As the world economy struggles to find its footing, the resurgence of the coronavirus and supply chain chokeholds threaten to hold back the global recovery’s momentum, a closely watched report warned on Tuesday.
The overall growth rate will remain near 6 percent this year, a historically high level after a recession, but the expansion reflects a vast divergence in the fortunes of rich and poor countries, the International Monetary Fund said in its latest World Economic Outlook report.
Worldwide poverty, hunger and unmanageable debt are all on the upswing. Employment has fallen, especially for women, reversing many of the gains they made in recent years.
Uneven access to vaccines and health care is at the heart of the economic disparities. While booster shots are becoming available in some wealthier nations, a staggering 96 percent of people in low-income countries are still unvaccinated.
restrictions and bottlenecks at key ports around the world have caused crippling supply shortages. A lack of workers in many industries is contributing to the clogs. The U.S. Labor Department reported Tuesday that a record 4.3 million workers quit their jobs in August — to take or seek new jobs, or to leave the work force.
Germany, manufacturing output has taken a hit because key commodities are hard to find. And lockdown measures over the summer have dampened growth in Japan.
Fear of rising inflation — even if likely to be temporary — is growing. Prices are climbing for food, medicine and oil as well as for cars and trucks. Inflation worries could also limit governments’ ability to stimulate the economy if a slowdown worsens. As it is, the unusual infusion of public support in the United States and Europe is winding down.
6 percent projected in July. For 2022, the estimate is 4.9 percent.
The key to understanding the global economy is that recoveries in different countries are out of sync, said Gregory Daco, chief U.S. economist at Oxford Economics. “Each and every economy is suffering or benefiting from its own idiosyncratic factors,” he said.
For countries like China, Vietnam and South Korea, whose economies have large manufacturing sectors, “inflation hits them where it hurts the most,” Mr. Daco said, raising costs of raw materials that reverberate through the production process.
The pandemic has underscored how economic success or failure in one country can ripple throughout the world. Floods in Shanxi, China’s mining region, and monsoons in India’s coal-producing states contribute to rising energy prices. A Covid outbreak in Ho Chi Minh City that shuts factories means shop owners in Hoboken won’t have shoes and sweaters to sell.
worldwide surge in energy prices threatens to impose more hardship as it hampers the recovery. This week, oil prices hit a seven-year high in the United States. With winter approaching, Europeans are worried that heating costs will soar when temperatures drop. In other spots, the shortages have cut even deeper, causing blackouts in some places that paralyzed transport, closed factories and threatened food supplies.
China, electricity is being rationed in many provinces and many companies are operating at less than half of their capacity, contributing to an already significant slowdown in growth. India’s coal reserves have dropped to dangerously low levels.
And over the weekend, Lebanon’s six million residents were left without any power for more than 24 hours after fuel shortages shut down the nation’s power plants. The outage is just the latest in a series of disasters there. Its economic and financial crisis has been one of the world’s worst in 150 years.
Oil producers in the Middle East and elsewhere are lately benefiting from the jump in prices. But many nations in the region and North Africa are still trying to resuscitate their pandemic-battered economies. According to newly updated reports from the World Bank, 13 of the 16 countries in that region will have lower standards of living this year than they did before the pandemic, in large part because of “underfinanced, imbalanced and ill-prepared health systems.”
Other countries were so overburdened by debt even before the pandemic that governments were forced to limit spending on health care to repay foreign lenders.
In Latin America and the Caribbean, there are fears of a second lost decade of growth like the one experienced after 2010. In South Africa, over one-third of the population is out of work.
And in East Asia and the Pacific, a World Bank update warned that “Covid-19 threatens to create a combination of slow growth and increasing inequality for the first time this century.” Businesses in Indonesia, Mongolia and the Philippines lost on average 40 percent or more of their typical monthly sales. Thailand and many Pacific island economies are expected to have less output in 2023 than they did before the pandemic.
debt ceiling — can further set back the recovery, the I.M.F. warned.
But the biggest risk is the emergence of a more infectious and deadlier coronavirus variant.
Ms. Gopinath at the I.M.F. urged vaccine manufacturers to support the expansion of vaccine production in developing countries.
Earlier this year, the I.M.F. approved $650 billion worth of emergency currency reserves that have been distributed to countries around the world. In this latest report, it again called on wealthy countries to help ensure that these funds are used to benefit poor countries that have been struggling the most with the fallout of the virus.
“We’re witnessing what I call tragic reversals in development across many dimensions,” said David Malpass, the president of the World Bank. “Progress in reducing extreme poverty has been set back by years — for some, by a decade.”
SEOUL — The signals are confusing. One day, North Korea is raising hopes for dialogue with South Korea, and the next, it is firing missiles or showing off the latest weaponry in its nuclear arsenal.
In the past week alone, North suggested the possibility of inter-Korean summit talks and said it would reopen communication hotlines with its neighbor. It also fired long-range cruise missiles, trotted out what it called its first hypersonic missile and, on Thursday, tested a new antiaircraft missile. Earlier in September, it launched ballistic missiles from a train rolled out of a mountain tunnel, on the same day that it called the South’s president, Moon Jae-in, “stupid.”
Once again, North Korea is turning to a well-honed, two-pronged strategy, designed to let it flex its military muscles without risking retaliation or nixing the chances for dialogue.
In the absence of talks with Washington, the missile tests reminded the world that North Korea is developing increasingly sophisticated weaponry capable of delivering nuclear warheads. But individually, these short-range or still-under-development missiles don’t amount to a direct threat to the United States.
met with then-President Donald J. Trump three times between 2018 and 2019, becoming the first North Korean leader to hold a summit with a sitting American president. But his diplomatic efforts failed to lift crippling sanctions the United Nations imposed on his impoverished country after its nuclear and I.C.B.M. tests. Soon the pandemic hit, further hamstringing the North’s economy.
American and South Korean officials had hoped that the North’s deepening economic troubles, caused by the double whammy of sanctions and the pandemic, would make North Korea more amenable to dialogue.
So far, Mr. Kim has proved them wrong.
Since his talks with Mr. Trump collapsed in early 2019, he has vowed to slog through the economic difficulties while expanding his nuclear arsenal, his country’s single best diplomatic leverage and deterrent against what it considers American threats to topple its government.By demonstrating his country’s growing military capabilities, Mr. Kim has also sought to legitimize his rule at a time when he has been able to deliver little on the economic front to his long-suffering people.
The antiaircraft missile test on Thursday indicated that the North is building a weapon similar to Russia’s S-400, one of the most potent air-defense systems in the world, according to Kim Dong-yub, an expert on North Korean weapons at the University of North Korean Studies.
The Biden administration has repeatedly urged North Korea to return to talks without preconditions. But Mr. Kim said he would not restart negotiations until he was convinced that Washington was ready to ease sanctions and its “hostile policy,” including the joint annual military exercises it conducts with South Korea.
an arms race in the region.
Mr. Kim can’t really attempt shocking provocations like the ones he conducted in 2017 — three I.C.B.M. tests and a nuclear test — that brought the Trump administration to the table. Such tests would sharply raise tensions, invite more U.N. sanctions and potentially invoke the ire of China by ruining the mood for the Beijing Winter Olympics in February.
desperate to put his Korean Peninsula peace process, his signature foreign policy, back on track before his single, five-year term ends in May.
“It’s our government’s destiny” to pursue dialogue with the North, Mr. Moon told reporters last week, referring to his efforts to build peace through his three meetings with Mr. Kim in 2018 and his efforts to help arrange the summit meetings between Mr. Kim and Mr. Trump.
This week, Mr. Kim also offered conciliatory words toward South Korea.
“We have neither aim nor reason to provoke South Korea and no idea to harm it,” he said.
North Korea was wooing South Korea while shunning talks with Washington, said Cheong Seong-chang, director of the Center for North Korean Studies at the Sejong Institute in South Korea. Other analysts said North Korea was leaning on South Korea to help bring Washington to dialogue.
On Thursday, Sung Kim, the U.S. special representative for North Korea, met with his counterparts from Japan and South Korea and indicated that Washington would support humanitarian aid to North Korea as an incentive for dialogue.
Analysis doubted that it would be enough.
“I am not sure that the old way of providing humanitarian shipments as an incentive will work this time, given the North’s reluctance to accept outside help during the pandemic,” said Professor Yang of the University of North Korean Studies. “North Korea wants the United States to address more fundamental issues concerning its well-being. It wants clearer commitments from the United States to easing sanctions and guaranteeing its security.”
TOKYO — With the world’s oldest population, rapidly declining births, gargantuan public debt and increasingly damaging natural disasters fueled by climate change, Japan faces deep-rooted challenges that the longstanding governing party has failed to tackle.
Yet in choosing a new prime minister on Wednesday, the Liberal Democratic Party elected the candidate least likely to offer bold solutions.
The party’s elite power brokers chose Fumio Kishida, 64, a stalwart moderate, in a runoff election for the leadership, seeming to disregard the public’s preference for a maverick challenger. In doing so, they anointed a politician with little to distinguish him from the unpopular departing leader, Yoshihide Suga, or his predecessor, Shinzo Abe, Japan’s longest-serving prime minister.
Elders in the party, which has had a near monopoly on power in the decades since World War II, made their choice confident that, with a weak political opposition and low voter turnout, they would face little chance of losing a general election later this year. So, largely insulated from voter pressure, they opted for a predictable former foreign minister who has learned to control any impulse to stray from the mainstream party platform.
slowly emerges from six months of pandemic restrictions that have battered the economy.
Taro Kono, an outspoken nonconformist whose common touch has made him popular with the public and with rank-and-file party members. Mr. Kishida prevailed in the second round of voting, in which ballots cast by members of Parliament held greater weight than ballots cast by other party members.
He will become prime minister when Parliament holds a special session next week, and will then lead the party into the general election, which must be held by November.
In his victory speech on Wednesday, Mr. Kishida acknowledged the challenges he faces. “We have mountains of important issues that lie ahead in Japan’s future,” he said.
They loom both at home and abroad. Mr. Kishida faces mounting tensions in the region as China has grown increasingly aggressive and North Korea has started testing ballistic missiles again. Taiwan is seeking membership in a multilateral trade pact that Japan helped negotiate, and Mr. Kishida may have to help finesse a decision on how to accept the self-governed island into the group without angering China.
As a former foreign minister, Mr. Kishida may have an easier time managing his international portfolio. Most analysts expect that he will maintain a strong relationship with the United States and continue to build on alliances with Australia and India to create a bulwark against China.
But on the domestic front, he is mostly offering a continuation of Mr. Abe’s economic policies, which have failed to cure the country’s stagnation. Income inequality is rising as fewer workers benefit from Japan’s vaunted system of lifetime employment — a reality reflected in Mr. Kishida’s campaign promise of a “new capitalism” that encourages companies to share more profits with middle-class workers.
close to 60 percent of the public is now inoculated. But Mr. Kishida has offered few concrete policies to address other issues like aging, population decline or climate change.
In a magazine questionnaire, he said that he needed “scientific verification” that human activities were causing global warming, saying, “I think that’s the case to some extent.”
Given the enduring power of the right flank of the Liberal Democratic Party, despite its minority standing in the party, Mr. Kishida closed what daylight he had with these power brokers during the campaign.
He had previously gained a reputation as being more dovish than the influential right wing led by Mr. Abe, but during the leadership race, he expressed a hawkish stance toward China. As a parliamentary representative from Hiroshima, Mr. Kishida has opposed nuclear weapons, but he has made clear his support for restarting Japan’s nuclear power plants, which have been idled since the triple meltdown in Fukushima 10 years ago.
And he toned down his support for overhauling a law requiring married couples to share a surname for legal purposes and declared that he would not endorse same-sex marriage, going against public sentiment but hewing to the views of the party’s conservative elite.
“I think Kishida knows how he won, and it was not by appealing to the general public, it was not by running as a liberal, but courting support to his right,” said Tobias Harris, a senior fellow at the Center for American Progress in Washington. “So what that’s going to mean for the composition of his cabinet and his priorities, and what his party’s platform ends up looking like, means he could end up being pulled in a few different directions.”
resigned last fall because of ill health. He had led the party for eight consecutive years, a remarkable stint given Japan’s history of revolving-door prime ministers. When he stepped down, the party chose Mr. Suga, who had served as Mr. Abe’s chief cabinet secretary, to extend his boss’s legacy.
Sanae Takaichi — a hard-line conservative who was seeking to become Japan’s first female prime minister — to revitalize his base in the party’s far right, analysts and other lawmakers said he helped steer support to Mr. Kishida in the runoff.
As a result, Mr. Kishida may end up beholden to his predecessor.
“Kishida cannot go against what Abe wants,” said Shigeru Ishiba, a former defense minister who challenged Mr. Abe for the party leadership twice and withdrew from running in the leadership election this month to support Mr. Kono.
“I am not sure I would use the word ‘puppet,’ but maybe he is a puppet?” Mr. Ishiba added. “What is clear is he depends on Abe’s influence.”
During the campaign for the party leadership, Mr. Kishida appeared to acknowledge some dissatisfaction with the Abe era with his talk of a “new capitalism.” In doing so, he followed a familiar template within the Liberal Democratic Party, which has been adept at adopting policies first introduced by the opposition in order to keep voters assuaged.
“That’s one of the reasons why they have maintained such longevity as a party,” said Saori N. Katada, a professor of international relations at the University of Southern California. “Kishida is definitely taking that card and running with it.”
Makiko Inoue, Hikari Hida and Hisako Ueno contributed reporting.
“The government can place them under watch and pressure them through their employers or relatives not to make trouble,” said Minxin Pei, a professor of government at Claremont McKenna College who is writing a study of China’s domestic security apparatus.
China has a lot riding on its ability to contain the fallout from an Evergrande collapse. After Xi Jinping, China’s most powerful leader in generations, began his second term in 2017, he identified reining in financial risk as one of the “great battles” for his administration. As he approaches a likely third term in power that would start next year, it could be politically damaging if his government were to mismanage Evergrande.
But China’s problem may be that it controls financial panics too well. Economists inside and outside the country argue that its safeguards have coddled Chinese investors, leaving them too willing to lend money to large companies with weak prospects for repaying it. Over the longer term, though, China’s bigger risk may be that it follows in the footsteps of Japan, which saw years of economic stagnation under the weight of huge debt and slow, unproductive companies.
By not forcefully signaling an Evergrande bailout, the Chinese government is essentially trying to force both investors and Chinese companies to stop channeling money to risky, heavily indebted companies. Yet that approach carries risks, especially if a disorderly collapse upsets China’s legions of home buyers or unnerves potential investors in the property market.
An abrupt default by Evergrande on a wide range of debts “would be a useful catalyst for market discipline, but could also sour both domestic and foreign investor sentiment,” said Eswar Prasad, an economics professor at Cornell University who is a former head of the China division at the International Monetary Fund.
Some global investors worry that Evergrande’s problems represent a “Lehman moment,” a reference to the 2008 collapse of the Lehman Brothers investment bank, which heralded the global financial crisis. Evergrande’s collapse, they warn, could expose other debt problems in China and hit foreign investors, who hold considerable amounts of Evergrande debt, and other property developers in the country.
PARIS — President Biden’s announcement of a deal to help Australia deploy nuclear-powered submarines has strained the Western alliance, infuriating France and foreshadowing how the conflicting American and European responses to confrontation with China may redraw the global strategic map.
In announcing the deal on Wednesday, Mr. Biden said it was meant to reinforce alliances and update them as strategic priorities shift. But in drawing a Pacific ally closer to meet the China challenge, he appears to have alienated an important European one and aggravated already tense relations with Beijing.
France on Thursday reacted with outrage to the announcements that the United States and Britain would help Australia develop submarines, and that Australia was withdrawing from a $66 billion deal to buy French-built submarines. At its heart, the diplomatic storm is also a business matter — a loss of revenue for France’s military industry, and a gain for American companies.
Jean-Yves Le Drian, France’s foreign minister, told Franceinfo radio that the submarine deal was a “unilateral, brutal, unpredictable decision” by the United States, and he compared the American move to the rash and sudden policy shifts common during the Trump administration.
“America-is-back” foreign-policy message, had promised to revive the country’s alliances, which were particularly undermined by Mr. Trump’s dismissiveness of NATO and the European Union. Hopes ran high from Madrid to Berlin. But a brief honeymoon quickly gave way to renewed tensions.
The French were disappointed that Secretary of State Antony J. Blinken did not make Paris, where he lived for many years, one of his first destinations in Europe. And they were angered when Mr. Biden made his decision on the American withdrawal from Afghanistan with scant if any consultation of European allies who had contributed to the war effort.
“Not even a phone call,” Ms. Bacharan said of the Afghan decision.
In his comments on Wednesday, Mr. Biden called France a key ally with an important presence in the Indo-Pacific. But the president’s decision, at least in French eyes, appeared to make a mockery of that observation.
The French statement on Thursday said that France was “the only European nation present in the Indo-Pacific region, with nearly two million citizens and more than 7,000 military personnel” in overseas territories like French Polynesia and New Caledonia in the Pacific and Reunion in the Indian Ocean.
Next week, Mr. Biden will meet at the White House with leaders of “the Quad” — an informal partnership of Australia, India, Japan and the United States — in what amounts to a statement of shared resolve in relations with Beijing. He will also meet with Mr. Johnson, apparently before the Quad gathering.
Given the Australian deal, these meetings will again suggest to France that in the China-focused 21st century, old allies in continental Europe matter less.
For Britain, joining the security alliance was further evidence of Mr. Johnson’s determination to align his country closely with the United States in the post-Brexit era. Mr. Johnson has sought to portray himself as loyal partner to Mr. Biden on issues like China and climate change.
London’s relations with Washington were ruffled by the Biden administration’s lack of consultation on Afghanistan. But the partnership on the nuclear submarine deal suggests that in sensitive areas of security, intelligence sharing and military technology, Britain remains a preferred partner over France.
Reporting was contributed by Helene Cooper and Eric Schmitt in Washington; Aurelien Breeden in Paris; Mark Landler in London; and Elian Peltier in Brussels.
SEOUL — North Korea launched two ballistic missiles off its east coast on Wednesday, the country’s first ballistic missile test in six months and a violation of multiple United Nations Security Council resolutions that ban North Korea from conducting such tests.
Hours after the missiles were launched, South Korea announced that its president, Moon Jae-in, had just attended the test of the country’s first submarine-launched ballistic missile, making South Korea the seventh country in the world to operate S.L.B.M.s, after the United States, Russia, China, Britain, France and India.
The missile tests by both Koreas on the same day dramatically highlighted the intensifying arms race on the Korean Peninsula as nuclear disarmament talks between Washington and North Korea remained stalled. They also underscored the growing concern over regional stability, with Prime Minister Yoshihide Suga of Japan calling the North Korean missile launch “outrageous” and a threat to peace.
In its announcement, South Korea revealed that it had successfully developed a supersonic cruise missile and a long-range air-to-land missile to be mounted on the KF-21, a South Korean supersonic fighter jet, and that it had developed a ballistic missile powerful enough to penetrate North Korea’s underground wartime bunkers.
test-fired what it called newly developed long-range cruise missiles over the weekend. But the United States has not imposed fresh sanctions against the North for weapons tests in recent years. When North Korea resumed testing short-range ballistic missiles in 2019, Donald J. Trump, then the president, dismissed them for being short range.
The Biden administration has said it would explore “practical” and “calibrated” diplomacy to achieve the goal of the complete denuclearization of the Korean Peninsula. But North Korea has yet to respond to the administration’s invitation to dialogue.
“Rather than strengthen sanctions and military exercises, the allies have emphasized a willingness for dialogue and humanitarian cooperation,” said Leif-Eric Easley, a professor of international studies at Ewha Womans University in Seoul. “The problem with less than robust responses to North Korea’s tests is that deterrence can be eroded while Pyongyang advances its capabilities and normalizes its provocations.”
The North Korean missiles on Wednesday — launched from Yangdok, in the central part of the country — flew 497 miles and reached an altitude of 37 miles before landing in the sea between North Korea and Japan, the South Korean military said. South Korean and United States defense officials were analyzing the data collected from the test to determine exactly what type of ballistic missiles were used, it said.
Japan’s Ministry of Defense issued a statement saying that it “assumed” the missile did not reach the country’s territorial waters or its exclusive economic zone.
The news of the North Korean missile test broke shortly after Foreign Minister Wang Yi of China, North Korea’s biggest supporter and only remaining major trading partner, finished a meeting with his South Korean counterpart, Chung Eui-yong, in Seoul.
“It’s not just North Korea, but other countries as well that engage in military activities,” Mr. Wang said when asked by reporters to comment on the North’s weekend cruise-missile test. “We must all work together to resume dialogue. We all hope to contribute to peace and stability on the Korean Peninsula.”
Mr. Wang didn’t elaborate, but appeared to be referring to the joint military exercises conducted by the United States and South Korea last month. North Korea has accused Washington and Seoul of preparing to invade the North, and usually counters joint military drills between the two allies with its own military exercise or weapons tests.
“The United States has no hostile intent toward” North Korea, Sung Kim, the Biden administration’s special envoy, said on Tuesday in Tokyo, where he met with representatives from Japan and South Korea to discuss the North’s arsenal. He said Washington hoped that North Korea would “respond positively to our multiple offers to meet without preconditions.”
The latest tests showed that North Korea continued to improve its arsenal of missiles despite a series of resolutions from the United Nations Security Council that banned North Korea from developing or testing ballistic missiles and nuclear weapons.
Tensions on the Korean Peninsula rose sharply in 2017, when North Korea tested three intercontinental ballistic missiles and conducted its sixth underground nuclear test, leading to the sanctions from the United Nations. After the tests, the country claimed an ability to target the continental United States with a nuclear warhead.
Mr. Trump met with Kim Jong-un, the North Korean leader, three times between 2018 and 2019, but the leaders failed to reach an agreement on lifting sanctions or rolling back the North’s nuclear and missile programs. Mr. Kim has since vowed to boost his country’s weapons capabilities.
With the recent tests, “North Korea is seeking to increase its leverage in coming talks” with Washington, said Lee Byong-chul, a North Korea expert at Kyungnam University’s Institute for Far Eastern Studies in Seoul.
By timing its latest test to Mr. Wang’s visit to Seoul, North Korea also appeared to “express discontent with Beijing” that it was not providing enough economic assistance during the global health crisis, Mr. Lee said.
North Korea’s economy, already battered by years of devastating international sanctions, has suffered greatly as trade with China has plummeted in the coronavirus pandemic.
Eighteen months into the pandemic, Jerome H. Powell, the Federal Reserve chair, has offered the strongest sign yet that the Fed is prepared to soon withdraw one leg of the support it has been providing to the economy as conditions strengthen.
At the same time, Mr. Powell made clear on Friday that interest rate increases remained far away, and that the central bank was monitoring risks posed by the Delta variant of the coronavirus.
The Fed has been trying to bolster economic activity by buying $120 billion in government-backed bonds each month and by leaving its policy interest rate at rock bottom. Officials have been debating when to begin slowing their bond buying, the first step in moving toward a more normal policy setting. They have said they would like to make “substantial further progress” toward stable inflation and full employment before doing so.
Mr. Powell, speaking at a closely watched conference that the Kansas City Fed holds each year, used his remarks to explain that he thinks the Fed has met that test when it comes to inflation and is making “clear progress toward maximum employment.”
six million fewer jobs than before the pandemic. And the Delta variant could cause consumers and businesses to pull back as it foils return-to-office plans and threatens to shut down schools and child care centers. That could lead to a slower jobs rebound.
Mr. Powell made clear that the Fed wants to avoid overreacting to a recent burst in inflation that it believes will most likely prove temporary, because doing so could leave workers on the sidelines and weaken growth prematurely. While the Fed could start to remove one piece of its support, he emphasized that slowing bond purchases did not indicate that the Fed was prepared to raise rates.
“We have much ground to cover to reach maximum employment, and time will tell whether we have reached 2 percent inflation on a sustainable basis,” he said in his address to the conference, which was held online instead of its usual venue — Jackson Hole in Wyoming — because of the latest coronavirus wave.
The distinction he drew — between bond buying, which keeps financial markets chugging along, and rates, which are the Fed’s more traditional and arguably more powerful tool to keep money cheap and demand strong — sent an important signal that the Fed is going to be careful to let the economy heal more fully before really putting away its monetary tools, economists said.
told CNBC on Friday that he supported winding down the purchases “as quickly as possible.”
“Let’s start the taper, and let’s do it quickly,” he said. “Let’s not have this linger.”
James Bullard, the president of the Federal Reserve Bank of St. Louis, said on Friday that the central bank should finish tapering by the end of the first quarter next year. If inflation starts to moderate then, the country will be in “great shape,” Mr. Bullard told Fox Business.
“If it doesn’t moderate, then I think the Fed is going to have to be more aggressive in 2022,” he said.
ushered in a new policy framework at last year’s Jackson Hole gathering that dictates a more patient approach, one that might guard against a similar overreaction.
But as Mr. Bullard’s comments reflected, officials may have their patience tested as inflation climbs.
The Fed’s preferred price gauge, the personal consumption expenditures index, rose 4.2 percent last month from a year earlier, according to Commerce Department data released on Friday. The increase was higher than the 4.1 percent jump that economists in a Bloomberg survey had projected, and the fastest pace since 1991. That is far above the central bank’s 2 percent target, which it tries to hit on average over time.
“The rapid reopening of the economy has brought a sharp run-up in inflation,” Mr. Powell said.
They warn that if the Fed overreacts to today’s inflationary burst, it could wind up with permanently weak inflation, much as Japan and Europe have.
White House economists sided with Mr. Powell’s interpretation in a new round of forecasts issued on Friday. In its midsession review of the administration’s budget forecasts, the Office of Management and Budget said it expected the Consumer Price Index inflation rate to hit 4.8 percent for the year. That is more than double the administration’s initial forecast of 2.1 percent.
initially expected. But they still insist that it will be short-lived and foresee inflation dropping to 2.5 percent in 2022. The White House also revised its forecast of growth for the year, to 7.1 percent from 5.2 percent.
Slow price gains sound like good news to anyone who buys oat milk and eggs, but they can set off a vicious downward cycle. Interest rates include inflation, so when it slows, Fed officials have less room to make money cheap to foster growth during times of trouble. That makes it harder for the economy to recover quickly from downturns, and long periods of weak demand drag prices even lower — creating a cycle of stagnation.
“While the underlying global disinflationary factors are likely to evolve over time, there is little reason to think that they have suddenly reversed or abated,” Mr. Powell said. “It seems more likely that they will continue to weigh on inflation as the pandemic passes into history.”
Mr. Powell offered a detailed explanation of the Fed’s scrutiny of prices, emphasizing that inflation is “so far” coming from a narrow group of goods and services. Officials are keeping an eye on data to make sure prices for durable goods like used cars — which have recently taken off — slow and even fall.
Mr. Powell said the Fed saw “little evidence” of wage increases that might threaten high and lasting inflation. And he pointed out that measures of inflation expectations had not climbed to unwanted levels, but had instead staged a “welcome reversal” of an unhealthy decline.
Still, his remarks carried a tone of watchfulness.
“We would be concerned at signs that inflationary pressures were spreading more broadly through the economy,” he said.
WASHINGTON — For months, Apple and Google have been fighting a bill in the South Korean legislature that they say could imperil their lucrative app store businesses. The companies have appealed directly to South Korean lawmakers, government officials and the public to try to block the legislation, which is expected to face a crucial vote this week.
The companies have also turned to an unlikely ally, one that is also trying to quash their power: the United States government. A group funded by the companies has urged trade officials in Washington to push back on the legislation, arguing that targeting American firms could violate a joint trade agreement.
The South Korean legislation would be the first law in the world to require companies that operate app stores to let users in Korea pay for in-app purchases using a variety of payment systems. It would also prohibit blocking developers from listing their products on other app stores.
How the White House responds to this proposal poses an early test for the Biden administration: Will it defend tech companies facing antitrust scrutiny abroad while it applies that same scrutiny to the companies at home?
executive order to spur competition in the industry, and his top two antitrust appointees have long been vocal critics of the companies.
The approach the White House chooses may have widespread implications for the industry, and for the shape of the internet around the world. A growing number of countries are pursuing stricter regulations on Google, Apple, Facebook and Amazon, fragmenting the rules of the global internet.
American officials have echoed some of the industry’s complaints about the proposal, saying in a March report it appeared to target American companies. But trade officials have yet to take a formal position on it, said Adam Hodge, a spokesman for the United States Trade Representative. He said officials were still considering how to balance the claim that the legislation discriminates against American companies with the belief among tech critics in South Korea and America that the legislation would level the playing field.
“We are engaging a range of stakeholders to gather facts as legislation is considered in Korea, recognizing the need to distinguish between discrimination against American companies and promoting competition,” Mr. Hodge said in a statement.
Apple said that it regularly dealt with the United States government on a range of topics. During those interactions it discussed the South Korean app store legislation with American officials, including at the U. S. Embassy in Seoul, the company said in a statement.
The company said the legislation would “put users who purchase digital goods from other sources at risk of fraud, undermine their privacy protections, make it difficult to manage their purchases” and endanger parental controls.
A Google spokeswoman, Julie Tarallo McAlister, said in a statement that Google was open to “exploring alternative approaches” but believed the legislation would harm consumers and software developers.
The proposal was approved by a committee in the Korean National Assembly last month, over the opposition of some in the Korean government. It could get a vote in the body’s judiciary committee as soon as this week. It would then require a vote from the full assembly and the signature of President Moon Jae-in to become law.
The proposal would have a major impact on Apple’s App Store and the Google Play Store.
The Google store accounted for 75 percent of global app downloads in the second quarter of 2021, according to App Annie, an analytics company. Apple’s marketplace accounted for 65 percent of consumer spending on in-app purchases or subscriptions.
One way software developers make money is by selling products directly in their apps, like Fortnite’s in-game currency or a subscription to The New York Times. Apple has insisted for years that developers sell those in-app products through the company’s own payment system, which takes up to a 30 percent cut of many sales. Last year, Google indicated it would follow suit by applying a 30 percent cut to more purchases than it had in the past. Developers say that the fees are far too steep.
After South Korean lawmakers proposed the app store bill last year, the Information Technology Industry Council, a Washington-based group that counts Apple and Google as members, urged the United States Trade Representative to include concerns about the legislation in an annual report highlighting “barriers” to foreign trade. The group said in October that the rules could violate a 2007 accord that says neither country can discriminate against firms with headquarters in the other.
Apple said that it was not unusual for an industry group to provide feedback to the trade representative. The company said the government had explicitly asked for comment on potentially discriminatory laws. In a statement, Naomi Wilson, the trade group’s vice president of policy for Asia, said that it encouraged “legislators to work with industry to re-examine the obligations for app markets set forth in the proposed measure to ensure they are not trade-restrictive and do not disproportionately affect” American companies.
When the trade representative’s report was published in March — just weeks after Mr. Biden’s nominee to the position was sworn in — it included a paragraph that echoed some of the tech group’s concerns. The report concluded that the South Korean law’s “requirement to permit users to use outside payment services appears to specifically target U.S. providers and threatens a standard U.S. business model.”
The American report did not say the law would violate the free trade agreement with South Korea. But in July, the managing director of a group called the Asia Internet Coalition, which lists Apple and Google as two of its members, pointed to the report when he told Korea’s trade minister that the law “could provoke trade tensions between the United States and South Korea.”
“The Biden administration has already signaled its concerns,” the director said in a written comment in July.
American diplomats in Seoul also raised questions about whether the legislation could cause trade tensions.
“Google said something like that, and a similar opinion was expressed by the U.S. Embassy in Korea,” said Jo Seoung Lae, a lawmaker who backs the legislation. He added that the embassy had been in touch with his staff throughout June and July. Park Sungjoong, another lawmaker, also said that the embassy had expressed trade concerns about the law.
Mr. Jo said that a Google representative had visited his office to express opposition to the proposal, and that Apple had also “provided their feedback” opposing the legislation.
Mr. Jo said that he had requested that the United States provide its official position, but he said he had not received one yet.
American trade officials sometimes defend companies even when they are criticized by others in the administration. While former President Donald J. Trump attacked a liability shield for social media platforms, known as Section 230, his trade representative wrote a similar provision into agreements with Canada, Mexico and Japan.
But Wendy Cutler, a former official who negotiated the trade agreement between South Korea and the United States, said that it would be difficult for America to argue that the Korean rules violate trade agreements when the same antitrust issues are being debated stateside.
“You don’t want to be calling out a country for potentially violating an obligation when at the same time your own government is questioning the practice,” said Ms. Cutler,now the vice president at the Asia Society Policy Institute. “It weakens the case substantially.”
South Korean and American app developers have run their own campaign for the new rules, arguing it would not trigger trade tensions.
In June, Mark Buse, the top lobbying executive at the dating app company Match Group and a former board member of a pro-regulation group called the Coalition for App Fairness, wrote to Mr. Jo, the Korean lawmaker, supporting the proposal. He said that the Biden administration knew about concerns around the tech giants, making trade tensions less likely.
Later that month, Mr. Buse attended a virtual conference about the app store legislation hosted by K-Internet, a trade group that represents major Korean internet companies like Naver, Google’s main search competitor in South Korea, and Kakao.
Mr. Buse, who traveled to Seoul this month to press the case for the legislation on behalf of the Coalition for App Fairness, made it clear that his employer considered it a high-stakes debate. He listed the many other countries where officials were concerned about Apple’s and Google’s practices.
“And all of this,” he said, “is following the leadership that the Korean assembly is showing.”
Toshiko Ishii, 64, who runs a traditional hotel in the city’s Taito Ward, spent over $180,000 converting the building’s first floor into an eatery in anticipation of a flood of tourists.
It was already a bit of a risk, and when the pandemic hit, Ms. Ishii became worried that she might have to shut down. Even with the Olympics, she has had no guests for weeks.
“There’s nothing you can really do about the Olympics or the coronavirus, but I’m worried,” she said. “We don’t know when this will end, and I have a lot of doubts about how long we can keep the business going.”
Pandemic or no, reality was bound to fall short of the grand expectations set by Japanese leaders.
They pitched Tokyo 2020 as an opportunity to show the world a Japan that had shaken off decades of economic stagnation and the devastation of the 2011 earthquake and tsunami that touched off the Fukushima nuclear disaster.
Appealing to nostalgia for the 1964 Olympics, when Japan wowed the world with its advanced technology and economic strength, Shinzo Abe, the former prime minister, framed the 2020 Olympics as an ad campaign for a cool, confident country that was the equal of a rising China.
After decades of perceived decline, “more and more Japanese, the elder generation, senior people, wanted to remember, wanted to repeat that successful experience again in 21st-century Japan,” said Shunya Yoshimi, a professor of sociology at Tokyo University who has written several books about Japan’s relationship to the events.
Instead, the pandemic brought a sense of fear and uncertainty that were worsened by the decisions of Japan’s leaders.
The 1992 Olympics in Barcelona had the Dream Team. The 2008 Olympics in Beijing had the Michael Phelps medal sweep. The Tokyo Olympics has a pandemic.
That has been the greatest challenge for NBCUniversal, the company that paid more than $1 billion to run 7,000 hours of games coverage across two broadcast networks, six cable channels and a fledgling streaming platform, Peacock.
The ratings have been a disappointment, averaging 16.8 million viewers a night through Tuesday, a steep drop from the 29 million who tuned in through the same day of the Rio de Janeiro Olympics in 2016. NBCUniversal has offered to make up for the smaller than expected television audience by offering free ads to some companies that bought commercial time during the games, according to four people with knowledge of the matter, who spoke on the condition of anonymity to discuss negotiations.
opening ceremony set a downbeat tone. Instead of the usual pageant of athletes smiling and waving to the crowd, there was a procession of participants walking through a mostly empty Tokyo Olympic Stadium, all wearing masks to protect themselves against the spread of Covid-19 as a new variant raged. The live morning broadcast and prime-time replay drew the lowest ratings for an opening ceremony in 33 years, with just under 17 million viewers. The high came Sunday, July 25, when a little more than 20 million people tuned in.
24 years as NBC’s prime-time Olympics host before leaving the network in 2017. “You can’t create something out of thin air. Everybody knows that this is, we hope, a one-of-a-kind Olympics.”
“It’s like if somebody is running the 100 meters and they have a weight around their ankles,” Mr. Costas continued. “That is not a fair judge of their speed.”
A widespread change in viewing habits, from traditional TV to streaming platforms, has been a big factor in the number of people watching. While NBC’s prime-time audience has shrunk considerably from what it was for the Rio games five years ago, the Olympics broadcasts are still bringing in significantly more viewers than even the most popular entertainment shows. The most recent episode of CBS’s “Big Brother,” a ratings leader, drew an audience of less than four million.
“We had a little bit of bad luck — there was a drumbeat of negativity,” said Jeff Shell, the chief executive of NBCUniversal, during a conference call last week, after NBC’s parent company, Comcast, reported its second-quarter earnings. The less-than-festive atmosphere, he added, “has resulted a little bit in linear ratings being probably less than we expected.”
a television critic for Vulture. “But more than anything, watching this year has shown the wounds that we’re dealing with.”
Ms. Chaney noted NBC’s interview with the American swimmer Caeleb Dressel right after he won gold in a glamour event, the men’s 100-meter freestyle. Moved to tears, Mr. Dressel said, “It was a really tough year. It was really hard.”
The 13-hour time-zone difference between Tokyo and the East Coast may have also figured in the drop in prime-time viewers. Many people in the United States have been waking up to phone alerts trumpeting the medal winners who will be featured in that night’s broadcast.
all-around win — seemed to gain traction not so much on TV but in snippets shared on social media. That trend has been apparent in the number of followers for NBCUniversal’s Olympics channel on TikTok, which have shot up 348 percent since the opening ceremony.
Those who decide to watch must choose from a jumble of channels and digital options. In addition to NBC, the coverage is spread across NBC Sports Network, CNBC, USA Network, the Olympic Channel, the Golf Channel, the Spanish-language channels Universo and Telemundo, not to mention NBCOlympics.com, the NBC Sports app and Peacock.
There are so many choices that NBC’s “Today” show brought in Steve Kornacki, the political correspondent best known for elucidating election results, to break it all down. “If you’re a badminton fan, you’re going to be looking for NBCSN,” he told viewers. “If you’re an archery fan, USA Network. There’s all sorts of different possibilities!”
Jim Bell, who stepped away from Tokyo planning in 2018 when the company placed him in charge of “The Tonight Show Starring Jimmy Fallon.” He left that program and NBC a year later.
Ms. Solomon said she has been waking up at 4:30 a.m. in Tokyo and relying on double-shot lattes to get her through workdays that may go till 11 p.m. She does not share the opinion of some critics of the coverage.
“Every day, new stars arise, and new stories come to the fore,” she said. “So, personally, I don’t want it to end.”
In the view of Mr. Costas, who guided viewers through NBC’s Olympics coverage from 1992 through 2016, any comparison of the Tokyo games with previous competitions is not fair, given the pall cast by the pandemic. And three years from now, if all goes according to plan, NBCUniversal will get what amounts to a do-over in Paris.
“Paris 2024 will be, we hope, fingers crossed, much more like a classic Olympics situation,” he said. “That will be a more legitimate test.”