The Federal Reserve is finishing up its two-day policy meeting on Wednesday, and officials are expected to signal that they will soon slow their large bond-buying program — the central bank’s first step in weaning the economy off the support it has offered since shortly after the pandemic began.
This Fed meeting is shaping up to be among the most closely watched of the year. Central bank officials are in the process of teeing up their plans to slow large-scale purchases of government-backed debt, which they have been using to keep longer-term interest rates low and many types of borrowing cheap. The Fed has been carefully broadcasting its progress toward the so-called taper, in hopes that it can avoid surprising and roiling markets. Officials could provide further details on the expected timing and pace.
The Fed — which will release its policy statement at 2 p.m. — will also provide fresh economic projections. Those will include policymakers’ predictions of when they might lift their main interest rate from near-zero, a move that officials have signaled is still months or even years away.
“The Fed has been very clear on their intentions,†said Michelle Meyer, chief U.S. economist at Bank of America, noting that officials want to get moving on the bond program so that they can separate it from the path ahead for the federal funds rate. “That’s one of the reasons they want to get the taper underway — they just want it on the back burner.â€
Most economists expect the Fed to formally announce the tapering plan at its November meeting, and few expect officials to signal a precise timeline this week. Instead, they will probably say that they hope to slow bond purchases before the end of the year, and may offer hints about how quickly the purchases will draw to a close.
“Their goal is just to keep inching toward the taper,†said Gennadiy Goldberg, senior U.S. rates strategist at TD Securities. “Why pre-commit yourself?â€
Indeed, there’s a reason for all the tiptoeing. In 2013, when a former Fed Chair suggested that a post-financial-crisis bond purchase program would slow, it roiled global markets in what became known as the “taper tantrum.â€
Jerome H. Powell, the current Fed chair, has managed to avoid a similar fate so far, but the stakes right now are particularly high. Markets have been rocky this week as investors have fretted about stress in China’s real estate sector and the Fed’s plans. That risk is probably not enough to dissuade central bankers from sticking to the course they have charted, economists said.
“It’s taken some effort to get Fed officials all on the same page, and to get the Fed and the markets on the same page,†Michael Feroli, chief U.S. economist at JPMorgan, said in an email Monday. “I’d be surprised if they want to upend that for something that may be fleeting.â€
The Fed is also wrestling with more long-lasting questions about the economic outlook. Inflation has been elevated this year as the economy has begun to reopen from the pandemic and supply has struggled to keep pace with rapid consumer demand, and some measures of consumer inflation expectations are creeping higher. If that continues, rapid price gains could become more permanent.
That would run counter to one of the Fed’s two main goals. The central bank is in charge of keeping inflation low and steady — it aims for 2 percent annual increases in prices on average over time — while fostering maximum employment.
But full employment also remains elusive. Millions of jobs are still missing, even after months of historically rapid employment gains, and officials want to avoid lifting interest rates to cool off the economy before the labor market has fully healed. It’s difficult to know when that might be, because the economy has never recovered from pandemic-induced lockdowns before.
Tapering bond purchases could give the Fed room to be nimble going forward, allowing it to lift interest rates relatively quickly if it appears that inflation is climbing in a way that is likely to be sustained. Officials have signaled that they would prefer not to lift interest rates before bond buying is brought to a close.
After the Fed releases its statement, Mr. Powell will offer a statement and take questions from reporters at 2:30 p.m.
The Federal Reserve chair, Jerome H. Powell, will provide an update on the state of the economy and the outlook for monetary policy at a news conference on Wednesday, but he’s likely to face tough questions on a less familiar topic: ethics at the central bank.
Two of Mr. Powell’s colleagues — Robert Kaplan, president of the Federal Reserve Bank of Dallas, and Eric Rosengren, president of the Federal Reserve Bank of Boston — have come under scrutiny for their trading activity last year, when the Fed was carrying out a sweeping market rescue in response to the onset of the coronavirus pandemic.
According to a Dallas Fed spokesperson, along with disclosures from the Boston Fed, the notable trades did not happen in late March or April, when the central bank was particularly active in markets. Yet even the possibility that Fed policymakers could make financial decisions informed by their privileged knowledge of central bank deliberations has drawn outrage and calls for changes to the rules that govern how Fed officials participate in financial markets.
“To even have to ask the question whether these critically important Fed guardians of the economy are profiteering off their official knowledge, expertise and activity is devastating to the public confidence,†said Norman Eisen, a senior fellow at the Brookings Institution who was an ethics adviser to former President Barack Obama.
Mr. Powell has asked the Fed’s staff to review ethics rules around what senior officials are allowed to invest in and buy or sell, a spokesperson for the central bank said last week. And the two officials whose trades drew attention have pledged to sell their individual security holdings and to invest in broad indexes and cash instead.
But outside groups are calling for more, saying those changes are an inadequate response to the deficiencies the episode laid bare.
The trading by the officials “reveals how grossly deficient their ethical standards and the code of conduct are,†Dennis Kelleher, president and chief executive at Better Markets, wrote in a letter to Mr. Powell this week calling for external investigations of what happened. “This requires you to take immediate, concrete and meaningful action, not just P.R. pronouncements of internal investigations and an internal review of the ethics code.â€
Mr. Kaplan bought and sold millions of dollars in individual stocks and invested in stock futures, which can allow investors to make bets on whether the market will go up or down, according to his 2020 financial disclosures. Mr. Rosengren traded in financial products tied to real estate, during a year in which he regularly warned the public about risks to that sector. Both said in statements that their investments complied with Fed ethics rules.
A Fed spokesperson said the Fed’s ethics rules are consistent with what most government agencies follow and in some cases more stringent. But given the special role the Fed plays in finance, many have questioned whether it should have stricter requirements.
Fed officials tend to be sophisticated economists and bankers themselves, and their comments can have an outsize impact on financial markets. The central bank has also taken on an increasingly expansive role: Last year, it rescued or aided the short-term corporate debt market, the long-term corporate debt market, the municipal bond market and money market mutual funds.
That raises questions about what sort of securities its officials should be allowed to own. Mr. Powell, for instance, was heavily invested in index funds and municipal debt last year, based on his own disclosures. His municipal bond holdings had not been widely criticized in years past, but they have received negative attention in recent days because the Fed helped that market for the first time last year.
All this poses a conundrum for the Fed, which must weigh what its officials can reasonably invest in, given that its actions influence everything from home prices to the broad stock market.
While there are examples of very high-level officials in government who have put their savings into blind trusts — in which independent money managers buy and sell securities without communicating with the beneficiary about the details of the transactions — those are typically discouraged by the Office of Government Ethics, which calls them “highly restrictive and usually burdensome.†Ethicists tend to instead recommend divesting from individual asset holdings and investing in mutual funds or other broad-based funds.
Many Fed officials, but clearly not all, already do that.
“The system is foolish in the leeway that it gives,†said Mr. Eisen, the former ethics adviser. “The trust system is a recipe for eventual scandal.â€
Erin Griffith (@eringriffith) and Erin Woo (@erinkwoo), two of our tech reporters, are covering the trial of Elizabeth Holmes, who dropped out of Stanford University to create the blood testing start-up Theranos at age 19 and built it to a $9 billion valuation and herself into the world’s youngest self-made female billionaire — only to flame out in disgrace after Theranos’s technology was revealed to have problems.
Follow along here or on Twitter as she is tried on 12 counts of wire fraud and conspiracy to commit wire fraud. The trial is generally held Tuesdays, Wednesdays and Fridays.
1 hour ago
Erin Griffith
Gould’s testimony lasted around 15 minutes – From behind a clear mask, she got emotional discussing her experience finding out via Theranos tests that, after three miscarriages, her fourth pregnancy was not viable. The happy ending is that it was. She had a baby. Adjourned!
2 hours ago
Erin Griffith
Defense wraps up by pointing out that Zachman’s practice had many many test results from Theranos beyond Ms. Gould that seemed to be fine. Judge Davila is eager to keep going, even though we are over on time today. Brittany Gould takes the stand.
3 hours ago
Erin Griffith
Defense works to chip away at the testimony by implying that the Theranos test results simply existed on a different scale and should have been “rebaselined.†Also noted that Holmes’s brother Christian, who responded to Zachman’s complaint about the results, apologized.
3 hours ago
Erin Griffith
Oh my, Theranos offered Zachman a “corrected†version of the results which simply removed a decimal point but the she says numbers still wouldn’t have made sense within the context of a viable pregnancy or a loss of one.
3 hours ago
Erin Griffith
“This circumstance was very impactful to me as it stood out as such a red flag for the pregnancy.â€
3 hours ago
Erin Griffith
Gould took 5 blood tests, 3 from a subsidiary of Quest Diagnostics and 2 from Theranos. She went on a rollercoaster, with the Quest test showing she was pregnant, the two Theranos tests showing a miscarriage, and 2 more Quest tests showing she was indeed still pregnant.
3 hours ago
Erin Griffith
Zachman describes the case of a patient named Brittany Gould (sp?) who had had 3 miscarriages. She came to see Gould after a positive at-home pregnancy test “to establish that yes, she is pregnant and look at the health of the pregnancy.â€
3 hours ago
Erin Griffith
Zachman was on a committee that evaluated service providers and her practice adopted Theranos blood tests around 2014. Theranos even set up a lab downstairs from one of her practice’s offices, which Zachman said was “very exciting.â€
4 hours ago
Erin Griffith
New witness: Audra Zachman, a nurse practitioner at an OB-GYN practice.
4 hours ago
Erin Griffith
I have enjoyed chatting with some of the trial-heads and and fans of justice who have shown up to watch (provided they’re not moles :). Today I met a retired paralegal who says he was at the Patty Hearst trial!!
4 hours ago
Erin Griffith
Redirect up. US Attorney Robert Leach reminds jurors that when Gangakhedkar resigned from Theranos, she had concerns about the reliability of Theranos’s tests and discussed them with Holmes.
4 hours ago
Erin Griffith
More bad boss/good boss content: We see an email Gangakhedkar sent to Balwani defending how hard her team was working + an email she sent to her team praising their long hours. She then resigned from Theranos and Holmes attempted to get her to stay, offering time off.
4 hours ago
Erin Griffith
Defense previously showed that Holmes let Gangakhedkar go to India to see family, painting her as a sympathetic boss and Balwani as the aggressive one. “[Balwani’s] trying to make you feel guilty that you weren’t working?†“Yes†“You were frustrated by that?†“Yes.â€
4 hours ago
Erin Griffith
We are still doing cross-examination of Gangakhedkar.
Wade shows an email from the former Theranos president, Ramesh Balwani (who goes by Sunny), chastising the lab workers for not working as hard as his software team, painting him as the one pushing unrealistically for overwork.
5 hours ago
Erin Griffith
Zachman will now offer expert testimony on interpreting HCG tests (a hormone used to identify pregnancy status)
You expect HCG levels to double every 48 hours or so in early pregnancy.
6 hours ago
Erin Griffith
Wade goes on a run of questions (peppered with “yes†responses by Gangakhedkar) arguing that the point of R&D is encountering issues and setbacks and fixing them.
“In R&D sometimes you have to fail before you can succeed right?â€
“Yes.â€
6 hours ago
Erin Griffith
We see an email where Holmes asked Gangakhedkar for some testing data ahead of a meeting with the DoD. Gangakhedkar emails that Vitamin D data isn’t ready and Holmes writes asking for data on other tests. The point is, apparently, look at this example of Holmes not doing fraud.
7 hours ago
Erin Griffith
The Defense strategy re: Theranos lab problems seems to be: look, real work was being done; there were processes in place that sure seemed rigorous; the very people pointing out problems also signed off on it all.
7 hours ago
Erin Griffith
So far it’s basically a call and response, where Wade describes work of Gangakhedkar + Theranos’s lab, and Gangakhedkar replies “yes.†“Were you proud of that work?†“Yes.†“And others at the company were happy about that work as well?†“I think so.â€
7 hours ago
Erin Griffith
Back in the San Jose courtroom today for more US v Holmes. Surekha Gangakhedkar, a scientist at Theranos, is back on the stand being cross-examined by Holmes’s lawyer Lance Wade.
4 days ago
Erin Woo
With that, Judge Davila is ending Gangakhedkar’s testimony for the day and instructing jurors not to consume media content about the trial, as always. The trial will resume on Tuesday — Erin Griffith will be at the courthouse to bring you live updates.
4 days ago
Erin Woo
We are now onto cross-examination. Holmes’s lawyer is questioning her about G.S.K.’s study of Theranos’s assays, pointing out that the study promoted her work. “The Theranos system eliminates the need for a lab and provided quality data,†the G.S.K. memo said.
4 days ago
Erin Woo
Despite having signed an N.D.A., Gangakhedkar printed out some documents and took them home when she left Theranos. “I was worried that I would be blamed,†she testified.
4 days ago
Erin Woo
Three days after the email from Balwani, Gangakhedkar sent Holmes her resignation email. She testified that she was “very stressed and unhappy and concerned†with the planning of the Walgreens launch.
4 days ago
Erin Woo
In an email from Balwani to Gangakhedkar, with Holmes copied, Balwani said the software team had been working until 3:07 a.m., but that the Edison blood-testing devices Gangakhedkar’s team worked on were “all sitting idle.†This was an example of the pressure they were under, Gangakhedkar said.
4 days ago
Erin Woo
And, with that, Cheung has been dismissed. The government is calling Surekha Gangakhedkar now, a former Theranos team manager.
4 days ago
Erin Woo
The government is now asking questions about a document that says, among other things, that Theranos’s devices “can be operated with minimal training†and that its results have “precision and accuracy equivalent to traditional clinical laboratory analyzers.†Neither is true, Cheung says.
4 days ago
Erin Woo
Cheung said they were constantly having to recalibrate the machines, which made results take 2-3 days rather than the couple hours promised. “We had people sleeping in the car because it was taking too long,†she said.
4 days ago
Erin Woo
Cheung just said she “became concerned about a month in†with the vitamin D samples, in November of 2013. She was concerned about the performance of the tests and that they were being used on patient samples.
4 days ago
Erin Woo
Defense is done with cross-examination, after showing Cheung Theranos policy documents she said she’d never seen. The government is now asking questions again for redirect.
4 days ago
Erin Woo
Holmes’s lawyer is asking Cheung a lot of questions about quality control checks that occurred on the Theranos devices. “There is a recognition that some errors would happen and this was the policy on how to deal with those errors,†he said.
4 days ago
Erin Woo
Erika Cheung is now taking the stand as cross-examination continues.
4 days ago
Erin Woo
The update you’ve all been waiting for: The judge is STILL pronouncing it ther-AH-nos.
4 days ago
Erin Woo
In the courthouse now for another day of the Elizabeth Holmes trial. We’re expecting to wrap up testimony today from Erika Cheung, one of the key whistleblowers in the case.
6 days ago
Erin Griffith
That’s it for today.🩸💉⚖️
6 days ago
Erin Griffith
So far the theme of the cross-exam of Cheung seems to be using excruciatingly arcane details about the processes and procedures of the Theranos lab to show that its work was very complicated, involving lots of smart, pedigreed people.
6 days ago
Erin Griffith
Cheung testified that in meetings about quality control failures, Theranos’s lab directors ignored the most obvious possible reason for the failures: “The Edison devices didn’t work.â€
6 days ago
Erin Griffith
Trial gear alert: A reporter brought their own binoculars to see the exhibits on the TV screens.
6 days ago
Erin Griffith
Erika Cheung is back on the stand.
She described Theranos’s practice of demoing blood tests for V.I.P.s, where some of the results came from Theranos machines and others from Siemens analyzers.
6 days ago
Erin Griffith
At this point we have heard lawyers and witnesses pronounce “Theranos†hundreds of times, making me start to wonder whether judge is trying to mess with us by sticking to his “ther-AHHHHH-nos†pronunciation.
6 days ago
Erin Griffith
I should note the woman who clapped and yelled “you’re a good mom!†at Holmes yesterday suddenly stormed out of the courtroom after Judge Davila warned everyone that yelling stuff like that in front of any jurors could cause a mistrial. I don’t see her here today!
6 days ago
Erin Griffith
Elizabeth Holmes’s entourage is down to just her mom today.
Nationally, car rentals have fallen 40 percent from their summer peaks
Average daily rate
Note: Excludes taxes, fees and insurance. Source: Hopper
Few markets better crystallize the topsy-turvy nature of the American economy during the pandemic than the rental car business.
The industry shows how economic decisions made in 2020 keep having serious implications in 2021, Quoctrung Bui and Neil Irwin report for The New York Times. Other industries have experienced less severe swings, but the same basic dynamics explain why inflation and product shortages jumped earlier in the year — and why they are starting to abate but are not yet close to prepandemic norms.
In the spring and summer of 2020, the industry was in a state of collapse as people stopped traveling. With a glut of cars, prices plummeted. Major rental car companies sold off hundreds of thousands of vehicles, and Hertz went bankrupt.
Fast-forward a year, and Americans were ready to travel again — but the rental car industry was stuck with its diminished fleets. And it faced challenges replenishing those fleets quickly, because automakers were facing supply constraints of their own.
“In the spring of 2020, nobody really knew what to expect,†said Neil Abrams, president of Abrams Consulting Group and a former Hertz executive. “I’ve seen cycles, recessions, peaks and valleys, but nothing quite like this.â€
With demand surging and the supply of cars still depressed, rental car companies raised prices. But high prices have a funny way of fixing themselves, at least to some degree:
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Those considering renting will toy around with different modes of transport if rental cars become very expensive.
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Some may decide to optimize their itinerary by using a mix of Uber or public transit to get around.
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Others may turn toward alternatives like Turo or even U-Haul for a car.
Mr. Abrams expects some of the shifts that have taken place in the industry — including higher prices — to be lasting.
“The industry has learned how to do business a different way, and I think the customer is going to get used to this paradigm shift in how cars are rented and how they’re priced,†he said.
