What’s happening? (June 12-18)
Biggest rate hike since 1994
The most To further curb inflation, the Federal Reserve raised interest rates by three-quarters of a percentage point on Wednesday, the largest hike by the central bank since 1994. While answering questions from reporters following the announcement, Fed Chairman Jerome H. Powell said, that officials “are not trying to create a recession at the moment.” Still, many fear that if the Fed’s efforts to curb rising prices and curb demand go too far, the bank could trigger a serious economic slowdown, forcing businesses to close and sending jobless numbers back higher. And the Fed has shown no signs of changing course. Wednesday’s surge could be followed by a similarly large one next month. Mr. Powell is likely to face tough questions about this and other Fed actions when he appears before lawmakers in the House and Senate this week.
Rocking week for the markets
The S&P 500 was up slightly on Friday, but that was no consolation for investors as the S&P had its worst weekly performance since March 2020. Stocks went into a bear market on Monday as investors feared Fed rate hikes, weighing more on the S&P than 20 percent from its last peak in January. When the Fed finally announced its decision, investors appeared largely unsurprised and markets remained fairly stable on the day. But shares fell sharply on Thursday and remain on shaky ground. And it may have been an even worse week for the cryptocurrency markets as prices continued to plummet and crypto companies cut staff. Bitcoin’s price fell below $20,000 for the first time since late 2020. Coinbase said it would lay off 18 percent of its employees following cuts at other crypto companies including Gemini and BlockFi. Celsius, an experimental crypto bank, announced it was halting withdrawals “due to extreme market conditions.”
A cosmetics giant in the red
Revlon, a staple of bathroom cabinetry since the Great Depression, filed for bankruptcy protection last week, a sign of the changing landscape for cosmetics brands and potential troubles for retailers. But the company has been in dire straits for some time: At the start of the pandemic, Revlon said it would cut 1,000 jobs in hopes of becoming more profitable. Months later, however, it narrowly avoided bankruptcy by striking a deal with its debtors. But with $3.8 billion in debt, supply chain problems, and plenty of competition from new makeup brands, Revlon eventually collapsed under the pressure.
What’s next? (June 19-25)
Headwind for the housing market
Realtors see trouble on the horizon. Last week Redfin and Compass announced major staff cuts, with chiefs of both companies citing concerns about the economic outlook. Glenn Kelman, Redfin’s chief executive, told employees in an email that demand was down 17 percent and the job cuts would affect about 8 percent of the company’s workforce. And Compass said it is laying off 10 percent of its employees “due to the clear signs of slowing economic growth.” In another harbinger of a possible downturn for the housing market, mortgage rates rose to 5.78 percent last week, the fastest pace since 1987.
Elon Musk’s vision for Twitter
Last week, Elon Musk did something remarkably standard for someone buying a company: he met with the staff at Twitter. Of course, the meeting had been a long time coming. Mr Musk was set to answer questions from employees after joining Twitter’s board of directors in April, but those plans changed when he decided to buy the company instead. During the hour-long question-and-answer session, Mr. Musk laid out his vision for the company, saying he wants to expand the platform to “at least a billion” Twitter users and expects it to be pretty handy. He reiterated his criticism of the number of bot accounts on Twitter, the crux of his recent handwringing over the deal, even as his takeover of Twitter continues to progress. Experts said his meeting with staffers could help reassure potential investors if the deal goes through.
Biden considers easing tariffs
As stubbornly high inflation threatens to spell losses for Democrats in November’s midterm elections, President Biden is considering the possibility of rolling back some tariffs former President Donald J. Trump imposed on Chinese goods. Mr. Biden had said he intended to rely primarily on the Fed to tame rising prices, but as the president comes under pressure from business groups and outside economists — as well as a frustrated public — he is considering taking action himself seize. Some private estimates in the White House say lifting the tariffs could lower headline inflation by a quarter of a point. But the move could hurt other aspects of the government’s economic agenda and fuel criticism that Mr. Biden is being too easy on Beijing.
Frequently asked questions about inflation
What is inflation? Inflation is a loss of purchasing power over time, meaning your dollar won’t go as far tomorrow as it did today. It is usually expressed as the annual change in the price of essential goods and services such as food, furniture, clothing, transportation and toys.
Hundreds of auto accidents in the United States over a 10-month period were linked to vehicles using advanced driver-assistance technology, a federal agency found. McDonald’s is paying $1.3 billion in fines and back taxes to settle a long-running tax dispute in France. German officials are urging residents to save energy as Russia reduces its flow of natural gas to Europe.