FED

The United States Federal Reserve will hold interest rates steady as the labour market cools and prices on goods and services surge following the US and Israel’s joint strikes on Iran.

The central bank will maintain its benchmark rate at 3.5–3.75 percent, consistent with the Fed’s decision last month, when it also held rates steady.

“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The implications of developments in the Middle East for the US economy are uncertain,” the central bank said in a statement announcing its policy decision and referring to its Federal Open Market Committee.

“The Committee is attentive to the risks to both sides of its dual mandate.”

Holding rates steady was in line with estimates. CME FedWatch, a tool that tracks monetary policy decisions, forecast that there was a 99 percent chance that rates would hold steady.

The stall comes after three rate cuts in 2025.

Global gripes

Consumers are also facing the repercussions of US President Donald Trump’s trade and military policies in their daily expenses.

“Despite meaningful progress on inflation in 2024, Trump’s tariffs have stalled progress and kept inflation persistently above the Fed’s target. Wholesale prices are running hot as service prices surge, and now, Trump’s war in Iran is rocking commodity markets around the globe,” Elizabeth Pancotti, managing director of policy and advocacy at Groundwork Collaborative, an economic think tank, said in comments provided to Al Jazeera.

Last month, the US Supreme Court ruled against the president for his use of the International Emergency Economic Powers Act (IEEPA). The high court said the president exceeded his authority and that the tariffs imposed under that order must be refunded. However, the president then imposed new tariffs not covered by IEEPA.

The White House announced a 15 percent tariff through Section 122, which allows the president to impose tariffs for 150 days. Those changes were reflected in the producer price index report released by the US Department of Labor’s Bureau of Labor Statistics on Wednesday.

Wholesale prices rose by 0.7 percent for the month, marking the biggest one-month surge in a year. Goods prices rose 1.1 percent overall after tumbling for two months. Energy prices rose by 2.3 percent, with the cost of gas or petrol rising by 1.8 percent. Those costs are expected to get higher as tensions rise in the Strait of Hormuz following joint US-Israel strikes on Iran in late February and the subsequent retaliation.

“In the near term, higher energy prices will push up overall inflation; however, it is too soon to know the scope and duration of the potential effects on the economy,” Fed Chair Jerome Powell told reporters.

In the last month, petrol prices have jumped for US consumers. The average price for a gallon of regular gasoline is $3.84, up from $2.92 this time last month.

“The Fed’s inflation worries extend beyond weathering a fleeting wave of one-off price hikes associated with tariffs and, more recently, an energy price spike,” Stephen Stanley, chief US economist at Santander US Capital Markets, told the Reuters news agency.

Labour market stalls

Holding rates steady also comes as the job market stagnates. The latest jobs report, which was released earlier this month, showed that the US economy lost 92,000 jobs, with unemployment rising to 4.4 percent.

Meanwhile, the Job Openings and Labor Turnover Survey, or JOLTS report, which came out last week, showed 6.9 million open jobs in the US, unchanged from the month prior. That shows that employer hiring has stalled and that those who have jobs are seldom leaving for new ones.

“This might be one of the toughest moments in recent memory for the Federal Reserve’s Open Market Committee,” Michael Linden, Senior Policy Fellow at the Washington Center for Equitable Growth, said in remarks provided to Al Jazeera. “Recent data has revealed that economic growth in the back half of last year was extremely weak, the labour market seems to be on the precipice of disaster, and prices keep rising faster than anyone feels comfortable with.”

Political undercurrents

Wednesday’s decision is the second-to-last one of current Fed Chair Powell, whose term is up in May. Powell, who was first appointed by Trump during his first administration, has been a target of Trump’s scorn and criticisms for not cutting interest rates fast enough.

“When is ‘Too Late’ Powell lowering INTEREST RATES?” Trump posted on his social media platform Truth Social on Wednesday morning ahead of the decision.

Previously, Trump said he would not nominate someone to lead the central bank unless the nominee agreed with his position.

“Anybody that disagrees with me will never be the Fed Chairman!” Trump said in a post on Truth Social in December.

“We at the Fed will continue to do our jobs with objectivity, integrity and deep commitment to serve the American people,” Powell told reporters.

Trump’s nominee to succeed Powell, Kevin Warsh, has his nomination in flux as Republican Senator Thom Tillis said he would not vote to advance any of Trump’s nominees to the central bank until a criminal probe into the current chairman, Powell, is closed.

Tillis sits on the Senate Banking Committee, which vets nominees for the central bank, including Warsh. He said he will not approve Trump’s Fed nominees until the probe of Powell is closed. The criminal probe of Powell centres on Fed building renovations after a judge quashed grand jury subpoenas and called the investigation a pretext to pressure the central bank to lower interest rates.

If Warsh has not been confirmed by the Senate in time for the Fed’s June 16–17 meeting, Powell would continue to lead the rate-setting Federal Open Market Committee.

“If my successor is not confirmed by the end of my term as chair, I would serve as chair pro tem until he is confirmed. That is what the law calls for,” Powell said.

“On the question of whether I will leave while the investigation is ongoing, I have no intention of leaving the board until the investigation is well and truly over with transparency and finality.”

March 18 (UPI) — The Federal Reserve announced that it is leaving its benchmark interest rate untouched Wednesday in its first Federal Open Market Committee statement since the start of the war with Iran.

The Fed’s benchmark interest rate remains at a 3.5% and 3.75% range as the committee held on to its projection of at least one rate cut coming this year.

“Available indicators suggest that economic activity has been expanding at a solid pace,” the FOMC statement said. “Job gains have remained low and the unemployment rate has been little changed in recent months. Inflation remains somewhat elevated.”

As for the war in Iran, the statement said its impact on the U.S. economy is “uncertain.”

The Fed continues to pursue monetary policies it believes will bring the rate of inflation down to 2%. In its statement it said it is “committed to supporting maximum employment,” in pursuit of its target.

Economic reports that inform the Fed’s decision have indicated pressures from inflation remain and economic growth has slowed.

Wednesday’s announcement comes on the heels of a producer price index report earlier in the day that showed the largest increase to the index for final demand goods since August 2023.

Last week, the U.S. Bureau of Labor Statistics reported that nonfarm payrolls fell by 92,000 in February. The unemployment rate increased to 4.4%.

These reports have economists and traders cooling on the potential for interest rate cuts. Eugenio Aleman, chief economist at Raymond James, said in a statement that the wholesale inflation report on Wednesday, “likely reinforces a hold decision.”

Data from the producer price index report predates the beginning of the war with Iran.

March 13 (UPI) — A federal judge this week quashed subpoenas the Department of Justice had issued to Federal Reserve Chair Jerome Powell because they were issued to pressure him into adjusting interest rates.

Judge James Boasberg redressed the DOJ for the subpoenas, saying that their purpose had nothing to do with a probe about renovations at the Federal Reserve in Washington, D.C.

The DOJ in January launched a criminal investigation into Powell’s testimony last year about the renovations, which Powell at the time said were “pretexts” to punish him and the Fed after they did not set interest rates at levels demanded by President Donald Trump.

“The Government has produced essentially zero evidence to suspect Chair Powell of a crime; indeed, its justifications are so thin and unsubstantiated that the Court can only conclude that they are pretextual,” Boasberg wrote in the opinion.

The department in January issued grand jury subpoenas in reference to Powell’s comments about the multi-year project to renovate the Fed’s office buildings during his June 2025 testimony before the Senate Banking Committee.

During a tour of the renovations, Powell disputed Trump’s over-estimates of the renovation’s cost, and threatened to sue him for the “horrible and grossly incompetent job” Powell had done on the project.

Overall, however, Trump has repeatedly ripped into and mused about firing Powell, which he cannot do, because the Fed chair has repeatedly said that interest rate changes would be dictated by only the market, rather than the preferences of any one person.

In the opinion, which was unsealed Friday, Boasberg said he blocked the subpoenas because “a mountain of evidence suggests that the Government served these subpoenas on the Board to pressure its Chair into voting for lower interest rates or resigning.”

WASHINGTON — A federal judge on Friday quashed Justice Department subpoenas issued to the Federal Reserve in January, a severe blow to an investigation that has already attracted strong criticism on Capitol Hill.

Judge James Boasberg said that a “mountain of evidence suggests” that the purpose of the subpoenas was simply to pressure the Fed to cut its key interest rate, as President Trump has repeatedly demanded.

Fed Chair Jerome Powell revealed the investigation Jan. 11, prompting Senator Thom Tillis, a North Carolina Republican to block consideration of Trump’s pick to replace Powell as Fed chair when his term expires May. 15.

Rugaber writes for the Associated Press.

WASHINGTON — President Trump, his Treasury secretary and his choice to lead the Federal Reserve believe they can coax the U.S. economy back to a boom reminiscent of the 1990s.

They are putting their faith in artificial intelligence to duplicate what happened when another technology arrived during the Clinton era: the internet. Back then, the American economy surged as businesses became more productive, unemployment tumbled and inflation remained in check.

Trump expresses confidence that his nominee to become Fed chair, Kevin Warsh, can unleash an economic bonanza by jettisoning what the president sees as the central bank’s hidebound reluctance to slash interest rates.

Many economists are skeptical.

The world looks a lot different today than it did when the Spice Girls ruled radio and “Titanic’’ dominated the box office. And the story the Trump team is telling — that a visionary Fed chair, Alan Greenspan, fueled the 1990s boom by keeping interest rates low — is incomplete at best.

“The administration is offering a rather distorted version of what actually happened in the 1990s,’’ economist Dario Perkins of TS Lombard said in a commentary.

Nonetheless, the Trump administration believes history can repeat itself. All that’s been missing, Trump says, is a Fed chair with Greenspan’s foresightedness.

AI’s influence over interest rates

Trump has repeatedly attacked current Fed chief Jerome H. Powell, whose term as chair ends in May, for his caution in lowering rates while inflation hovers above the central bank’s 2% target. Treasury Secretary Scott Bessent said on social media in January that the president sought to replace Powell with someone with “an open, Greenspan-like mind.”

“Our nation can see productivity boom like we did in the ’90s when we are not encumbered by a Federal Reserve which throws the brakes on,’’ Bessent wrote.

On Jan. 30, Trump said he was picking Warsh.

In speeches and writings, Warsh has argued that AI-driven improvements in productivity could justify lower interest rates.

These views align with Trump’s desires for Fed rate cuts but mark a break with Warsh’s past as an inflation hawk.

In the aftermath of the 2007-09 Great Recession, Warsh — then a Fed governor — objected to some of the central bank’s efforts to help the struggling economy by pushing down rates even though unemployment exceeded 9%. He warned then, wrongly, that inflation would soon accelerate.

At issue now are gains in productivity and the possibility that AI will make them bigger — much bigger.

To economists, productivity improvements are almost magical. When companies roll out new machines or technology, their workers can become more efficient and produce more stuff per hour. That enables firms to earn more and to raise employees’ pay without raising prices. In short: Surging productivity can drive economic growth without spurring inflation.

Greenspan and the internet

In the mid-1990s, Greenspan was contending with a strange set of economic circumstances: Wages were rising but inflation wasn’t heating up.

Big productivity gains might have explained things, but government data showed no sign of them. Other Fed policymakers worried that surging wages and tame inflation couldn’t coexist and that higher prices were coming. They wanted to raise interest rates.

But Greenspan suspected that the official productivity numbers were missing something. For one thing, they didn’t jibe with the amazing tales of efficiency improvements the Fed was hearing from companies investing in computers and turning to the internet.

So he ordered his lieutenants to dig through decades of productivity numbers. The official statistics they assembled told an implausible story: Services firms — including retailers and legal practices — had supposedly seen productivity fall over the years, despite intense competitive pressure and massive investments in technology.

Greenspan didn’t believe it. He persuaded his Fed colleagues that the government’s numbers were wrong and were understating productivity. They agreed in September 1996 to hold off on raising rates.

The economy took flight.

Tardily, productivity advances began to show up in the official data. Overall, American economic growth surpassed 4% every year from 1997 through 2000, something it would do again only once in the next quarter century. The unemployment rate plunged to 3.8% in April 2000, the lowest in three decades. Inflation stayed in its cage, coming in below 2% — later the Fed’s official target — for 17 straight months in 1997-99.

History repeats itself … maybe?

American productivity looked strong in the second and third quarters of 2025, and some economists attribute the improvements to the early adoption of AI; they see bigger gains and stronger economic growth ahead.

Others aren’t so sure.

Joe Brusuelas, chief economist at consulting firm RSM, wrote that the 2025 productivity improvements “are not because of artificial intelligence’’ but reflect investments in automation that companies made when they couldn’t find enough workers during the COVID-19 pandemic. “Those investments are starting to pay off,’’ Brusuelas wrote.

Economist Martin Baily, senior fellow emeritus at the Brookings Institution, believes it will take time for AI to have a big effect on the way companies do business and on the nation’s productivity.

“Companies don’t change that fast,” said Baily, chair of President Clinton’s Council of Economic Advisors during the boom era. “It’s expensive to change. It’s risky to change. The managers don’t necessarily understand the new technology that well. So they have to learn how to use it. They have to train their staff. All that stuff takes a long time.’’

A productivity boom can raise the economy’s speed limit — how fast it can grow without pushing prices higher. But it might not justify lower interest rates, Fed Gov. Michael Barr said in a speech last month.

Businesses will borrow to invest in AI, putting upward pressure on interest rates. Likewise, American workers and their families probably would save less and borrow more in anticipation of higher wages, the payoff for being more productive; that would put still more pressure on rates to rise.

Bottom line, Barr said: “The AI boom is unlikely to be a reason for lowering policy rates.’’

Even Greenspan’s Fed eventually came to the same conclusion, reversing course and starting to raise its benchmark rate in mid-1999, taking it from 4.75% to 6.5% in less than a year. (The rate Trump complains about now is around 3.6%.)

“Warsh and Bessent talk only about the dovish 1995/96 version of Greenspan; they overlook the hawkish 1999/2000 variant,’’ Perkins wrote.

Then and now

Many of Warsh’s potential future colleagues on the Fed’s interest-rate setting committee see the late-1990s experience differently than he does, setting up what could be a clash at the central bank if the Senate confirms Warsh as chair.

Austan Goolsbee, president of the Federal Reserve Bank of Chicago, said last week that “the analogy to the late ‘90s is a little harder for me to understand.” Greenspan’s insight was that productivity gains meant the Fed could hold off on raising rates, not that it should slash them, Goolsbee noted.

“It wasn’t, ‘Should we cut rates because productivity growth is higher?’” he said.

The economic backdrop that awaits Warsh is also far less friendly than the one Greenspan enjoyed.

Greenspan was avoiding rate hikes at a time when the usually profligate U.S. government was running rare budget surpluses and didn’t need to borrow so desperately. Now, after a series of spending hikes and tax cuts, deficits are piling up year after year, and the Congressional Budget Office expects federal debt to hit a historic high of 120% of America’s gross domestic product by 2035.

Nor was productivity the only thing controlling inflation in the 1990s. Countries were lowering tariffs and dismantling trade barriers. Immigration was surging.

Now, due largely to Trump’s policies, notably his sweeping taxes on imports and his crackdown on immigration, the world is much different. “Trade barriers are going up,’’ Perkins wrote. “Globalization has given way to de-globalization.’’

“That benign era is clearly behind us,’’ said Michael Pearce, chief U.S. economist at Oxford Economics.

Wiseman writes for the Associated Press. AP writer Christopher Rugaber contributed to this report.

Winning tip: cycle the greenways of Annecy

Saint-Jorioz in Haute-Savoie will provide a springtime lift for your spirits. On the shore of Lake Annecy, it’s a short bus ride from the city of Annecy, but less busy and with superior lake and mountain views. Hike to the surrounding peaks, towards the lesser-known Col de l’Arpettaz, or cycle on the excellent greenways. Relax by the cool blue alpine water. Behind you lies the underrated Les Bauges Unesco Geopark. The department only joined France in 1860, and has its own Italian-influenced regional cuisine.
Brian Lowry

Naples is best in early spring

Although not the most traditionally beautiful city in Italy, Naples offers a glimpse of warmth in early spring. A world apart from Florence or Turin, Naples is a fascinating, lived-in city with a long history and a rich culinary tradition. The Spaccanapoli, which runs right through the core of the city, is a bustling place to walk along and experience Neapolitan life. The world-class sites of Pompeii and Herculaneum are nearby, as are Mount Vesuvius, Sorrento and the wonderful islands of Capri, Ischia and Procida. You can get to Naples by train from London via Paris and Turin or Milan in about 15 hours.
Michael Kuipers

Take the ferry to Corsica

Eurostar from London via an easy connection at Lille or a change in Paris takes between six and eight hours to arrive in Marseille. After a shower at the station, refresh in Vieux Port before arriving for breakfast in Bastia, Corsica, via a comfortable night-ferry. From Bastia, catch the scenic mountain railway into this remarkably unspoiled island to explore its wild interior and coastal regions. Mid to late spring is best for southern Europe, when snow-melt replenishes streams and waterfalls that dry up in summer. The weather is sunny yet exceedingly pleasant, hillsides blanketed with wildflowers, wild animals nurturing their young and locals refreshed in mood.
Jake

Germany’s greenest, sunniest city

Take the Eurostar to Paris and continue east via Strasbourg by high-speed train through the rolling hills and vineyards of Alsace to Freiburg – Germany’s warmest, sunniest and greenest city. (Some routes go via Brussels and Cologne.) Feast on Swabian classics such as käsespätzle (cheesy egg noodles with caramelised onion), enjoy tacos at YepaYepa or drop into Hausbrauerei Feierling’s lively beer garden for a drink. From Freiburg, explore the Black Forest’s highlights, from Triberg’s cuckoo clocks and waterfalls to the treetop walk in Bad Wildbad. Opt to stay at a participating town and you’ll receive a Konus guest card, giving you free transport around the region for your entire stay.
George

Tiny beaches near Nice

I’ve spent many happy spring breaks in Villefranche-sur-Mer, just a few miles east of Nice. The charm of its historic heart, the beauty of its deepwater bay, the proximity to spectacular coast and mountains, plus excellent cafes and restaurants make it hard to beat. Take the TGV to Nice, then it’s just a few minutes on the local train (easy for day trips to Cannes and Menton, too). It should be warm enough for a dip at the tiny, secluded Plage de la Darse, or Plage de la Fosse on swanky Cap Ferrat …
Gill R

Lemons and light on the Côte d’Azur

My sister and I spent a beautiful sunny few days in Menton on the Côte d’Azur in early April. We spent our time meandering the cobbled streets with their pastel-coloured buildings, eating a mix of French and Italian meals (it’s the last French town before the Italian border) and paddling in the calm blue bay. We trekked in the hills north of the town, past stunning houses, pine trees and spring flowers to explore Maison Gannac, a citrus farm that grows the Menton lemon, which is renowned for its flavour and aroma.
Katie

A boat trip along the Moselle in Germany

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Kirsten Lowery

Coastal paths near Perpignan

Go south by train and resist the rush. Take the Eurostar to Paris, then a fast TGV to Perpignan in six hours, before a final 25-minute local train to Port-Vendres – about nine hours from London, end to end. Early spring suits this working harbour: many places are shut, the fish market is not. Lunch at its no-nonsense restaurant, then walk the coastal paths to Collioure, brighter and busier by comparison. The Pyréneés-Orientales coast is one of France’s sunniest areas, and even out of season the light does much of the work.
Becky

The hazily golden city of Avignon

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Hilary