Business

Fed Officials Were Wary About Slow Inflation Progress at June Meeting

Published

2 years ago

July 5, 2023

Fed Officials Were Wary About Slow Inflation Progress at June Meeting

Federal Reserve officials were concerned about sluggish progress toward lower inflation and wary about the surprising staying power of the American economy at their June meeting — so much so that some even wanted to raise rates last month, instead of holding them steady as the central bank ultimately did, minutes from the gathering showed.

Fed officials decided to leave interest rates unchanged at their June 13-14 gathering to give themselves more time to see how the 10 straight increases they had previously made were affecting the economy. Higher interest rates slow the economy by making it more expensive to borrow and spend money, but it takes months or even years for their full effects to play out.

At the same time, officials released economic forecasts that suggested they would make two more quarter-point rate increases this year. That forecast was meant to send a message: Fed policymakers were simply slowing the pace of rate increases by taking a meeting off. They were not stopping their assault against rapid inflation.

The meeting minutes, released Wednesday, both reinforced the message that further interest rates increases were likely and offered more detail on the June debate — underscoring that Fed officials were divided about how the economy was shaping up and what to do about it.

All 11 of the Fed’s voting officials supported the June rate hold, but that unanimity concealed tensions under the surface. Some of the central bank’s officials — 18 in total, including 7 who do not vote on policy this year — were leaning toward a rate increase.

While “almost all” Fed officials thought it was “appropriate or acceptable” to leave rates unchanged in June, “some” either favored raising interest rates or “could have supported such a proposal” given continued strength in the labor market, persistent momentum in the economy, and “few clear signs” that inflation was getting back on track, the minutes showed.

And officials remained worried that if they failed to wrestle inflation under control quickly, there was a risk it could become such a normal part of everyday life that it would prove harder to stamp out down the road.

“Almost all participants stated that, with inflation still well above the Committee’s longer-run goal and the labor market remaining tight, upside risks to the inflation outlook or the possibility that persistently high inflation might cause inflation expectations to become unanchored remained key factors shaping the policy outlook,” the minutes said.

The minutes underlined what a difficult moment this is for the Fed. Inflation has come down notably on an overall basis, but that is partly because food and fuel prices are cooling off. An inflation measure that strips out those volatile categories — known as core inflation — is making much more halting progress. That has caught the Fed’s attention, especially given signs that the broader economy is holding up.

“Core inflation had not shown a sustained easing since the beginning of the year,” Fed officials noted at the meeting, according to the minutes, and they “generally” noted that consumer spending had been “stronger than expected.” Officials reported that they were hearing a range of reports from businesses, as some saw weaker economic conditions and others reported “greater-than-expected strength.”

The details of recent inflation data were also disquieting for some at the Fed. Officials noted that price increases for goods — physical purchases like furniture or clothing — were moderating, but less quickly than expected in recent months.

While rent inflation was expected to continue to cool down and help to lower overall inflation, “a few” officials were worried that it would come down less decisively than hoped amid low for-sale housing inventory and “less-than-expected deceleration” recently in rents for leases signed by new tenants. “Some” Fed officials noted that other service prices “had shown few signs of slowing in the past few months.”

Since the Fed’s meeting, officials have continued to signal that further rate increases are expected. Jerome H. Powell, the Fed chair, said during an appearance last week in Madrid that he would expect to continue with a slower pace of interest rate increases — but he did not rule out that officials could return to back-to-back rate moves.

“We did take one meeting where we didn’t move, so that’s in a way a moderation of the pace,” he explained. “So I would expect something like that to continue, assuming the economy evolves about as expected.”

The question for investors is what would prod the Fed to return toward a more aggressive path for rate increases — or, on the other hand, what would cause officials to hold off on future rate moves.

Policymakers have been clear that the path forward for interest rate increases could change depending on what happens with the economy. If inflation is showing signs of sticking around, the job market is unexpectedly strong and consumer spending continues to chug along, that might suggest that it will take even higher interest rates to cool down household and business spending to a point where companies are forced to stop raising prices so much.

If, on the other hand, inflation is coming down quickly, the job market is cooling and consumers are pulling back sharply, the Fed could feel more comfort in holding off on future rate increases.

For now, investors expect the Fed to raise interest rates at its July 25-26 meeting. And economists will closely watch fresh job market data set for release on Friday for the latest evidence of how the economy is evolving.

Business

Albania Gives Jared Kushner Hotel Project a Nod as Trump Returns

Published

5 hours ago

January 16, 2025

Press Room

Albania Gives Jared Kushner Hotel Project a Nod as Trump Returns

The government of Albania has given preliminary approval to a plan proposed by Jared Kushner, Donald J. Trump’s son-in-law, to build a $1.4 billion luxury hotel complex on a small abandoned military base off the coast of Albania.

The project is one of several involving Mr. Trump and his extended family that directly involve foreign government entities that will be moving ahead even while Mr. Trump will be in charge of foreign policy related to these same nations.

The approval by Albania’s Strategic Investment Committee — which is led by Prime Minister Edi Rama — gives Mr. Kushner and his business partners the right to move ahead with accelerated negotiations to build the luxury resort on a 111-acre section of the 2.2-square-mile island of Sazan that will be connected by ferry to the mainland.

Mr. Kushner and the Albanian government did not respond Wednesday to requests for comment. But when previously asked about this project, both have said that the evaluation is not being influenced by Mr. Kushner’s ties to Mr. Trump or any effort to try to seek favors from the U.S. government.

“The fact that such a renowned American entrepreneur shows his interest on investing in Albania makes us very proud and happy,” a spokesman for Mr. Rama said last year in a statement to The New York Times when asked about the projects.

Mr. Kushner’s Affinity Partners, a private equity company backed with about $4.6 billion in money mostly from Saudi Arabia and other Middle East sovereign wealth funds, is pursuing the Albania project along with Asher Abehsera, a real-estate executive that Mr. Kushner has previously teamed up with to build projects in Brooklyn, N.Y.

The Albanian government, according to an official document recently posted online, will now work with their American partners to clear the proposed hotel site of any potential buried munitions and to examine any other environmental or legal concerns that need to be resolved before the project can move ahead.

The document, dated Dec. 30, notes that the government “has the right to revoke the decision,” depending on the final project negotiations.

Mr. Kushner’s firm has said the plan is to build a five-star “eco-resort community” on the island by turning a “former military base into a vibrant international destination for hospitality and wellness.”

Ivanka Trump, Mr. Trump’s daughter, has said she is helping with the project as well. “We will execute on it,” she said about the project, during a podcast last year.

This project is just one of two major real-estate deals that Mr. Kushner is pursuing along with Mr. Abehsera that involve foreign governments.

Separately, the partnership received preliminary approval last year to build a luxury hotel complex in Belgrade, Serbia, in the former ministry of defense building, which has sat empty for decades after it was bombed by NATO in 1999 during a war there.

Serbia and Albania have foreign policy matters pending with the United States, as both countries seek continued U.S. support for their long-stalled efforts to join the European Union, and officials in Washington are trying to convince Serbia to tighten ties with the United States, instead of Russia.

Virginia Canter, who served as White House ethics lawyer during the Obama and Clinton administrations and also an ethics adviser to the International Monetary Fund, said even if there was no attempt to gain influence with Mr. Trump, any government deal involving his family creates that impression.

“It all looks like favoritism, like they are providing access to Kushner because they want to be on the good side of Trump,” Ms. Canter said, now with State Democracy Defenders Fund, a group that tracks federal government corruption and ethics issues.

Business

Craft supplies retailer Joann declares bankruptcy for the second time in a year

Published

6 hours ago

January 16, 2025

Press Room

Craft supplies retailer Joann declares bankruptcy for the second time in a year

The craft supplies and fabric retailer Joann filed for bankruptcy for the second time in less than a year, as the chain wrestles with declining sales and inventory shortages, the company said Wednesday.

The retailer emerged from a previous Chapter 11 bankruptcy process last April after eliminating $505 million in debt. Now, with $615 million in liabilities, the company will begin a court-supervised sale of its assets to repay creditors. The company owes an additional $133 million to its suppliers.

“We hope that this process enables us to find a path that would allow Joann to continue operating,” said interim Chief Executive Michael Prendergast in a statement. “The last several years have presented significant and lasting challenges in the retail environment, which, coupled with our current financial position and constrained inventory levels, forced us to take this step.”

Joann’s more than 800 stores and websites will remain open throughout the bankruptcy process, the company said, and employees will continue to receive pay and benefits. The Hudson, Ohio-based company was founded in 1943 and has stores in 49 states, including several in Southern California.

According to court documents, Joann began receiving unpredictable and inconsistent deliveries of yarn and sewing items from its suppliers, making it difficult to keep its shelves stocked. Joann’s suppliers also discontinued certain items the retailer relied on.

Along with the “unanticipated inventory challenges,” Joann and other retailers face pressure from inflation-wary consumers and interest rates that were for a time the highest in decades. The crafts supplier has also been hindered by competition from others in the space, including Michael’s, Etsy and Hobby Lobby, said Retail Wire Chief Executive Dominick Miserandino.

“It did not necessarily learn to evolve like its nearby competitors,” Miserandino said of Joann. “Not many people have heard of Joann in the way they’ve heard of Michael’s.”

Joann is not the first retailer to continue to struggle after going through bankruptcy. The party supply chain Party City announced last month it would be shutting down operations, after filing for and emerging from Chapter 11 bankruptcy in 2023.

Over the last two years, more than 60 companies have filed for bankruptcy for a second or third time, Bloomberg reported, based on information from BankruptcyData. That’s the most over a comparable period since 2020, when the COVID-19 pandemic kept shoppers home.

Discount chain Big Lots filed for bankruptcy last September, and the Container Store, a retailer offering storage and organization products, declared bankruptcy last month. Companies that rely heavily on brick-and-mortar locations are scrambling to keep up with online retailers and big-box chains. Fast-casual restaurants such as Red Lobster and Rubio’s Coastal Grill have also struggled.

High prices have prompted consumers to pull back on discretionary spending, while rising operating and labor costs put additional pressure on businesses, experts said. The U.S. annual inflation rate for 2024 was 2.9%, down from 3.4% in 2023. But inflation has been on the rise since September and remains above the Federal Reserve’s goal of 2%.

If a sale process for Joann is approved, Gordon Brothers Retail Partners would serve as the stalking-horse bidder and set the floor for the auction.

Business

U.S. Sues Southwest Airlines Over Chronic Delays

Published

13 hours ago

January 15, 2025

Press Room

U.S. Sues Southwest Airlines Over Chronic Delays

The federal government sued Southwest Airlines on Wednesday, accusing the airline of harming passengers who flew on two routes that were plagued by consistent delays in 2022.

In a lawsuit, the Transportation Department said it was seeking more than $2.1 million in civil penalties over the flights between airports in Chicago and Oakland, Calif., as well as Baltimore and Cleveland, that were chronically delayed over five months that year.

“Airlines have a legal obligation to ensure that their flight schedules provide travelers with realistic departure and arrival times,” the transportation secretary, Pete Buttigieg, said in a statement. “Today’s action sends a message to all airlines that the department is prepared to go to court in order to enforce passenger protections.”

Carriers are barred from operating unrealistic flight schedules, which the Transportation Department considers an unfair, deceptive and anticompetitive practice. A “chronically delayed” flight is defined as one that operates at least 10 times a month and is late by at least 30 minutes more than half the time.

In a statement, Southwest said it was “disappointed” that the department chose to sue over the flights that took place more than two years ago. The airline said it had operated 20 million flights since the Transportation Department enacted its policy against chronically delayed flights more than a decade ago, with no other violations.

“Any claim that these two flights represent an unrealistic schedule is simply not credible when compared with our performance over the past 15 years,” Southwest said.

Last year, Southwest canceled fewer than 1 percent of its flights, but more than 22 percent arrived at least 15 minutes later than scheduled, according to Cirium, an aviation data provider. Delta Air Lines, United Airlines, Alaska Airlines and American Airlines all had fewer such delays.

The lawsuit was filed in the United States District Court for the Northern District of California. In it, the government said that a Southwest flight from Chicago to Oakland arrived late 19 out of 25 trips in April 2022, with delays averaging more than an hour. The consistent delays continued through August of that year, averaging an hour or more. On another flight, between Baltimore and Cleveland, average delay times reached as high as 96 minutes per month during the same period. In a statement, the department said that Southwest, rather than poor weather or air traffic control, was responsible for more than 90 percent of the delays.

“Holding out these chronically delayed flights disregarded consumers’ need to have reliable information about the real arrival time of a flight and harmed thousands of passengers traveling on these Southwest flights by causing disruptions to travel plans or other plans,” the department said in the lawsuit.

The government said Southwest had violated federal rules 58 times in August 2022 after four months of consistent delays. Each violation faces a civil penalty of up to $37,377, or more than $2.1 million in total, according to the lawsuit.

The Transportation Department on Wednesday also said that it had penalized Frontier Airlines for chronically delayed flights, fining the airline $650,000. Half that amount was paid to the Treasury and the rest is slated to be forgiven if the airline has no more chronically delayed flights over the next three years.

This month, the department ordered JetBlue Airways to pay a $2 million fine for failing to address similarly delayed flights over a span of more than a year ending in November 2023, with half the money going to passengers affected by the delays.