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Jerome H. Powell, the Federal Reserve chair, signaled that the central bank is growing more wary of high — and stubborn — inflation, and that it could speed up its plan to withdraw economic support as soon as its meeting in December as it tries to make sure that rapid price gains do not last.
The Fed had been buying $120 billion in government-backed securities each month for much of the pandemic to bolster the economy by keeping money flowing in financial markets. In November, officials announced plans to slow those purchases by $15 billion per month. That would have ended the program midway through 2022. But Mr. Powell signaled on Tuesday that the process could speed up, cutting down on how much juice the Fed will add to demand in upcoming months.
“At this point, the economy is very strong, and inflationary pressures are high,” Mr. Powell said during a hearing before the Senate Banking Committee. “It is therefore appropriate in my view to consider wrapping up the taper of our asset purchases, which we actually announced at our November meeting, perhaps a few months sooner.”
Mr. Powell said that the Fed will discuss slowing bond purchase faster “at our upcoming meeting in a couple of weeks” — stressing that between now and then, the Fed will get a better sense of the new Omicron variant of the coronavirus, a fresh labor market report and a new reading on consumer price inflation.
The Fed’s next two-day policy meeting will take place Dec. 14-15.
Mr. Powell made it clear that it was too soon for Fed policymakers — or anyone — to tell how big the new variant’s impact will be, since that will hinge on how easily it transmits and whether it causes more severe disease.
“What I’m told by experts is that we’ll know quite a bit about those answers in about a month,” he said. “We’ll know something, though, within a week or ten days.”
For now, he said, “it’s a risk, it’s a risk to the baseline — it’s not really baked into our forecasts.”
The challenge that Omicron might pose hits at a complicated moment for policymakers. The economy has boomed back this year, and hot demand has collided with choked supply chains to push inflation sharply higher. The central bank has been working toward removing its economic help as price gains remain stubbornly high, reorienting its policy so that it can raise rates next year if that is necessary to keep rising costs in check as inflation proves more stubborn than officials had hoped.
“Generally, the higher prices we’re seeing are related to the supply and demand imbalances that can be traced directly back to the pandemic and the reopening of the economy, but it’s also the case that price increases have spread much more broadly in the recent few months,” Mr. Powell said Tuesday. “I think the risk of higher inflation has increased.”
If the new variant continues to roil supply chains even as it keeps workers at home and prevents a full labor market recovery, it could put the Fed in a tough spot. Central bank policymakers are supposed to foster both full employment and keep prices stable.
Stocks on Wall Street fell in early trading Tuesday, driven lower by the growing possibility the Federal Reserve may remove its supports for the economy just as a worrying new variant of the coronavirus has begun to spread.
The Federal Reserve chair, Jerome H. Powell, told a Senate committee on Tuesday that inflation was likely to persist well into next year and that the Fed would consider tapering off its bond-buying program more quickly in response.
“At this point, the economy is very strong, and inflationary pressures are high,” Mr. Powell said during a hearing before the Senate Banking Committee. “It is therefore appropriate in my view to consider wrapping up the taper of our asset purchases, which we actually announced at our November meeting, perhaps a few months sooner.”
The Fed’s efforts have been a crucial factor in the swift rise of stocks since the start of the pandemic. The S&P 500, which had been down roughly 0.5 percent for much of the morning, tumbled after of Mr. Powell’s comments. The index was down 1.5 percent at 11 a.m., more than giving up its gains from Monday.
Short-term bond yields, which are heavily influenced by expectations for Fed rate hikes, spiked. The yield on the two-year Treasury note rose to 0.56 percent from roughly 0.43 percent in relatively short order, as investors interpreted the move away from designating inflation as “transitory” as a signal of a shift by the Fed toward preferring higher interest rates.
“The Fed is the ultimate owner of the ‘transitory’ characterization, and the chair’s decision to move beyond that is a decidedly hawkish step,” Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets in New York, wrote in a note to clients shortly after Mr. Powell’s comments.
Stocks prices were falling around the world before Mr. Powell’s testimony as investors struggled to understand the danger posed by the Omicron variant. The Stoxx Europe 600 fell 0.4 percent. In Asia, the Nikkei 225 in Japan and the Hang Seng in Hong Kong had each dropped more than 1 percent.
Investors have been closely watching updates on the Omicron variant since last week, and remain particularly attuned to the effectiveness of vaccines against it.
The chief executive of Moderna, a vaccine maker, said in an interview on Tuesday that there could be a “material drop” in the effectiveness of current vaccines to the new variant. The executive, Stéphane Bancel, told The Financial Times that it might be months before an Omicron-specific vaccine could be produced at scale, but added that it would be risky to shift the company’s entire vaccine production while other variants are still prevalent.
Financial markets have been unsteady since the discovery of the new variant in southern Africa late last week. The S&P 500 suffered its worst day since February on Friday, dropping 2.3 percent. On Monday, it began to recover as politicians around the world cautioned against panic, even as some put travel bans in place.
Still, relatively little is known about the Omicron variant. Scientists have detailed its mutations, but it will be a couple of weeks before they know how it responds to existing vaccines and if it causes severe disease.
Coral Murphy Marcos contributed to this report.
Inflation soared to a record high in Europe in November as a continued upward climb in energy costs pushed prices skyward, data showed on Tuesday.
Annual inflation in the eurozone surged to 4.9 percent, the European statistics agency Eurostat reported, the highest since records began in 1997. Excluding volatile energy and food prices, inflation jumped by 2.6 percent from a year earlier, the highest in two decades.
Prices for goods and services have been climbing steadily since summer as a reopening of the global economy from coronavirus lockdowns juiced economic activity, sending energy costs up and crimping global supply chains.
Energy costs jumped 27.4 percent in November from a year ago, continuing an upward trend.
“We haven’t seen inflation this high since the eighties,” Bert Colijn, senior economist for the eurozone at ING Bank, said in a note to clients. “The energy shock of 2021 is starting to have a substantial impact on consumers,” he added.
Year-over-year inflation in the eurozone
The inflation gains have driven up costs for a range of products and services, and have led workers and unions to demand higher wages in many European countries.
Germany, Europe’s largest economy, reported that inflation accelerated to 6 percent from a year ago, while in France it rose to 3.4 percent, the highest in over a decade. The highest rates were in Belgium, where inflation rose to 7.1 percent, and in Lithuania, where it topped 9 percent.
With the rapid circulation of the recently discovered Omicron variant of the coronavirus, the global economic outlook has suddenly grown more uncertain.
The European Central Bank has said that it expects the inflation spike to be temporary as energy price increases fade next year. The bank’s mandate is to keep inflation to a 2 percent target.
“Although the ECB has stated that it sees the current price pressures easing in 2022, and our baseline is that monetary policy will remain accommodative, the latest data will add to the debate on the appropriate level of policy support,” Katharina Koenz, an economist at Oxford Economics, said in a note to clients.
“However,” she added, “there isn’t much the ECB can do about higher energy prices and supply bottlenecks in the short-term anyway.”
The athletic apparel retailer Lululemon filed a lawsuit against the fitness company Peloton on Monday, accusing it of patent infringement over the designs of a new line of leggings and sports bras.
The lawsuit, filed in U.S. District Court for the Central District of California, accuses Peloton of trade dress infringement, false designation of origin and unfair competition. Lululemon is seeking an injunction against Peloton as well as a jury trial, damages and other monetary relief.
Peloton and Lululemon ended a co-branding relationship this year, a split that Peloton described as amicable, according to court documents. Peloton introduced a new apparel brand in September.
In its suit, Lululemon said that five Peloton-branded women’s bra and legging products, including the Strappy Bra, the Cadent Laser Dot Bra and the Cadent Laser Dot Legging, “were infringing” on six Lululemon patents.
Lululemon also claimed that a Peloton product labeled One Luxe Tight was an imitation of one of Lululemon’s best sellers, the Align Pant.
“We are confident in our position and look forward to properly resolving this case through the courts,” Shannon Higginson, senior vice president, general counsel and chief compliance officer at Lululemon, said in a statement.
Lawyers for Peloton did not immediately respond to requests for comment on Tuesday.
“Unlike innovators such as Lululemon, Peloton did not spend the time, effort and expense to create an original product line,” Lululemon said in its complaint. “Instead, Peloton imitated several of Lululemon’s innovative designs and sold knockoffs of Lululemon’s products, claiming them as its own.”
The suit is the latest escalation in a dispute between the two popular brands. On Nov. 24, Peloton filed a complaint in U.S. District Court for the Southern District of New York, asking for a court declaration that it had not infringed on any of Lululemon’s patents.
Peloton said in its complaint that its merchandise “has clear and obvious differences that allow the products to be easily distinguished” from Lululemon’s products.
On Nov. 11, lawyers for Lululemon sent a cease-and-desist letter to Peloton saying that the company would sue unless Peloton stopped selling “copy-cat products” that infringed on Lululemon’s “design patent and trade dress rights.”
In its complaint, Peloton said that Lululemon’s “allegations lack any merit,” adding that the companies’ “brands and logos are also distinctive and well-recognized, making confusion between products a virtual impossibility.”
British antitrust regulators on Tuesday ordered Facebook’s parent company Meta to sell the animated images library Giphy, escalating the country’s efforts to push back against the growing power of the world’s largest technology companies.
The Competition and Markets Authority said the acquisition of Giphy, which Meta bought last year, reduced competition between social media platforms and in the display advertising market, which Facebook dominates and where Giphy was beginning to expand before the deal.
Though the animated images, known as GIFs, are often silly clips and memes shared in text messages and social media posts — like Homer Simpson slinking back into a hedge — authorities concluded that Meta’s acquisition could cause serious harm to competition. Giphy is a dominant platform for creating and sharing GIFs, and regulators warned that if Meta restricted access to its vast archive of images it would further solidify Meta’s leadership position in social media.
Meta’s services, including Facebook, WhatsApp and Instagram, account for 73 percent of user time spent on social media in Britain, regulators said. The overall company was known as Facebook until a name change last month.
The Competition and Markets Authority said its order was legally binding and should result in Meta selling all of Giphy, not just the piece of its business in Britain.
Meta’s ownership of Giphy allows the company “to increase its significant market power in social media even further, through controlling competitors’ access to Giphy GIFs,” Stuart McIntosh, chair of the team investigating the deal, said in a statement. By ordering the sale, “we are protecting millions of social media users and promoting competition and innovation in digital advertising.”
In October, British antitrust regulators fined Meta 50.5 million pounds, or nearly $70 million, for “consciously refusing” to report all required information related to the Giphy investigation.
On Tuesday, Meta said it was reviewing the order to sell Giphy. It has four weeks to decide whether to appeal.
“We disagree with this decision,” the company said in a statement. “We are reviewing the decision and considering all options, including appeal. Both consumers and Giphy are better off with the support of our infrastructure, talent, and resources.”
The effort to reverse the Giphy acquisition is another step Britain is taking against the biggest tech companies. British policymakers are drafting tougher competition laws, including the appointment of a new technology industry regulator, to prevent companies like Meta from consolidating power.
A new online safety law is also being debated that would require Meta and other internet platforms to do more to block illicit content.
In the United States, Meta is battling claims brought by the Federal Trade Commission and several states that it bought up smaller rivals to illegally undermine competition.
Thousands of pages of new evidence and sworn testimony released on Monday show the extent to which former Gov. Andrew M. Cuomo relied on a group of allies, including his younger brother, the CNN host Chris Cuomo, to strategize how to deflect and survive a cascade of sexual harassment charges that eventually engulfed him.
Chris Cuomo pressed to take on a greater role in crafting his brother’s defense, including phoning into strategy calls and using his media contacts to keep tabs on reporters pursuing stories about the governor. At one point, he even ran down a secondhand tip that another woman accusing the governor of unwanted advances at a wedding was lying. (She was not.)
“You need to trust me,” Chris Cuomo pleaded with Melissa DeRosa, the governor’s secretary, at one point in March, arguing that she should rely on him and other outside advisers like the political consultant Lis Smith and the pollster Jefrey Pollock.
He added: “We are making mistakes we can’t afford.”
CNN said on Monday that the investigative documents “deserve a thorough review and consideration.”
“We will be having conversations and seeking additional clarity about their significance as they relate to CNN over the next several days,” the company said in a statement.
When Ms. DeRosa was trying to keep tabs in early March on journalists working to uncover stories of harassment, she turned to Chris Cuomo for “intel.”
“On it,” he wrote back after one such request. A few days later, Ms. DeRosa wrote to the governor’s brother that she had heard Ronan Farrow of The New Yorker was “getting ready to move” a story. “Can u check your sources?”
In text messages with Ms. DeRosa in March, Chris Cuomo said he was in a “panic” about how the governor’s team was handling the accusations and pleaded to “let me help with the prep” before drafting his own proposed statements for the governor to read, including one referencing “cancel culture.”
The newly released records included copies of text and email messages, as well as transcripts of depositions with many of Governor Cuomo’s closest aides. READ THE ARTICLE →
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Taking a deep breath, Elizabeth Holmes briefly crumpled her face as she spoke, her voice breaking.
Ramesh Balwani, her former boyfriend and business partner, emotionally and physically abused her, Ms. Holmes testified in court on Monday. He was controlling, she said, prescribing the food she ate, dictating every minute of her schedule and keeping her away from her family. And he forced her to have sex with him against her will, she said.
“He would force me to have sex with him when I didn’t want to because he would say that he wanted me to know he still loved me,” Ms. Holmes said on the stand, while crying.
It was the most dramatic moment in a three-month trial, with Ms. Holmes accused of lying and faking her way into hundreds of millions of dollars for her failed blood testing start-up, Theranos. READ MORE →
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A regional office of the National Labor Relations Board on Monday ordered a new union election at an Amazon warehouse in Alabama, upholding a union challenge to a vote that the company won decisively.
The decision was widely expected after a hearing officer recommended in August that the results be thrown out and that a new election take place. The company declared after the August decision that it intended to appeal to the labor board in Washington if it did not prevail at the regional level, but it did not say Monday whether it would follow through.
The union filed a formal objection to the election shortly after the results were announced in April, arguing that Amazon had undermined the conditions for a fair election by pressing the Postal Service to install a collection box at the warehouse, among other complaints. The union said the box, which was not authorized by the labor board, created the impression that Amazon was monitoring which workers voted.
In her decision Monday, the labor board’s regional director for the Atlanta region agreed, writing that Amazon “gave a strong impression that it controlled the process” by arranging the installation of the box. “This dangerous and improper message to employees destroys trust in the board’s processes and in the credibility of the election results,” the director, Lisa Y. Henderson, concluded. READ MORE →
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