The Week in Business: Higher Interest Rates Are Coming

After nearly two years of near-zero interest rates, the Federal Reserve has signaled that it will likely raise them in March. Fed Chairman Jerome H. Powell said officials no longer believe the healing U.S. economy needed as much support, given that inflation is well above policymakers’ target and the tight labor market. By making it more expensive to borrow money to buy a house or a car, the Fed hopes that rising interest rates will dampen demand and eventually help curb inflation. The Fed’s favorite measure of inflation, the Personal Consumption Expenditure Index, was 5.8% in December, the fastest pace since 1982 and one that could be disastrous for the policy outlook of President Biden and his colleagues. fellow Democrats in November’s midterm elections.

Whether you hold traditional stocks, cryptocurrencies, or a combination of the two, it’s been a stressful week to be an investor. Stocks swung sharply as uncertainty about future interest rate hikes – how much and how fast – came alongside positive signs about the growth of the US economy last year. Bitcoin, the largest cryptocurrency, continued its dramatic fall before rising slightly, although its value remained just above what it was last summer. Bitcoin’s value is now about halfway from its November peak.

The International Monetary Fund has released new forecasts for 2022, showing slower-than-expected economic growth, mainly due to issues with the world’s two largest economies, China and the United States. Compared to the 5.9% growth recorded in 2021, the IMF predicted that global growth this year would be 4.4%, down from its previous forecast of 4.9%. The demise of President Biden’s Build Back Better legislation, coupled with reduced economic support from the Fed and ongoing supply chain issues, has contributed to lower expectations for the United States, while the Chinese economy continues to struggle with its disruptive “zero Covid” approach and a real troubled real estate sector.

The 2022 Beijing Winter Olympics begin this week as China comes under increasing scrutiny for human rights abuses, including allegations of forced labor in Uyghur communities in Xinjiang. The United States, Britain, Canada and Australia have announced they will not send government officials to Beijing as part of a diplomatic boycott of the Games. However, many of the world’s most famous brands will still be there, including Visa and Coca-Cola. Corporate reluctance to boycott the Games could soften the political blow of diplomatic boycotts.

The Labor Department will release its report on January employment numbers on Friday, showing the state of the labor market at the start of the year and the extent to which the Omicron variant has affected it. Last month’s report showed that 199,000 jobs were added to the economy in December, the smallest gain of 2021. But with an unemployment rate of 3.9%, people looking for work have hard to find. Employers, however, continue to struggle to attract workers, with demand for them far outstripping supply. The Labor Department will also release data on the number of Americans who voluntarily quit their jobs in December. A record 4.5 million Americans quit their jobs in November.

Workers at an Amazon warehouse in Birmingham, Alabama will begin voting in a mail-in election to decide whether or not to form a union. Last spring, workers voted against unionizing before the National Labor Relations Board rejected the vote, citing improper interference by Amazon. If the unionization vote is successful this time, it would be the first union at the online retailer, which employs about one million people in the United States. Amazon workers at a Staten Island warehouse are also pushing for a union vote. And Starbucks workers recently voted to unionize in two locations.

Apple’s holiday quarter revenue and profit beat expectations. CNN is launching a wave of hiring for its new streaming news channel. Neil Young leaves Spotify on the streaming platform of Joe Rogan, a podcaster dismissive of Covid vaccines. The Biden administration’s plan to force companies to mandate vaccines or testing is over.

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