Yellen, Janet L

Biden Administration’s Bid to Cap Russia Oil Prices Faces Resistance

WASHINGTON — The Biden administration’s push to form an international buyers’ cartel to cap the price of Russian oil is facing resistance amid private sector concerns that it cannot be reliably enforced, posing a challenge for the U.S.-led effort to drain President Vladimir V. Putin’s war chest and stabilize global energy prices.

The price cap has been a top priority of Treasury Secretary Janet L. Yellen, who has been trying to head off another spike in global oil costs at the end of the year. The Biden administration fears that the combination of a European Union embargo on Russian oil imports and a ban on the insurance and financing of Russian oil shipments will send prices soaring by taking millions of barrels of that oil off the market.

But the untested concept has drawn skepticism from energy experts and, in particular, the maritime insurance sector, which facilitates global oil shipments and is key to making the proposal work. Under the plan, it would be legal for them to grant insurance for oil cargo only if it was being sold at or below a certain price.

Mike Salthouse, global claims director at The North of England P&I Association Limited, a leading global marine insurer. “If you have sophisticated state actors wanting to deceive people, it’s very easy to do.”

He added: “We’ve said it won’t work. We’ve explained to everybody why.”

That has not deterred Ms. Yellen and her top aides, who have been crisscrossing the globe to make their case with international counterparts, banks and insurers that an oil price cap can — and must — work at a moment of rapid inflation and the risk of recession.

“At a time of global anxiety over high prices, a price cap on Russian oil is one of the most powerful tools we have to address inflation by preventing future spikes in energy costs,” Ms. Yellen said in July.

The Biden administration is trying to mitigate fallout from sanctions adopted by the European Union in June, which would ban imports of Russian oil and the financing and insuring of Russian oil exports by year’s end. Britain was expected to enact a similar ban but has not yet done so.

not solve the world’s oil supply problems. European officials, who have been skeptical, continue to say they are analyzing its viability.

restricted natural gas flows to parts of Europe in retaliation for sanctions, would curb oil exports because of their importance to its economy.

senior fellow at the Atlantic Council who works in the financial services industry, said of Russia’s cooperation with a price cap. “If that were the case, he wouldn’t have invaded Ukraine in the first place.”

But proponents believe that if the European Union bans insurance transactions, an oil price cap may be the best chance to mitigate the economic fallout.

John E. Smith, former director of the foreign assets control unit, said the key was ensuring that financial services firms and maritime insurers were not responsible for vetting every oil transaction, as well as providing guidance on complying with the sanctions.

“The question is will enough jurisdictions agree on the details to move this forward,” said Mr. Smith, who is now co-head of Morrison & Foerster’s national security practice. “If they do, it could be a win for everyone but Russia.”

Matina Stevis-Gridneff contributed reporting from Brussels.

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Treasury Secretary Yellen Looks to Get Global Tax Deal Back on Track

“I think the reality of turning a political commitment into binding domestic legislation is a lot more complex,” said Manal Corwin, a Treasury official in the Obama administration who now heads the Washington national tax practice at KPMG. “The E.U. has moved and gotten over most of the objections, but they still have Poland and it’s not clear whether they’re going to be able to get the last vote.”

With President Emmanuel Macron of France heading the European Union’s rotating presidency until June, his administration was eager to get a deal implemented. But at a meeting of European finance ministers in early April, Poland became the sole holdout, saying there were no ironclad guarantees that big multinational companies wouldn’t still be able to take advantage of low-tax jurisdictions if the two parts of the agreement did not move ahead in tandem, undercutting the global effort to avoid a race to the bottom when it comes to corporate taxation.

Poland’s stance was sharply criticized by European officials, particularly France, whose finance minister, Bruno Le Maire, suggested that Warsaw was instead holding up a final accord in retaliation for a Europe-wide political dispute. Poland has threatened to veto measures requiring unanimous E.U. votes because of an earlier decision by Brussels to block pandemic recovery funds for Poland.

The European Union had refused to disburse billions in aid to Poland since late last year, citing separate concerns over Warsaw’s interference with the independence of its judicial system. Last week, on the eve of Ms. Yellen’s visit to Poland, the European Commission came up with an 11th-hour deal unlocking 36 billion euros in pandemic recovery funds for Poland, which pledged to meet certain milestones such as judiciary and economic reforms, in return for the money.

Negotiators from around the world have been working for months to resolve technical details of the agreement, such as what kinds of income would be subject to the new taxes and how the deal would be enforced. Failure to finalize the agreement would likely mean the further proliferation of the digital services taxes that European countries have imposed on American technology giants, much to the dismay of those firms and the Biden administration, which has threatened to impose tariffs on nations that adopt their own levies.

“It’s fluid, it’s moving, it’s a moving target,” Pascal Saint-Amans, the director of the center for tax policy and administration at the Organization for Economic Cooperation and Development, said of the negotiations at the D.C. Bar’s annual tax conference this month. “There is an extremely ambitious timeline.”

Countries like Ireland, with a historically low corporate tax rate, have been wary of increasing their rates if others do not follow suit, so it has been important to ensure that there is a common understanding of the new tax rules to avoid opening the door to new loopholes.

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Fed Raises Interest Rate Half a Percentage Point, Largest Increase Since 2000

Deciding how quickly to remove policy support is a fraught exercise. Central bankers are hoping to move decisively enough to arrest the pop in prices without curbing growth so aggressively that they tip the economy into a deep downturn.

Mr. Powell nodded to that balancing act, saying, “I do expect that this will be very challenging — it’s not going to be easy.” But he said the economy had a good chance “to have a soft, or soft-ish, landing.”

He later elaborated that it could be possible to “restore price stability without a recession, without a severe downturn, and without materially higher unemployment.”

The balance sheet plan the Fed released on Wednesday matched what analysts had expected, which probably also contributed to the sense of market calm. The Fed will begin shrinking its nearly $9 trillion in asset holdings in June by allowing Treasury and mortgage-backed debt to mature without reinvestment. It will ultimately let up to $60 billion in Treasury debt expire each month, along with $35 billion in mortgage-backed debt, and the plan will have phased in fully as of September.

By reducing its bond holdings, the Fed is likely to take steam out of financial markets — bond prices will fall, causing yields to rise, and riskier investments like stocks will become less attractive. It also could help to cool the housing market by pushing up longer-term borrowing costs, which follow bond yields, reinforcing the effect of the central bank’s interest rate increases.

In fact, mortgage rates have already begun to push higher, climbing nearly two percentage points since the start of the year. The rate on a 30-year fixed-rate mortgage averaged 5.1 percent for the week that ended last Thursday, according to Freddie Mac, touching its highest level in more than a decade.

The Fed’s moves “will quickly make financing big-ticket purchases more challenging.” Jonathan Smoke, chief economist at Cox Automotive, wrote in a research note after the meeting. “This is exactly what the Fed wants to see. As demand for homes, cars and other durables declines in response to declining affordability, the rate of price increases should slow as well.”

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Treasury’s Janet Yellen Is Being Tested by Debt Limit Fight

Ms. Yellen’s task has been complicated by the fact that while she can readily convey the economic risks of default, the debt limit has become wrapped up in a larger partisan battle over Mr. Biden’s entire agenda, including the $3.5 trillion spending bill.

Republicans, including Mr. McConnell, have insisted that if Democrats want to pass a big spending bill, then they should bear responsibility for raising the borrowing limit. Democrats call that position nonsense, noting that the debt limit needs to be raised because of spending that lawmakers, including Republicans, have already approved.

“This seems to be some sort of high-stakes partisan poker on Capitol Hill, and that’s not what her background is,” said David Wessel, a senior economic fellow at the Brookings Institution who worked with Ms. Yellen at Brookings.

While lawmakers squabble on Capitol Hill, Ms. Yellen’s team at Treasury has been trying to buy as much time as possible. After a two-year suspension of the statutory debt limit expired at the end of July, Ms. Yellen has been employing an array of fiscal accounting tools known as “extraordinary measures” to stave off a default.

Uncertainty over the debt limit has yet to spook markets, but Ms. Yellen is receiving briefings multiple times a week by career staff on the state of the nation’s finances. They are keeping her informed about the use of extraordinary measures, such as suspending investments of the Exchange Stabilization Fund and suspending the issuing of new securities for the Civil Service Retirement and Disability Fund, and carefully reviewing Treasury’s cash balance. Because corporate tax receipts are coming in stronger than expected, the debt limit might not be breached until mid- to late October, Ms. Yellen has told lawmakers.

A Treasury spokeswoman said that Ms. Yellen is not considering fallback plans such as prioritizing debt payments if Congress fails to act, explaining that the only way for the government to address the debt ceiling is for lawmakers to raise or suspend the limit. However, she has reviewed some of the ideas that were developed by Treasury during the debt limit standoff of 2011, when partisan brinkmanship brought the nation to the cusp of default.

A new report from the Bipartisan Policy Center underscored the fact that if Congress fails to address the debt limit, Ms. Yellen will be left with no good options. If the true deadline is Oct. 15, for example, the Treasury Department would be approximately $265 billion short of paying all of its bills through mid-November. About 40 percent of the funds that are owed would go unpaid.

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Fed Officials’ Trading Draws Outcry, and Fuels Calls for Accountability

None of those transactions took place between late March and May 1, a Fed official said, which would have curbed Mr. Kaplan’s ability to use information about the coming rescue programs to earn a profit.

But the trades drew attention for other reasons. Mr. Conti-Brown pointed out that Mr. Kaplan was buying and selling oil company shares just as the Fed was debating what role it should play in regulating climate-related finance. And everything the Fed did in 2020 — like slashing rates to near zero and buying trillions in government-backed debt — affected the stock market, sending equity prices higher.

“It’s really bad for the Fed, people are going to seize on it to say that the Fed is self-dealing,” said Sam Bell, a founder of Employ America, a group focused on economic policy. “Here’s a guy who influences monetary policy, and he’s making money for himself in the stock market.”

Mr. Perli noted that Mr. Kaplan’s financial activity included trading in a corporate bond exchange-traded fund, which is effectively a bundle of company debt that trades like a stock. The Fed bought shares in that type of fund last year.

Other key policymakers, including the New York Fed president, John C. Williams, reported much less financial activity in 2020, based on disclosures published or provided by their reserve banks. Mr. Williams told reporters on a call on Wednesday that he thought transparency measures around trading activity were critical.

“If you’re asking should those policies be reviewed or changed, I think that’s a broader question that I don’t have a particular answer for right now,” Mr. Williams said.

Washington-based board officials reported some financial activity, but it was more limited. Jerome H. Powell, the Fed chair, reported 41 recorded transactions made by him or on his or his family’s behalf in 2019, and 26 in 2020, but those were typically in index funds and other relatively broad investment strategies. Randal K. Quarles, the Fed’s vice chair for supervision, recorded purchases and sales of Union Pacific stock from 2019 in his 2020 disclosure. Those stocks were assets of Mr. Quarles’s wife and he had no involvement in the transactions, a Fed spokesman said.

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Finance Ministers Meet in Venice to Finalize Global Tax Agreement

“I think first, this is an economic surrender that other countries are glad to go along with, as long as America is making itself that uncompetitive,” Mr. Brady said. “And secondly, I think there are too many competing interests here for them to finalize a deal that would be agreeable to Congress.”

Other nations must also determine how to turn their commitments into domestic law.

The mechanics of changing how the largest and most profitable companies are taxed, and of making exceptions for financial services, oil and gas businesses, will be central to the discussions. There are already concerns that carve-outs could lead to new tax loopholes.

Ms. Yellen, who is making her second international trip as Treasury secretary, will be holding bilateral meetings with many of her counterparts, including officials from Saudi Arabia, Japan, Turkey and Argentina. China, which signed on to the global minimum tax framework, is not expected to send officials to the gathering of finance ministers and central bank governors, so there will be no discussions between the world’s two largest economic powers.

Mr. Saint-Amans expressed optimism about the trajectory of the tax negotiations, which were on life support during the final year of the Trump administration, and attributed that largely to the new diplomatic approach from the United States.

“It took a U.S. election, and some work at the O.E.C.D.,” he said.

During the panel discussion on tax and climate change, Ms. Yellen’s counterparts said they appreciated the spirit of cooperation from the United States.

Chrystia Freeland, Canada’s deputy prime minister and finance minister, said having the United States back at the table working to combat climate change was “welcome” and “transformative.” Mr. Le Maire thanked the Biden administration for rejoining the Paris Agreement.

“The U.S. is back,” he said.

Jim Tankersley contributed reporting from Washington, andLiz Alderman from Paris.

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Global Tax Deal Reached Among G7 Nations

LONDON — The top economic officials from the world’s advanced economies reached a breakthrough on Saturday in their yearslong efforts to overhaul international tax laws, unveiling a broad agreement that aims to stop large multinational companies from seeking out tax havens and force them to pay more of their income to governments.

Finance leaders from the Group of 7 countries agreed to back a new global minimum tax rate of at least 15 percent that companies would have to pay regardless of where they locate their headquarters.

The agreement would also impose an additional tax on some of the largest multinational companies, potentially forcing technology giants like Amazon, Facebook and Google as well as other big global businesses to pay taxes to countries based on where their goods or services are sold, regardless of whether they have a physical presence in that nation.

Officials described the pact as a historic agreement that could reshape global commerce and solidify public finances that have been eroded after more than a year of combating the coronavirus pandemic. The deal comes after several years of fraught negotiations and, if enacted, would reverse a race to the bottom on international tax rates. It would also put to rest a fight between the United States and Europe over how to tax big technology companies.

has been particularly eager to reach an agreement because a global minimum tax is closely tied to its plans to raise the corporate tax rate in the United States to 28 percent from 21 percent to help pay for the president’s infrastructure proposal.

EU Tax Observatory estimated that a 15 percent minimum tax would yield an additional 48 billion euros, or $58 billion, a year. The Biden administration projected in its budget last month that the new global minimum tax system could help bring in $500 billion in tax revenue over a decade to the United States.

The plan could face resistance from large corporations and the world’s biggest companies were absorbing the development on Saturday.

“We strongly support the work being done to update international tax rules,” said José Castañeda, a Google spokesman. “We hope countries continue to work together to ensure a balanced and durable agreement will be finalized soon.”

said this month that it was prepared to move forward with tariffs on about $2.1 billion worth of goods from Austria, Britain, India, Italy, Spain and Turkey in retaliation for their digital taxes. However, it is keeping them on hold while the tax negotiations unfold.

Finishing such a large agreement by the end of the year could be overly optimistic given the number of moving parts and countries involved.

“A detailed agreement on something of this complexity in a few months would just be lighting speed,” said Nathan Sheets, a former Treasury Department under secretary for international affairs in the Obama administration.

The biggest obstacle to getting a deal finished could come from the United States. The Biden administration must win approval from a narrowly divided Congress to make changes to the tax code and Republicans have shown resistance to Mr. Biden’s plans. American businesses will bear the brunt of the new taxes and Republican lawmakers have argued that the White House is ceding tax authority to foreign countries.

Representative Kevin Brady of Texas, the top Republican on the House Ways and Means Committee, said on Friday that he did not believe that a 15 percent global minimum tax would curb offshoring.

“If the American corporate tax rate is 28 percent, and the global tax rate is merely half of that, you can guarantee we’ll see a second wave of U.S. investment research manufacturing hit overseas, that’s not what we want,” Mr. Brady said.

At the news conference, Ms. Yellen noted that top Democrats in the House and Senate had expressed support for the tax changes that the Biden administration was trying to make.

“We will work with Congress,” she said.

Liz Alderman contributed reporting from Paris.

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U.S. Backs Global Minimum Tax of at Least 15% to Curb Profit Shifting Overseas

The Biden administration proposed a global tax on multinational corporations of at least 15 percent in the latest round of international tax negotiations, Treasury Department officials said on Thursday, as the U.S. looks to reach a deal with countries that fear hiking their rates will deter investment.

The rate was a lower-than-expected proposal from the United States, and the Treasury Department hailed its positive reception among other countries as a breakthrough in the negotiations. The fate of the talks is closely tied to the Biden administration’s plans for overhauling the corporate tax code in the United States, and the White House is pushing to reach an international agreement this summer and pass legislation later this year.

President Biden has proposed raising the corporate tax rate in the United States to 28 percent from 21 percent, which would be higher than the rate in many other countries. A deal over a global minimum tax would better allow the United States to make the increase without putting American companies at a disadvantage or encouraging them to move operations offshore.

Treasury has been holding meetings this week with a panel of negotiators from 24 countries about the so-called global minimum tax, which would apply to multinational companies regardless of where they locate their headquarters.

said in a statement after the meetings.

The negotiations over the global minimum tax are part of a broader global fight over how to tax technology companies, and they come as the Biden administration is trying to fix provisions in the tax code that it says incentivizes moving jobs overseas. The talks have dragged on for more than two years, slowed by the recalcitrance of the Trump administration and the onslaught of the pandemic.

As part of its American Jobs Plan, the Biden administration called for doubling a tax called the global intangible low-taxed income (or GILTI) to 21 percent, which would narrow the gap between what companies pay on overseas profits and what they pay on earned income in the United States. Under the plan, the tax would be calculated on a per-country basis, which would have the effect of subjecting more income earned overseas to the tax than under the current system.

If the 15 percent global minimum tax rate is adopted, it would still leave a gap between that rate and the Biden administration’s proposed U.S. domestic rate. Treasury officials have argued that the new gap would be smaller than the current one and therefore would not diminish the competitiveness of American companies. A large delta between the global minimum tax and what U.S.-based companies face on their foreign income gives companies that are based outside of the United States an advantage.

American companies have been watching the different moving parts of the negotiations closely. Big businesses have been generally wary of the Biden administration’s tax plans.

also expressed skepticism this week.

Manal Corwin, a former Treasury Department official in the Obama administration who now heads the Washington national tax practice at KPMG, said that other countries had been under the impression that the United States was set on a 21 percent global minimum tax, which would match the tax rate the Biden administration has proposed for U.S.-based companies’ foreign income. The fact that the U.S. is ready to negotiate from a lower rate is important, she said.

“To get a deal, it was important for the U.S. to clarify that they’re not necessarily saying 21 percent or nothing,” Ms. Corwin said.

Still, she added, the 15 percent “floor” could be too high for some countries to accept and too low to win approval from some members of Congress in the United States.

Rohit Kumar, leader of PwC’s Washington National Tax Services office, said that the reaction from Ireland and other countries to the proposal will be crucial because a tax agreement reached through the negotiations would be far from ironclad.

“Do countries actually change national law and enact it? Or is it just a political agreement where everyone is says, ‘That’s nice, but we’re not doing it?’” Mr. Kumar, a former top aid to Senator Mitch McConnell, the Senate minority leader, said. “As U.S. lawmakers are examining these proposals, that is the several trillion dollar question.”

Treasury officials said that they never insisted on the 21 percent rate, but that they believed that other countries were receptive to the idea of adopting a rate higher than 15 percent depending on the fate of the changes to the American tax system that are under consideration.

Ms. Yellen has warned that a global “race to the bottom” has been eating away at government revenues, and she has adopted a more collaborative approach to the negotiations than the Trump administration employed.

She is expected to continue talks about global tax reform with her international counterparts at the Group of 7 finance ministers meeting next month.

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Biden Administration Will Begin Disbursing $350 Billion in State and Local Aid

The Biden administration will begin deploying $350 billion in aid to state and local governments this month, a significant step in its effort to shore up segments of the economy that have been hardest hit by the pandemic, White House and Treasury officials said on Monday.

The infusion of funds also marks the Biden administration’s most significant opportunity to date to start reviving infrastructure across the nation and to fulfill its goal of ensuring a more equitable recovery.

“With this funding, communities hit hard by Covid-19 will able to return to a semblance of normalcy. They’ll be able to rehire teachers, firefighters and other essential workers — and to help small businesses reopen safely,” Treasury Secretary Janet L. Yellen said in a statement.

The details of the disbursement have been eagerly awaited by the states, cities, territories and tribal governments that are expected to receive money. But several Republican-led states and the Biden administration are in a legal confrontation over whether states can cut taxes after taking relief money and using it to solidify their budgets.

return-to-work bonuses could be funded using relief money.

States and cities are being given broad discretion on how they can use the money, which is intended to replace public sector revenue that was lost during the pandemic; provide extra pay for essential workers; and invest in sewer, water and broadband infrastructure.

The allocation of the funds is also likely to be a contentious matter as the money starts to flow. Some states have complained that states that managed the pandemic well are essentially being penalized because the formula for awarding aid is based on state unemployment rates.

The Treasury Department said on Monday that the states that were hardest hit economically by the pandemic will also get their money faster.

Local governments will generally receive half the money this May and the rest next year. But states that currently have a net increase in unemployment of more than 2 percentage points since February 2020 will get the funds in a lump sum right away.

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Biden and Republicans Spar Over Unemployment as Job Gains Disappoint

WASHINGTON — The disappointing jobs report released Friday by the Labor Department is posing the greatest test yet of President Biden’s strategy to revive the economy, with business groups and Republicans warning that the president’s policies are causing a labor shortage and that his broader agenda risks stoking runaway inflation.

But the Biden administration showed no signs on Friday of changing course, with the president defending the more generous jobless benefits included in the $1.9 trillion bill he signed into law in March and saying the $4 trillion in spending he proposed for infrastructure, child care, education and other measures would help create more and better-paying jobs after the pandemic.

Speaking at the White House, Mr. Biden urged “perspective” on the report, which showed only 266,000 new jobs added in April. He said it would take time for his aid bill to fully reinvigorate the economy and hailed the more than 1.5 million jobs added since he took office. And he rejected what he called “loose talk that Americans just don’t want to work.”

“The data shows that more workers are looking for jobs,” he said, “and many can’t find them.”

Republicans cast the report as a sign of failure for Mr. Biden’s policies, even though job creation has accelerated since Mr. Biden replaced President Donald J. Trump in the White House. They called on his administration to end the $300 weekly unemployment supplement, while several Republican governors — including those in Arkansas, Montana and South Carolina — moved to end the benefit for unemployed people in their states, citing worker shortages.

relief money to subsidize tax cuts, which could further slow the rollout.

Mr. Biden said at the White House that the administration would begin releasing the first batch of money to state and local governments this month. He said the money would not restore all of the lost jobs in one month, “but you’re going to start seeing those jobs in state and local workers coming back.”

The administration also took steps on Friday to get money out the door more quickly, saying the Treasury Department would release $21.6 billion of rental assistance that was included in the pandemic relief legislation to provide additional support to millions of people who could be facing eviction in the coming months.

Officials said they expected increased vaccination rates to ease some lingering fears about returning to jobs in the pandemic. The number of Americans 18 to 64 who are fully vaccinated grew by 22 million from mid-April, when the survey for the jobs report was conducted, to Friday. That was an acceleration from the previous month. Some White House officials said the administration’s push to further increase the ranks of the vaccinated could be the most important policy variable for the economy this summer.

Treasury Secretary Janet L. Yellen, speaking at the White House, said that a lack of child care related to irregular school schedules was making it a challenge to get the labor market back to full strength. She also said that health concerns about the pandemic were holding back some workers who might return to the market.

“I don’t think that the addition to unemployment compensation is really the factor that’s making the difference,” Ms. Yellen said.

She said that she believed the labor market was healthier than the figures released on Friday suggested, but she allowed that the economic recovery would take time.

“We’ve had a very unusual hit to our economy,” Ms. Yellen said, “and the road back is going to be somewhat bumpy.”

Ms. Boushey and Mr. Bernstein said that it appeared the economy was working through a variety of rapid changes related to the pandemic, including supply chain disruptions that have hurt automobile manufacturing by reducing the availability of semiconductor chips and businesses beginning to rehire after a year of depressed activity because of the virus.

“It’s our view that these misalignments and bottlenecks are transitory,” Mr. Bernstein said, “and they’re what you expect from an economy going from shutdown to reopening.”

Other key economic officials treated the report as a sign that the labor recovery ahead is likely to prove wildly unpredictable. Robert S. Kaplan, the president at the Federal Reserve Bank of Dallas, said in an interview that his economics team had warned him that the April report might show a significant slowdown as shortages of materials — including lumber and computer chips — and labor bit into employment growth.

He said he was hoping to see those supply bottlenecks cleared up, but he was watching carefully in case they did not resolve quickly.

“It shows me that getting the unemployment rate down and moving forward to improved employment to population is going to have fits and starts,” Mr. Kaplan said. He noted that sectors that were struggling to acquire materials, like manufacturing, shed jobs, and he said leisure and hospitality companies would have added more positions if not for challenges in finding labor.

“It’s just one jobs report,” cautioned Tom Barkin, the president of the Federal Reserve Bank of Richmond, in Virginia. But he said labor supply issues could be at play: Some people may have retired, others may have health concerns, and unemployment insurance could be encouraging low-paid workers to stay at home or allowing them to come back on their own terms.

“I get the feeling that people are being choosy,” Mr. Barkin said. “The first question I have in my mind is — is it temporary or is it more structural?”

He said that the supply constraints playing out were likely to fade over time, and that while businesses complain about rising input costs and might have to raise entry-level wages somewhat, he struggled to see that leading to much higher inflation — the kind that would worry the Fed.

The Fed is trying to achieve maximum employment and stable inflation around 2 percent on average. It has pledged to keep its cheap-money policies, which make borrowing inexpensive, in place until it sees realized progress toward those goals.

Neel Kashkari, the president of the Federal Reserve Bank of Minneapolis, said the payrolls disappointment vindicated the Fed’s slow-moving stance.

“I feel very good about our policy approach, which is outcome-based,” Mr. Kashkari said, speaking on a Bloomberg television interview shortly after the report came out. “Let’s actually allow the labor market to recover, let’s not just forecast that it’s going to recover.”

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Yellen, Janet L

Inflation F.A.Q.