unexpected costs.
Ride-sharing companies say they’re trying to help, but drivers say the gas relief comes with caveats. For now, drivers say they’re being pickier about what rides they accept, cutting hours and are looking at other ways to make money.
Mejia, who started driving for Lyft more than a decade ago, said in his early days, he would sometimes make $400 in three hours. Now it takes 12 hours to rake in $200.
The San Francisco Bay Area consultant is an active member of the California Gig Workers Union, so he knows he isn’t alone. California has more than 800,000 gig rideshare drivers, according to the group, which is affiliated with the Service Employees International Union.
On social media sites such as Reddit and Facebook, gig workers have posted about how the higher gas prices are eating into their earnings. Among the tricks they are suggesting: reducing the number of times the ignition is turned on or off, avoiding traffic, working in specific neighborhoods and at times with high demand and switching to electric vehicles.
Gig drivers usually have only seconds to decide whether to accept a ride on the app, but they have become more strategic about which rides and deliveries they accept.
That means they are more likely to sit back in their cars and wait for higher fares for quick pick-up and drop-off.
“I highly recommend the ‘decline and recline’ strategy, rejecting unprofitable rides until a better one appears,” wrote Sergio Avedian, a driver, in the popular blog the Rideshare Guy.
Pedestrians cross the street in front of a Lyft and Uber driver on Wednesday. High gas prices have made it hard for gig drivers to make a living, cutting into their profits.
(Jess Lynn Goss / For The Times)
Uber, Lyft and other companies have unveiled several ways to help drivers save on gas.
Uber said drivers can get up to 15% cash back through May 26 with the Uber Pro card, a business debit Mastercard for drivers and couriers. Based on a worker’s tier, they can get up to $1 off per gallon of gas through Upside — an app that offers cash rewards — and up to 21 cents off per gallon of gas with Shell Fuel Rewards. The company also offers incentives for drivers who want to switch to electric vehicles.
“We know the price of gas is top of mind for many rideshare and delivery drivers across the country right now,” Uber said in a blog post about its gas savings efforts.
Lyft also said it’s expanding gas relief through May 26 because the company knows that the extra cost “hits hardest for drivers who depend on driving for their income.”
The company is offering more cash back, depending on the driver’s tier, for drivers who use a Lyft Direct business debit card to pay for gas at eligible gas stations. They can get an additional 14 cents per gallon off through Upside.
Drivers say the fine print on the offers dictates which card they use and where they fill up gas, making it difficult for them to save money.
“If I do the math, it’s ridiculous,” Mejia said. “They’re offering us nothing.”
Uber declined to comment, but pointed to its blog post about the gas relief efforts. Lyft also referenced the blog post and said “the gas savings were structured through rewards to maximize stackable opportunities.”
Guests at The Westin St. Francis hotel get into an Uber.
(Jess Lynn Goss / For The Times)
Gig workers have struggled with rising gas prices in the past.
In 2022, Lyft and Uber temporarily added a surcharge to their fares amid record-high gas prices following Russia’s invasion of Ukraine. This year, Uber is adding a fuel charge to its fares in Australia for roughly two months to offset the high cost of gas for drivers. Lyft said it hasn’t added a fuel charge in the U.S. or elsewhere.
Margarita Penalosa, who drives full time for Uber and Lyft in Los Angeles, started as a rideshare driver in 2017. Back then, gas was cheaper. She would easily hit her goal of making $300 in eight hours. Now she’s making just $250 after working as much as 14 hours.
Gas prices, she said, used to be less than $3 per gallon. Now some gas stations are charging more than $8 per gallon.
“Take out the gas. Take out the mileage from my car and maintenance. How much [do] I really make? Probably I get $11 for an hour,” she said.
Jonathan Tipton Meyers wants to spend fewer hours as a rideshare driver.
He already juggles multiple gigs even while driving for Uber and Lyft in Los Angeles. He’s a mobile notary and loan signing agent, a writer and performer.
Driving is “a very challenging, full-time job,” he said. “It’s very taxing and, of course, wages were just continually decreasing.”
John Mejia, a longtime Lyft and Uber driver, poses for a portrait before attending a meeting about unionizing gig drivers.
(Jess Lynn Goss / For The Times)
Even if oil continues to flow through the Strait of Hormuz, which Iran reopened Friday, it could take a while for gas prices to come down to earth, said Mark Zandi, the chief economist at Moody’s Analytics.
“There’s an old adage that prices rise like a rocket and fall like a feather,” he said. “I think that’ll apply.”
In the meantime, it will be survival of the fittest drivers. If enough of them decide to leave the apps, the ride-hailing companies could be forced to raise fares further to attract some back.
“Those who approach rideshare driving strategically, tracking expenses, choosing trips carefully, and optimizing efficiency are far more likely to weather periods of high gas prices,” wrote Avedian in the Rideshare Guy blog. “For everyone else, a spike at the pump can quickly turn rideshare driving from a side hustle into a money-losing venture.”
The proprietor of Los Angeles’ legendary Clifton’s has given up on reopening the shuttered venue.
It’s just too difficult to do business in downtown’s historic core, he says.
Andrew Meieran bought Clifton’s on Broadway in 2010 and poured more than $14 million into repairs, renovations and upgrades, adding additional bar and restaurant spaces in the four-story building. In 2018, he found that demand for cafeteria food was too low to be profitable, and he pivoted to a nightclub and lounge concept called Clifton’s Republic, featuring multiple dining and drinking venues. Meieran has tried elaborate themed environments, such as a tiki bar and forest playgrounds, and renting out the location for big events to spark more interest.
It was never easy, but during and since the pandemic, the neighborhood has grown increasingly unsafe as downtown has emptied of office workers and visitors.
Storefronts are gated up due to vandalism in the historic district in downtown Los Angeles on Tuesday.
(Eric Thayer / Los Angeles Times)
The alley behind Clifton’s Cafeteria in the downtown historic district Tuesday.
(Eric Thayer / Los Angeles Times)
Vandalism has been rampant, with graffiti appearing on the historic structure almost daily. Vandals would use acid or diamond glass cutters to deface the windows, often cracking the glass. It would cost Meieran more than $30,000 each time to replace the windows. Insurance companies either stopped offering policies that covered vandalism or raised premiums by as much as 600%, he said.
There has been continuous crime in the area, he said, including multiple assaults on people in front of his building. He last shut the venue last year, hoping things would improve and he could come back with a business that could work. Now he has given up. Someone else may take over the space or even the name of the historic spot, but he is done trying.
“We’ve lost our way,” Meieran said. “I want to get up on the tops of the skyscrapers and yell that people need to pay attention to this.”
The disenchantment of a business leader who used to be one of downtown L.A.’s biggest backers shines a spotlight on the stubborn safety concerns, rising costs and thinner foot traffic that have made it increasingly difficult for even iconic businesses to survive.
The once-popular institution dates back to 1935, when it was a Depression-era cafeteria and kitschy oasis that sold as many as 15,000 meals a day when Broadway was the city’s entertainment hub.
It served traditional cafeteria food such as pot roast, mashed potatoes and Jell-O in a woodsy grotto among fake redwood trees and a stone-wrapped waterfall reminiscent of Brookdale Lodge in Northern California.
It’s not the only once-prominent destination that has failed to find a way to flourish in today’s market. Cole’s, one of L.A.’s most famous restaurants and often credited with inventing the French dip sandwich, closed last month after a 118-year run.
“The bigger problem for us and the rest of the industry is the high cost of doing business,” said Cedd Moses, who used to operate Cole’s and has backed many other bars and restaurants in historic buildings downtown for decades. “That’s what is killing independent restaurants in this city.”
Outside of Clifton’s Cafeteria.
(Eric Thayer / Los Angeles Times)
Clifton’s Republic owner Andrew Meieran stands next to a boat on the top floor of the historic restaurant in 2024.
(Wally Skalij / Los Angeles Times)
Clifton’s opened and closed repeatedly during the pandemic and, more recently, after a burst pipe caused extensive damage. Meieran opened it for special events such as last Halloween, but it has otherwise been closed.
Police are woefully understaffed and hampered by public policy, said Blair Besten, president of downtown’s Historic Core Business Improvement District, a nonprofit that arranges graffiti removal, trash pickup and safety patrols in the area.
Businesses and residents in the area would like to see a bigger police presence, but there have been protests against that by people who are not from downtown, she said.
“People are starting to see the fruits of the defunding movement,” she said. “It has not led us to a better place as a city.”
The Los Angeles Police Department is making progress downtown, Captain Kelly Muniz said, with violent crime down more than 10% from last year.
“While we’re working very hard to solve crime, to prevent crime, there are still elements such as trash, open-air drug use, homelessness and graffiti,” she said. “We’re swinging in the right direction.”
Retailers have been opting out of downtown L.A., said real estate broker Derrick Moore of CBRE, who helps arrange commercial property leases. Brands have headed to more vibrant nearby neighborhoods such as Echo Park and Silver Lake.
“A lot of operators are just electing to skip over downtown,” he said. “They’re leasing spaces elsewhere, where they feel they have a greater chance at higher sales.”
A man walks past a pile of trash left on the street in the historic district.
(Eric Thayer / Los Angeles Times)
While some businesses are struggling, many downtown residents say their perceptions of safety are improving and that the area is regaining some vibrancy.
“A lot of people live here. I think people forget that,” Besten said. “We’re all surviving. It’s just hard for all the businesses to survive.”
A green shoot for the Historic Core is Art Night on the first Thursday of every month, when 50 or 60 locations, including permanent art galleries and pop-up galleries in unused storefronts, display art to map-toting visitors who come for the occasion.
They often end up in Spring Street bars, which more typically thrive on weekend nights but are still a draw to downtown.
“I think nightlife will thrive downtown, since bars attract people that don’t mind a little grittier atmosphere,” said Moses. “Our sales are hitting new records at our bars downtown, fortunately, but our costs have risen dramatically.”
A closed sign for Clifton’s Cafeteria.
(Eric Thayer / Los Angeles Times)
Clifton’s former backer, Meieran, says he doesn’t think things are going to bounce back enough to warrant more massive investment. He has sold the building, and the owner is looking for a new tenant to occupy Clifton’s space. He still controls the Clifton’s name.
While there is still a chance he could let someone else use the name Clifton’s, Meieran is done for now — too many bad memories.
“There was a guy who was terrorizing the front of Clifton’s because he decided he wanted to live in the vestibule in front, and he didn’t want us to operate there,” Meieran said. “He would threaten to kill anybody who came through.”
He doesn’t believe official statistics that show crime and homelessness are way down in the area, and he doesn’t want to restart a business when criminals can so easily erase his hard work.
“What business that’s already on thin margins can survive that?” he said.
Trader Joe’s customers might soon get a payout from the popular grocery chain.
The Monrovia-based company agreed to a $7.4-million settlement in a class action lawsuit that claimed customers were left vulnerable to identity theft.
Customers who purchased items with a credit or debit card from March to July in 2019 might be eligible for a payment as part of the settlement.
The plaintiff alleged that some receipts printed in 2019 included 10-digit credit or debit card numbers —double what’s allowed under the Fair and Accurate Credit Transactions Act.
Trader Joe’s “vigorously denies any and all liability or wrongdoing whatsoever,” the grocery chain said in the settlement website. The grocery chain decided to settle to avoid a long and costly litigation process.
The payout will go toward paying impacted customers as well as attorney fees and other expenses.
About $2.6 million will go toward attorney fees, and the plaintiff will receive a $10,000 incentive payment, according to the settlement. The remaining funds will be distributed evenly among customers who submit valid claims.
It’s unclear how much money each customer would get, but the payout could be about $102, according to the settlement notice.
To receive the payout, customers must have received a receipt displaying the first six and last four digits of the card number.
Some customers identified as part of the settlement class have been notified and received a class ID number to file a claim.
Customers have from now until June 6 to file a claim online or by phone.
A customer not identified in the settlement can still submit a claim by entering the first six and last four digits of the card used, along with the date it was used at Trader Joe’s.
Brian Keim, the plaintiff who brought the case, used his debit card at stores in Florida in 2019. He said some stores printed transaction receipts that included the first six and last four digits of customers’ card numbers.
The receipts did not include other personal information, such as the middle digits of the users’ cards, the cards’ expiration dates, or the users’ addresses. No customer has reported identity theft as a result of the receipts since the lawsuit was filed, the grocer said.
However, identity theft doesn’t require submitting a claim for payment.
The settlement was agreed upon by both the grocer and the plaintiff, but still has to be approved by a court. A hearing is set in August.
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