Inflation

Yields on government debt across European countries and the United States have been rising since the start of the Iran war.

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Investors are demanding higher yields as confidence in the global economy has cratered due to the severe negative impact of the conflict on energy markets, supply chains and Middle Eastern infrastructure.

The 2-year notes, sensitive to near-term rate expectations, have risen faster than their 10-year counterparts in a classic bear-flattening move, while longer-dated yields reflect worries over the economic drag caused by more expensive energy.

Speaking to Euronews, BCA Research’s Chief Fixed Income Strategist, Robert Timper, explained that “the aggressive bear flattening of yield curves reflects a hawkish monetary policy repricing in response to inflation fears stemming from the Iran war”.

“The front-end [2-year yields] is more sensitive to changes in monetary policy and has therefore risen more than the long-end [10-year yields] in response to investors’ anticipation of more hawkish central bank policy,” Timper added.

Historically, this specific curve behaviour often precedes an inverted yield curve, which is a well-recognised indicator of a potential economic recession.

European bonds bear the brunt of the sell-off

The repricing has been most pronounced in Europe, with the UK bond market feeling the biggest pressure.

Since the start of the conflict, the 10-year UK gilt yield has risen from 4.2% to a high of over 5% while the 2-year note yield jumped from 3.5% to a peak of 4.6%.

Timper explained to Euronews that past inflation experience has proved decisive, stating that “rate hikes in the UK are more likely than elsewhere because inflation has been more elevated than elsewhere, and the risk of inflation expectations unanchoring is therefore higher.”

On Wednesday, AJ Bell’s investment director Russ Mould highlighted the UK-specific implications in a detailed press release, noting that the 10-year gilt yield is hovering near 5% for only the third time since 2008 while the 2-year gilt yield comfortably exceeds the Bank of England base rate.

Mould also explained that the gap between the 10-year gilt yield and the FTSE 100 dividend yield has widened to more than one-and-a-half percentage points, making UK equities relatively less attractive.

Elsewhere in Europe, bond yields experienced similar surges.

Germany’s 10-year bund yield increased from 2.65% to around 3%, nearing 15-year highs, while the 2-year note yield climbed from roughly 2% to 2.65%.

In France, the 10-year OAT yield jumped from 3.2% to above 3.7%, approaching 17-year peaks, while the 2-year note yield has risen from 2.1% to over 2.8%.

As for Italy, the 10-year BTP yield was at around 3.3% before the Iran war and has now surpassed 3.9%, approaching two-year highs, while the 2-year note yield has increased from roughly 2.15% to 3%.

In every single one of these bond markets, the yield on the 2-year notes has risen faster than their 10-year counterparts.

The 30 and 20-year bond yields are also all trading higher which denotes deteriorating confidence in the long-term growth prospect of the respective European economies.

US Treasuries face comparable headwinds

Across the Atlantic, US Treasuries have followed a similar trajectory, though the sell-off has been less severe than in the UK for example.

The 10-year note yield has risen from around 3.9% to a peak of 4.4%, reached on Monday, and is currently trading at 4.37%.

Meanwhile, the 2-year note yield increased from 3.35% to a high of over 4%, and it is hovering 3.9% at the time of writing.

The yields on both notes have hit an 8-month high.

Timper’s analysis places US bond performance close to that of the euro area, reflecting broadly comparable inflation histories and policy outlooks. There is scant evidence of investors fleeing European bonds for US Treasuries as a safe-haven trade.

Speaking to Euronews, Timper explained that such shifting flows would be more visible in currency markets as the US dollar benefits from being the predominant denominator for energy exports.

For now the message from bond markets on either side of the Atlantic is consistent, the Middle East conflict has rewritten the near-term outlook for inflation, monetary policy and borrowing costs.

BRITS are urged to apply for passports now before the price hike.

Holidaymakers have only 21 days before the application fees increase to £102.

From April 8, passport fees are set to rise sharply from £94.50 to £102.

It’s the third year in a row prices have gone up, meaning Brits will now pay 24% more for a passport compared to renewing back in January 2024.

And it gets worse if you apply by post, with fees jumping from £107 to £115.50 for adults.

Kids aren’t spared either, with children’s passports rising from £61.50 to £66.50 online, or from £74 to £80 by post.

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The Government says the increases are needed to make the system self-funded rather than relying on taxpayers.

Officials insist they’re not making a profit, with fees instead covering processing applications, supporting Brits overseas and managing UK border checks.

Standard applications take on average three weeks to process, which is the exact date when the new price comes into force.

So if you want a passport before the cost shoot up, you can apply for one-day premium service.

And be quick as the premium service will go up from from £222 to £239.50 in April as well.

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.

New York City, United States – Rising prices on the back of US-Israel strikes on Iran are adding to the economic pressure facing US consumers despite efforts by US President Donald Trump to paint the war as a success.

On Wednesday, Trump declared, “We won – in the first hour it was over.”

Trump’s declaration comes even as the Strait of Hormuz remains closed, cutting off oil from the Gulf amid warnings from Iran, which continues to strike ships, that oil could reach $200 per barrel.

Oil prices spiked above $100 per barrel on Sunday and again today.

The magnitude of the economic pressure on consumers will depend on how long the war lasts and, crucially, how soon shipping traffic can return to the Gulf.

“If it drags on and especially if it remains at this intensity, prices will be higher, and more volatile for consumers,” said Rachel Ziemba, an adjunct senior fellow at the think tank Center for a New American Security.

“If it ends quickly, and it’s a credible and stable end, then we could see prices fairly quickly normalising”.

If the war lasts more than a few weeks, however, observers say the US economy is more likely to see deepening impacts, like 1970s-style “stagflation” or a recession.

When might we see a recession?

On Thursday, the International Energy Agency said in a report that “the war in the Middle East is creating the largest supply disruption in the history of the global oil market.”

According to Sam Ori, who directs the Energy Policy Institute at the University of Chicago, in the past, when oil prices have reached 4 percent to 5 percent of gross domestic product and stayed elevated, “that’s always triggered a recession.”

The US will not hit that threshold as quickly as it would have in the 1970s, when its economy was more deeply dependent on foreign oil, Ori said, but added he expected a recession if prices remained about $140 a barrel for most of the year.

Alternatively, “the indefinite closure of the Strait of Hormuz would so vastly exceed that number, it would not take a year,” he said.

Ori, who used to run an oil shock war game for US officials, said he would have been “laughed out of the room” if he had proposed a scenario where the strait was closed for six months, because many analysts see it as “too big to fail”.

Ori says that assessment is still likely, but recent developments “are chipping away at that level of certainty”.

The Gulf, which separates the Arabian Peninsula and Iran, provides more than one-fifth of the world’s oil supply via tanker ships through the Strait of Hormuz.

The severity of that threat to the global economy is the “strongest indicator that this is going to get resolved pretty fast, because it’s impossible to fathom what would happen if it didn’t”, Ori said.

He added that the conflict has now entered a phase in which it may be moving out of US control, especially as some countries have turned off the oil wells as they run out of storage.

While those events have now been baked into oil prices, the things that he is on the lookout for include “successful mining of the strait, some kind of structural blockage, or a battlespace development that binds the US into a longer, drawn out conflict”, outcomes that could signal a total loss of the strait for an unknown amount of time and create the “conditions for a complete meltdown”.

Higher prices

The war is already driving petrol prices up for US consumers.

Patrick DeHaan, who leads petroleum analysis for the app GasBuddy, said that the national average as of Wednesday is now $3.59 per gallon ($0.95 per litre) – up 65 cents since February.

The highest increases are near the coasts, where US petrol, diesel and jet fuel supplies are more easily diverted to meet global demand, according to DeHaan.

An end to the conflict could lower petrol prices within weeks, DeHaan said, but “every week that this goes on, we could see another 25 to 40 cent increase”.

Robert Rogowsky, an adjunct professor at Georgetown University’s School of Foreign Service, said lower-income people in particular, “will pay the price for this inflationary burst”.

As the war continues, it will also nudge up prices for consumer goods.

Peter Sand, chief analyst for freight intelligence platform Xeneta, said the backup at the Strait of Hormuz is already causing congestion at ports worldwide.

In the short term, consumers should not feel much of a pinch, Sand said. But if the conflict lasts for a month, some goods will be delayed, “and of course, the price tag on those goods also goes up.”

The war also means that the Red Sea, mostly closed in 2025 due to Houthi attacks, will likely stay closed throughout 2026, Sand said. It was expected to reopen, which could have lowered consumer prices.

Oil and oil byproducts from the Gulf are also used directly in consumer goods, like plastics, pharmaceuticals and fertilisers. Shortages now may mean higher prices later.

Fertilisers from the Gulf, for example, are needed soon for spring planting. Delays could affect crops next year.

A shortage of helium from the Gulf could also impact semiconductor manufacturing, delaying car manufacturing and other industries, Ziemba said.

The spectre of 1970’s-style ‘stagflation’

Higher consumer prices could increase the risk of “stagflation”, when stagnant economic growth occurs alongside high unemployment and high inflation.

That is how the US economy responded to the oil price shocks of the 1970s.

Severin Borenstein, faculty director of the Energy Institute at the University of California, Berkeley’s Haas School of Business, said, “There’s certainly concern about stagflation again.”

That combination of high inflation plus high unemployment, Borenstein said, “is just really tough for the Fed to deal with”.

“They can either juice the economy or slow it down, and the two problems call for opposite solutions”, Borenstein said.

The Fed can lower interest rates to prompt spending and hiring, which can make inflation worse, or it can raise interest rates to lower inflation, which can slow hiring.

Ziemba said higher oil prices likely point to “inflation remaining stickier, which means it’s harder for the Fed to cut interest rates.”

As a result, “mortgage rates and other long-term interest rates might be stuck at their current levels,” Ziemba said. Mortgage rates, which were at 5.99 percent on February 27, are up to 6.29 percent as of March 12.

Even if the war ends tomorrow, it may already be accelerating longer-term shifts.

Rogowsky called US attacks on Iran “an injection of adrenaline” into a realignment already under way, as middle powers seek to reduce their reliance on the US.

That realignment “will affect our terms of trade, which will have a distinct impact on our economy”, Rogowsky said.

Logistics consultant David Coffey said for some businesses, the war is expediting conversations about risk. “They may have been assuming ‘Yes, there’s risk in the Middle East,’ but they may not have been assuming that this would kick off”, Coffee said.

Making supply chains more secure could raise costs for consumers, he said.

Military spending and the US budget

Meanwhile, Heidi Peltier, a senior researcher at Brown University’s Costs of War Project, said war also means long-term expenses around debt payments and veterans’ healthcare.

“We have spent at least $1 trillion in interest on the Iraq and Afghanistan wars – and rising, because it’s not like we’ve paid off any of that principal”, Peltier said.

Military spending, she said, also tends to create fewer jobs than government investment in education or healthcare. “If we’re spending money on this, what are we not spending money on?” Peltier asked.

BRITISH holidaymakers have been caught up in the Iran crisis, with thousands stranded abroad and even more fearing for their upcoming trips.

But if you haven’t booked your holiday yet, should you be doing it now to avoid any price hikes?

Due to the ongoing US-Iran conflict, the cost of jet fuel has spiked, with airline fares already spiking in response.

Before the attack, prices were around $90 (£67) per barrel.

However, this has now jumped to as much as $200 (£149) per barrel – the highest prices since Russia invaded Ukraine in 2022.

Jet fuel makes up about a quarter of the cost of airline operations, according to the IATA.

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In response, airlines such as Qantas, Scandinavia’s SAS and Air New Zealand have all raised flight prices already.

Some airlines such as Ryanair, easyJet, British Airways and Virgin Atlantic, are less affected as they have secured some of their fuel at fixed prices for a set amount of time – called hedging.

Ryanair boss Michael O’Leary said the rise in jet fuel “won’t affect our costs and it won’t affect ​our low fares,” something easyJet also echoed.

But flights elsewhere are likely to go up in the next year or so, as the conflict continues.

Most airlines in America do not protect themselves against jet fuel price increases, meaning Brits are likely to see more expensive transatlantic fares.

According to research from Skift this could cost US airlines as much as $24billion in extra fuel costs – working out to 11 per cent increases on flights.

Not only that, but the closure of the Strait of Hormuz – one of the world’s most important shipping routes – is also having a knock-on affect and could lead to shortages.

James Noel-Beswick, head of commodities at market intelligence firm Sparta Commodities, told the BBC that it was very likely” that prices will increase this summer.

He added: “I think we’re weeks away from maybe flight cancellations or delays due to lack of jet fuel, rather than months.”

So, what can Brit holidaymakers do?

If you were planning on booking a package holiday, many tour operators allow you to lock in a cheap price, and simply pay a deposit, with the full balance coming later.

Jet2 allows you to book a holiday with a £60pp deposit while TUI has a number of £0 deposit schemes.

Loveholidays has deposits from £19pp, as well as a “Best Price Promise” that refunds the difference if your holiday is cheaper within seven days of booking, plus an extra £5 per person.

Destinations like Spain – already one of the most popular holiday destinations for Brits – are likely to see even more demand this year along with Greece due to being seen as ‘safer’ holiday destinations.

This means you might see a jump in price more than usual as well.

Other popular destinations like Cyprus is already seeing some booking cancellations after a drone attack on an RAF base on the island.

Hoteliers have said cancellations are affecting holidays in March and April – this is despite Cyprus remaining on the safe travel list.

Dubai is still on the “only essential travel” list so holidays to the UAE city are currently suspended, along with Jordan also on the travel ban list.

Even destinations like Egypt and Turkey are being affected, with a number of Sun readers concerned about holidays to both.

The Sun’s Head of Travel on which holiday destinations to go to instead this year

The Sun’s Head of Travel Lisa Minot, explains: “There’s no doubt the current crisis in the Middle East is going to have a seismic impact on our holiday habits.

“Reports of travellers stranded in the UAE and across the globe will certainly prompt those looking to travel long haul to look at alternative ways to fly – with direct flights to places like Thailand, the Maldives and Japan sure to be very popular.

“Closer to home, the situation will sadly likely impact destinations like Turkey, Egypt, Cyprus and possibly even Greece.

“And with soaring fuel costs, tour operators will be looking to price alternative destinations competitively. 

“But there are other options – our traditional resorts in places like Spain and Portugal are good, safe bets.

“Comparison giant TravelSupermarket has crunched the numbers for this summer and declared Spain’s Costa Calida one of the best-value destinations for this summer. 

“Dubbed the ‘warm coast’, this region stretching along the south eastern region of Murcia is one of Spain’s most underrated coastlines with 150miles of beaches, crystal clear waters and the unique Mar Menor lagoon, Europe’s largest saltwater lake.

“Also worth exploring arethe likes of Montenegro, Albania and even North Macedonia for cheaper hotel and restaurant costs as well as traditional favourite Bulgaria.

Both countries have not been affected by the Iran crisis and the tourist resorts remain safe to travel to.

Long haul holiday destinations are likely to see a spike in prices too, as Brits try to avoid booking connecting flights that go via Dubai, Doha and Abu Dhabi.

Some popular countries include Thailand, Vietnam, the Maldives and Bali, all of which usually fly via the Middle East.

There are alternative stopover destinations, usually via Turkey, Singapore or Hong Kong – but the soaring demand is likely to see these cost more this year too.

And with longer flight times? More jet fuel, so even more costs being passed on.

Here are five lesser visited coastal resorts to visit this year.

And here is another lesser known European city that is a bargain weekend trip.

The United States and Israel’s war on Iran has caused the largest energy supply shock in decades.

The Strait of Hormuz is in effect closed, and attacks are being carried out on energy facilities in the Middle East, rattling oil markets.

From Americans filling their tanks at the pump to European factories and Asian economies, the impact is already being felt.

US President Donald Trump says the rise in oil prices is a “very small price to pay” for “safety and peace”. But investors warn that if the conflict drags on, there’s danger of stagflation.

EU economy and finance ministers are gathering in Brussels on Monday and Tuesday to discuss how to respond to surging energy prices and anticipated inflation amid the ongoing strikes and counter-strikes in the Middle East.

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“We are ready to take necessary and coordinated steps in order to stabilise markets, such as strategic stockpiling,” French Economy Minister Roland Lescure told journalists on Monday after chairing a meeting of G7 finance ministers.

Asked whether G7 finance ministers had agreed on releasing the system’s strategic stockpile, Lescure said: “We are not there yet.”

“What we’ve agreed upon is to use any necessary tools to stabilise the market, including the potential release of necessary stockpiles. The work is going to keep being done in the next couple of days”, the French minister said.

German Vice-Chancellor Lars Klingbeil said on Monday that his country is open to unlocking the oil reserve, but that “this is not the right time”.

The International Energy Agency’s member countries currently hold over 1.2 billion barrels of public emergency oil stocks, with a further 600 million barrels of industry stocks held under government obligation.

Oil prices have rocketed since the Israeli and US attacks on Iran on 28 February, which killed some 40 Iranian leaders, including the country’s supreme leader, Ayatollah Ali Khamenei. The conflict has now expanded into other countries in the region, including Lebanon and Gulf countries, with retaliatory attacks by Iran hitting civilian energy facilities and US bases.

Mojtaba Khamenei, the former Ayatollah’s son, was elected as successor on Monday, providing continuity in leadership for the current regime.

The price for a barrel of Brent crude, the international benchmark, surged to $119.50 early on Monday, but later traded around $107.80 after the Financial Times indicated that the use of reserve oil to respond to the crisis was on the table.

Leading European stock market indexes started the week with a big sell-off, following a major drop across Asian markets and surging oil prices.

The war is showing no sign of de-escalation. On 4 March, Qatar announced the suspension of its LNG production; then, over the weekend, Israel struck Iranian energy infrastructure while passage through the critical Strait of Hormuz remained suspended.

Energy prices in Europe will be affected, and inflation is likely to rise in the coming months. However, some EU diplomats and the European Commission indicates that the current situation presents significant differences from the energy crisis Europe experienced when the war in Ukraine started in February 2022.

“Thanks to the decisive actions we have taken over the past years, Europe’s energy system is better prepared and way more resilient today. Our energy sources are more diverse and cleaner. Our coordination is stronger,” European Commissioner for Energy Dan Jorgensen wrote on X on 6 March.

He called on the bloc to double down on the energy transition and continue to expand clean and homegrown renewable energy and energy efficiency efficients, all while modernising Europe’s energy infrastructure.

Spanish Economy Minister Carlos Cuerpo told journalists on Monday that the EU should take inspiration from the response to the 2022 crisis as it formulates its response to the war.

A different crisis?

This crisis is also structurally different from the one that exploded in 2022, an EU government official told Euronews.

When Russia’s full-scale invasion of Ukraine began, Europe needed an “infrastructure reset” with a new portfolio of suppliers, the official said – whereas in the current case, “the release of reserves and re-opening of routes could see prices going down faster”.

However, the situation remains extremely volatile, as it is highly dependent on when the Strait of Hormuz will reopen and when production will resume in top LNG-exporting countries.

Discussions on Monday and Tuesday among EU ministers are expected to touch upon energy prices with the European Commission, while euro-area ministers are set to discuss with the European Central Bank how the war could impact inflation and the overall macroeconomic outlook.

While EU ministers are not expecting to put forward a common strategy on the table by the end of the meetings, the EU institutions will present an update of the situation. Most of the member states will likely present their remarks based on their national assessment of the war’s impact, an EU diplomat told Euronews.

Maria Tadeo contributed reporting.

WASHINGTON — President Trump promised that 2026 would be a bumper year for economic growth, but instead it has kicked off with job losses, rising gasoline prices and more uncertainty about America’s future.

In his State of the Union address less than two weeks ago, the Republican president confidently told the country: “The roaring economy is roaring like never before.” The latest batch of data on jobs, pump prices and the stock market suggests that Trump’s roar has started to sound far more like a whimper.

There is a gap between the boom that Trump has predicted and the volatile results he has produced — one that could set the tone in this year’s midterm elections as he tries to defend his party’s majorities in the House and Senate. With Trump’s tariffs uncertainty ongoing, the war in Iran has suddenly created inflationary concerns regarding oil and natural gas.

The White House says it is still early in the year and stronger growth is coming.

No signs of a jobs boom

“WOW! The Golden Age of America is upon us!!!” Trump posted on social media Feb. 11 after the monthly jobs report showed gains of 130,000 jobs in January.

Since then, the job market has evaporated in worrisome ways.

Friday’s employment report showed job losses of 92,000 in February. The January and December figures were revised downward, with December swinging to a loss of 17,000 jobs. Monthly data can be rocky, but a trend has emerged that shows an enduring weakness. Without the healthcare sector, the economy would have shed roughly 202,000 jobs since Trump became president in January 2025. His administration notes construction job gains outside of the housing sector, which it says point to future hiring growth.

Trump often claims that jobs are going to people born in the United States, rather than to immigrants. But the latest report punctured some of that argument.

The unemployment rate for people born in the U.S. has climbed over the last 12 months to 4.7% from 4.4%. This means a greater share of the people who Trump said would get jobs because of his immigration crackdown are, in fact, searching for work.

Prices at the pump are going up

“Slashing energy costs is among the most important actions we can take to bring down prices for American consumers,” Trump said in a February speech in Texas just before the U.S. and Israel attacked Iran. “Because when you cut the cost of energy, you really cut — you just cut the cost of everything.”

The president has repeatedly told Americans that keeping gas costs low would be key to defeating inflation. He has talked up the decline, citing figures that were far below the national average to persuade the public that driving was getting cheaper.

But the strikes against Iran that began Feb. 28 have, for the moment, crushed that narrative. Prices at the pump have jumped 19% over the last month to a national average of $3.45, according to AAA. The investment bank Goldman Sachs warned in an analyst note that, if higher oil prices persist, inflation could rise from its 2.4% reading in January to 3% by the end of the year.

The administration is banking on plans to contain any energy price increases, essentially betting that either the conflict will end shortly or the administration can succeed in getting more tankers through the Strait of Hormuz. Trump advisors on Sunday sought to assure anxious Americans that surging fuel prices are a short-term problem.

“We never know exactly the timeframe of this,” Energy Secretary Chris Wright said on CNN’s “State of the Union. “But in the worst case, this is a weeks, this is not a months thing.”

Stocks are off their highs

“You know, we set the all-time record in history with the Dow going to 50,000,” Trump said Thursday at the White House.

This frequently repeated talking point has grown stale. The Dow Jones industrial average, one of Trump’s preferred measures of success, has dropped 5% over the last month. Stocks are up during his presidency, just as they were when Democrat Joe Biden was president. The recent decline could be reversed if the war with Iran ends and companies see solid profits over the next year and beyond. The recent dip, however, should be a warning sign as the administration has stressed the importance of more people investing in the stock market through vehicles such as “Trump accounts” for children.

The stock market has become a barometer of how people feel about the economy, with stock investors tending to have more confidence and those without money in the markets being more pessimistic.

Joanna Hsu, the director of the University of Michigan’s surveys of consumers, noted that in February a “sizable” increase in sentiment among people owning stocks “was fully offset by a decline among consumers without stock holdings.”

Productivity is up, but workers aren’t benefiting

Trump can point to a win in that the economy has become more productive — generating more value for each hour of work. That is a positive sign for long-term growth in the U.S. and a reflection of its strong tech sector.

Business sector labor productivity climbed 2.8% in the fourth quarter of last year, the Labor Department reported Thursday. But the challenge is that the gains might not be spread to workers in the form of higher pay as labor’s share of income last year fell to the lowest level on record, noted Mike Konczal, senior director of policy and research at the Economic Security Project, a nonprofit aligned with liberal economic issues.

Economy grew at a faster pace under Biden

“Under the Biden administration, America was plagued by the nightmare of stagflation, meaning low growth and high inflation — a recipe for misery, failure and decline,” Trump said at the World Economic Forum in Davos, Switzerland, in January.

The scoreboard tells a far different story, one that makes Biden’s track record in 2024 look better than Trump’s performance last year. The U.S. economy grew at a 2.8% pace during Biden’s last year, compared with 2.2% under Trump in 2025.

As for inflation, the primary measure used by the Federal Reserve is the personal consumption expenditures price index. It was 2.6% in both 2024 and 2025.

Trump has staked his economic argument on doing better than Biden. But while he has avoided the inflation spikes that haunted Biden’s presidency — amid the height of the COVID-19 pandemic — Trump has not delivered stronger growth or more hiring.

Boak writes for the Associated Press.

March 6 (Asia Today) — South Korea’s consumer prices rose 2.0% in February from a year earlier, extending a six-month run of inflation at or above 2% as officials warned that rising oil prices linked to Middle East tensions could add fresh upward pressure in coming weeks.

The consumer price index stood at 118.40 in February, government data showed Thursday. The annual increase matched January’s rate and met the government’s inflation target, but the February figures did not yet fully reflect the late-month jump in global oil prices after the regional conflict intensified.

Service prices helped drive the increase. Personal services rose 3.5%, the sharpest gain in more than two years, while agricultural, livestock and fishery products rose 1.7%. Livestock prices climbed 6.0%, and the living-cost index, which tracks frequently purchased items, rose 1.8%.

Petroleum prices fell 2.4% from a year earlier, helping contain headline inflation in February. Officials said that decline was tied to earlier movements in international crude prices and that the latest Middle East shock had not yet been reflected in the monthly data.

Government officials said Lunar New Year holiday demand also pushed up prices for travel, lodging and livestock products.

The outlook has become more uncertain since the end of February. Nationwide gasoline prices moved above 1,800 won ($1.35) a liter, while prices in Seoul topped 1,900 won ($1.43), according to local reports citing Opinet, the Korea National Oil Corporation’s fuel price system.

President Lee Jae-myung has ordered officials to prepare a fuel price ceiling system, and the government has said it could invoke legal authority to set temporary maximum prices if fuel costs rise sharply. The industry ministry has also issued an early-stage alert for crude oil and natural gas supply conditions.

Analysts say higher crude prices and a weaker won could lift inflation in the coming months. ING said it raised its 2026 South Korea inflation forecast from 2.0% to 2.2%, estimating the recent oil shock could add 0.2 to 0.4 percentage point to consumer prices.

— Reported by Asia Today; translated by UPI

© Asia Today. Unauthorized reproduction or redistribution prohibited.

Original Korean report: https://www.asiatoday.co.kr/kn/view.php?key=20260306010001666

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.