Watch live: The Fed chair says inflation will likely remain high in coming months.
Price gains are up “notably,” the Federal Reserve chair will tell House lawmakers, but that owes partly to temporary factors.
Jerome H. Powell, the Federal Reserve chair, testifies before the House. He is likely to say that inflation has increased “notably” and is poised to remain higher in coming months before moderating.CreditCredit…Pool photo by Al Drago
Jerome H. Powell, the Federal Reserve chair, is set to tell House lawmakers that inflation has increased “notably” and is poised to remain higher in coming months before moderating — but he will make no indication that the recent jump in prices is pushing central bankers to rush to change policy.
The Fed chair will attribute high inflation numbers to factors tied to the economy’s reopening from the pandemic, based on the text of his prepared remarks. He will offer no precise estimate for when or how much price pressures will ease.
Mr. Powell’s testimony before the House Financial Services Committee on Wednesday, starting at noon, will come at a fraught moment politically and economically when it comes to inflation. The Consumer Price Index spiked by 5.4 percent in June, the biggest jump since 2008 and a larger move than economists had expected. Price pressures appear to be poised to last longer than policymakers at the White House or Fed had expected.
“Inflation has increased notably and will likely remain elevated in coming months before moderating,” Mr. Powell is prepared to say.
He will explain that today’s higher inflation comes from temporary data quirks, rising prices on goods and services facing supply constraints that ought to “partially reverse,” and prices for services that were hard-hit by the pandemic and are now experiencing a demand surge. He will also note that longer-run inflation expectations remain under control — which matters because inflation outlooks help to shape the future path for prices.
Expectations “have moved up from their pandemic lows and are in a range that is broadly consistent with the F.O.M.C.’s longer-run inflation goal,” Mr. Powell said, referring to the policy-setting Federal Open Market Committee.
The Fed chair’s prepared remarks make no indication that the path for policy will change based on the hotter-than-expected price data. Instead, he will say that labor market conditions are improving but that “there is still a long way to go” and that the Fed’s goal of achieving “substantial further progress” toward its economic goals before taking the first steps toward a more normal policy setting “is still a ways off.”
Fed officials are debating when and how to slow their $120 billion of monthly government-backed bond purchases, which would be the first step in moving policy away from an emergency mode. Mr. Powell said those discussions will continue “in coming meetings.”
The central bank is also maintaining its policy interest rate at near-zero, which helps to keep borrowing cheap for consumers and businesses. Officials have set out a higher standard for lifting rates: They want the economy to return to full employment and inflation to come in on track to average 2 percent over time.
Raising rates is not yet up for discussion, officials have said publicly and privately.
Mr. Powell said the Fed’s current approach means that “monetary policy will continue to deliver powerful support to the economy until the recovery is complete.”
Shoppers in Manchester, England. Analysts noted tha price increases in Britain reached across food, used cars, clothing and footwear, eating and drinking out and fuel.Credit…Phil Noble/Reuters
Britain’s annual rate of inflation climbed to 2.5 percent in June, data published on Wednesday showed, exceeding economists’ expectations. The British pound and government bond yields rose as investors weighed how the central bank might eventually react to the continued increase in prices.
The pace was the highest since August 2018. After the 2016 Brexit referendum, Britain went through a period of high inflation set off by the slump in the pound. Inflation rose 0.5 percent in June from the previous month, the fifth-consecutive month of increases.
Analysts noted that the price increases were broad-based, reaching across food, used cars, clothing and footwear, eating and drinking out and fuel. Last month, Bank of England policymakers said they expected the inflation rate to temporarily rise above their 2 percent target, and even exceed 3 percent, before falling again.
Price rises are mostly contained to items that either fell a lot the previous year or are part of sectors reopening from the winter lockdown. This should allow the Bank of England to “continue to judge that rising inflation will prove temporary,” analysts at Royal Bank of Canada wrote.
The potential path of inflation has gripped investors and economists globally as they debate whether the increase might be sustained and force central banks to take action. On Tuesday, data showed the annual rate of inflation in the United States climbed to 5.4 percent, the fastest pace in 13 years. On Wednesday, Jerome H. Powell, the Federal Reserve chair, is set to tell House lawmakers that inflation has increased “notably” and is poised to remain higher in coming months before slowing down again.
The pound rose 0.5 percent against the U.S. dollar and 0.1 percent against the euro. The yield on 10-year bonds rose as much as five basis points, or 0.05 percentage point, to 0.68 percent.
Elsewhere in markets
Stocks on Wall Street climbed, with the S&P 500 up about half a percent in early trading.
Most European indexes were lower. The Stoxx Europe 600 index fell slightly.
Oil prices dipped. Futures of West Texas Intermediate, the U.S. crude benchmark, fell 0.3 percent to $75.05 a barrel.
Bank of AmericaCredit…Carlo Allegri/Reuters
Americans are ramping up spending. That’s good for Bank of America’s bottom line.
The lender reported solid results for the second quarter on Wednesday, saying that its profit soared to $9.2 billion in the period — more than double its earnings of $3.5 billion a year earlier — as consumers charged more on their cards, bought homes and made investments while emerging from the pandemic shutdowns of 2020.
“Consumer spending has significantly surpassed prepandemic levels, deposit growth is strong, and loan levels have begun to grow,” Brian Moynihan, Bank of America’s chief executive, said in a statement. “More than 85 percent of our buildings and offices are open, and we’re welcoming our teammates back,” he said.
The company’s losses from consumers not paying back their debts fell to the lowest rates in 25 years, while balances on loans grew for the first time since the beginning of last year, according to the bank’s chief financial officer, Paul Donofrio. It also released $2.2 billion from a rainy-day fund that it had set aside for a predicted wave of loan defaults that never emerged, thanks to robust government stimulus efforts that helped keep many Americans afloat.
Still, the results weren’t entirely rosy: Revenue fell short of analyst’s expectations to $21.5 billion, declining 4 percent from a year ago.
Two other major banks, Citigroup and Wells Fargo, reported profit and revenue that beat expectations.
Citi reported profit of $6.2 billion on revenue of $17.5 billion. Analysts had been expecting slightly lower revenue of $17.2 billion, and Citi’s per-share earnings of $2.85 exceeded analysts’ expectations by 88 cents. Wells Fargo posted earnings per share of $1.38, swinging from a loss of $1.01 a year earlier, while revenue increased to $20.3 billion, up 11 percent from a year earlier.
Citi’s chief executive, Jane Fraser, said the company was benefiting from a faster-than-expected economic recovery, which had lowered the amount it cost the bank to make loans. Wells Fargo’s chief executive, Charlie Scharf, also highlighted the economic recovery as a boon.
Two other banking behemoths, JPMorgan Chase and Goldman Sachs, reported strong results on Tuesday. Bank stocks have rebounded slightly in the past week after weakening recently as investors became concerned about economic growth slowing down from its breakneck pace.
— Lananh Nguyen
Lina Khan, chair of the Federal Trade Commission, Facebook demanded that she recuse herself from the agency’s lawsuit against the companyCredit…Pool photo by Saul Loeb
Facebook on Wednesday demanded that the new chair of the Federal Trade Commission, Lina Khan, recuse herself from the agency’s lawsuit against the company, saying her prior criticism of the company meant she could not be impartial in the case.
In a petition filed with the F.T.C., the company said that allowing Ms. Khan to play a role in deciding the future of the case would violate its due process rights. As evidence of her bias, it pointed to critical statements that she had made about Facebook, her work on a congressional investigation into the company and her previous role at the Open Markets Institute, a group critical of the tech giants.
The F.T.C.’s lawsuit against Facebook, which argued that the company had broken antitrust laws while buying its nascent rivals Instagram and WhatsApp, was thrown out by a federal judge in June. The agency has 30 days from that ruling to file a new version of its complaint that addresses the judge’s concerns.
“Chair Khan has consistently made well-documented statements about Facebook and antitrust matters that would lead any reasonable observer to conclude that she has prejudged the Facebook antitrust case brought by the F.T.C.,” Christopher Sgro, a spokesman for Facebook, said in a statement.
Amazon made a similar argument last month, requesting that Ms. Khan recuse herself from any antitrust investigations into the company, citing her longstanding critiques of the company’s practices.
An F.T.C. spokeswoman, Lindsay Kryzak, declined to comment.
Zomato, a food-delivery company based in India, received over $562 million from a mix of foreign and domestic institutions ahead of its initial public offering on Wednesday, out of $1.3 billion it had planned to raise in its market debut.
The first batch of shares it sold to the public was oversubscribed, with strong interest from retail investors. That was despite some financial analysts saying that the loss-making company’s offering was expensive compared to its global peers.
The share sales thus far imply a company valuation of more than $8 billion. The company is selling shares through Friday, in an offering that’s set to be the biggest in the country this year. Zomato was valued at $5.4 billion in a funding round in February.
Deepinder Goyal, Zomato’s founder and chief executive officer, tweeted on Wednesday that he had “ordered a triple breakfast” and was “stress eating” before the start of the public offering.
Zomato, founded in 2008, has quickly grown into one of the largest food-delivery firms in the world. The company acquired Uber’s food-delivery business in India and maintains a presence in 24 countries and in over 10,000 cities.
As pandemic lockdowns have bolstered the popularity of online platforms and led people to order more food online, analysts said Zomato has strong growth potential.
“Zomato is in a sweet spot, as the online food delivery market is at the cusp of evolution,” said Sneha Poddar, a financial analyst. “With economics of scale playing out, the losses have reduced substantially.”
India’s other digital start-ups will be watching this week’s I.P.O. closely. In the coming months, more of the country’s tech unicorns — as firms valued at over $1 billion are known — are likely to make their market debuts, including the mobile payments app Paytm and the online beauty retailer Nykaa.
Delta Air Lines said there were promising indications that the travel business was returning to normal.Credit…Elijah Nouvelage/Reuters
Delta Air Lines reported a $652 million profit in the second quarter of the year, its first since the pandemic began and the latest sign that the airline recovery is well underway. The carrier reported $7.1 billion in revenue.
There were also promising indications that the business is returning to normal, Delta said, noting that booking trends recovered as customers bought tickets further out, with average daily sales beating Delta’s internal expectations by 20 percent.
“Domestic leisure travel is fully recovered to 2019 levels and there are encouraging signs of improvement in business and international travel,” the airline’s chief executive, Ed Bastian, said in a statement.
Corporate travel recovered as offices reopened throughout the quarter, with the number of business travelers down 60 percent in June compared with 80 percent in March, according to the airline.
Despite those encouraging signs, Delta’s quarterly profit, which was buoyed by $1.5 billion in federal stimulus money, was still down 55 percent from the same quarter in 2019. Its revenue was down 43 percent from two years ago.
The number of people flying for vacation or to visit friends and family within the United States has recovered to prepandemic levels, but Delta’s revenue from domestic travel was down 45 percent from 2019 because of the drop-off in business travel.
Revenue from travel to Latin America was down only 36 percent, while longer flights across the Atlantic or Pacific oceans brought in about 85 percent less revenue. Cargo revenue, on the other hand, was up 35 percent.
Delta also offered a preview of how it expects to fare during the quarter encompassing July, August and September: Passenger capacity will be down 28 to 30 percent and revenue will be off 30 to 35 percent, compared with the same period in 2019.
The financial results came as Delta announced plans to buy 29 used Boeing 737 planes and lease seven used Airbus A350s, some of which will replace older aircraft that the carrier had removed from its fleet. That decision drove improvements in fuel efficiency, which was up more than 7 percent in the second quarter compared with 2019.
Delta is the first major airline to report financial results for the second quarter. American Airlines, United Airlines and Southwest Airlines are all expected to announce earnings next week.
American offered a preview of those results, saying in a securities filing on Tuesday that it expected to announce earnings between a $35 million loss and a $25 million profit for the quarter.
“We are clearly moving in the right direction,” the airline’s chief executive, Doug Parker, and president, Robert Isom, said in a staff memo on Tuesday. “Our revenue and expense performance in the quarter came in better than expectations, and this was achieved while bringing the operation back up to full capacity and safely transporting a record number of travelers.”
Travel within the United States is down about 20 percent compared with the same period in 2019, according to Transportation Security Administration screening data. Summer is the industry’s busiest season, but it’s unclear what the fall will look like, when corporate travel typically picks up.
Americans get millions of illegal robocalls every month.Credit…Steven Senne/Associated Press
Americans get millions of illegal robocalls every month, despite attempts by the telecommunications industry and government agencies to stop them.
The Federal Communications Commission — the government agency that regulates communications — is trying to cut down on the calls with new rules that went into effect on June 30, Christine Hauser reports for The New York Times.
Here’s how it works.
In short, the F.C.C. is trying to make sure that if you’re getting a call, the network on which it is being made is verifying the caller.
The F.C.C.’s first step was setting a June 30 deadline for what it calls “voice service providers” (you know them as phone companies) to register their efforts to reduce the scourge of scams in a public Robocall Mitigation Database. So far, more than 1,500 of them have, the F.C.C. said.
Starting on Sept. 28, phone companies must refuse calls from providers that have not registered with the F.C.C.
The F.C.C. hopes to get all providers, including smaller regional networks, on board. That would reduce spam by verifying calls as they pass through different networks, from the caller to the recipient.
This will help stop some scammers from manipulating their number to make the call appear more legitimate. But some businesses legitimately change the number displayed on caller ID to show their switchboard number or toll-free number, rather than a specific department or extension.
“The key thing here is it was never intended to be a silver bullet,” one analyst said of the new effort. “It was intended to be a tool to help.”
A planned merger involving an upstart space transportation company may not get off the ground after securities regulators brought one of the first major enforcement actions targeting special purpose acquisition companies, or SPACs. The Securities and Exchange Commission said on Tuesday that it had reached a settlement with several parties involved in the planned merger of Momentus, a company that said it had developed a unique propulsion technology, and Stable Road Acquisition, a SPAC. Investors were misled into believing the propulsion system had been successfully tested in space, when the test had failed, regulators said. “This case illustrates risks inherent to SPAC transactions, as those who stand to earn significant profits from a SPAC merger may conduct inadequate due diligence and mislead investors,” the S.E.C. chairman, Gary Gensler, said in a statement.
The United States is hopeful that Ireland will drop its resistance to joining the global tax agreement that it is brokering, as Treasury Secretary Janet L. Yellen made the case to her Irish counterpart this week that it is in its economic interests to join the deal. Ms. Yellen held high-stakes meetings in Brussels this week with Paschal Donohoe, Ireland’s finance minister and president of the Eurogroup, a club of European finance ministers. She needs Mr. Donohoe’s support because the European Union requires unanimity among its members to formally join the deal, which will require changes to domestic tax laws. After meeting with Ms. Yellen on Monday, Mr. Donohoe struck a positive tone and said he would continue to engage in the process.