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When Federal Reserve officials last met in late January, things looked pretty good: Hiring was solid. The economy had just grown at a solid pace in last year’s final quarter. And inflation, while stubborn, had fallen sharply from its peak more than two years ago.What a difference seven weeks makes.As the Fed prepares to meet Tuesday and Wednesday, the central bank and its chair, Jerome Powell, are potentially headed to a much tougher spot. Inflation improved last month but is still high and tariffs could push it higher. At the same time, ongoing tariff threats as well as sharp cuts to government spending and jobs have tanked consumer and business confidence, which could weigh on the economy and even push up unemployment.The toxic combination of still-high inflation and a weak or stagnant economy is often referred to as “stagflation,” a term that haunts central bankers. It is what bedeviled the United States in the 1970s, when even deep recessions didn’t kill inflation.Stagflation, should it emerge, is hard for the Fed because typically policymakers would lift ratesor keep them highto combat inflation. Yet if unemployment also rises, the Fed would usually cut rates to reduce borrowing costs and lift growth.It’s not yet clear the economy will sink into stagflation. For now, like businesses and consumers, the Fed is grappling with a huge amount of uncertainty surrounding the economic outlook. But even a mild versionwith the unemployment rising from its current low level of 4.1%, while inflation stayed stuck above the Fed’s 2% targetwould pose a challenge for the central bank.“That’s the tangled web they’re in,” said Esther George, former president of the Federal Reserve’s Kansas City branch. “You have inflation stickiness on the one hand. At the same time, you’re trying to look at what impact could this have on the job market, if growth begins to pull back. So it is a tough scenario for them for sure.”Fed officials will almost certainly keep their key rate unchanged at their meeting this week. Once the meeting concludes Wednesday, they will release their latest quarterly economic projections, which will likely show they expect to cut their rate twice this yearthe same as they projected in December.The Fed implemented three cuts last year and then signaled at the January meeting that they were largely on pause until the economic outlook becomes clearer.Wall Street investors expect three rate reductions this year, in June, September, and December, according to futures prices tracked by CME Fedwatch, in part because they worry an economic slowdown will force more reductions.One development likely to unnerve Fed officials is the sharp jump in inflation expectations this month in the University of Michigan’s consumer sentiment survey. It showed the biggest increase in long-term inflation expectations since 1993.Such expectationswhich basically measure whether Americans are worried inflation will get worseare important because they can become self-fulfilling. If businesses and consumers expect higher costs, they may take steps that push up inflation, like demanding higher wages, which in turn can force companies to raise prices to offset higher labor costs.Some economists caution that the University of Michigan’s survey is preliminary and for now based on only about 400 responses. (The final version to be released later this month typically includes about 800.) And financial market measures of inflation expectations, based on bond prices, have actually declined in recent weeks.The most recent inflation readings have been mixed. The consumer price index dropped last week for the first time in five months to 2.8% from 3%, an encouraging change. But the Fed’s preferred price gauge, to be released later this month, is likely to be unchanged.The jump in inflation expectations is also a problem for the Fed because officials, including Powell, have said they are willing to let inflation gradually return to their 2% target in 2027, because expectations have generally been low. If other measures show inflation worries rising, the Fed could come under more pressure to get inflation down more quickly.“I do worry when I see consumer expectations moving in the opposite direction,” George said. “I think you just have to keep an eye on that.”The last time President Donald Trump imposed tariffsin 2018 and 2019overall inflation didn’t rise by much, in part because they weren’t nearly as broad as what he is currently proposing and some duties, such as those on steel and aluminum, were watered down with loopholes. Now that Americans have lived through a painful inflationary episode, they are likely to be more skittish about rising prices.Powell referred such concerns in remarks earlier this month. He said tariffs could just have a one-time impact on prices without causing ongoing inflation. But that could change “if it turns into a series” of tariff hikes, he said March 7, or “if the increases are larger, that would matter.”“What really does matter is what is happening with long-term inflation expectations,” Powell added.A week after his comments, those expectations shot higher in the University of Michigan survey.Christopher Rugaber, AP Economics Writer
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E-Commerce
In what could be one of the most high-profile fintech public offerings this year, Swedish Buy Now, Pay Later (BNPL) giant Klarna has filed paperwork with the U.S. Securities and Exchange Commission (SEC) relating to an initial proposed public offering. Heres what you need to know about Klarnas IPO. Whats happened? On March 14, Klarna Group plc announced that it had filed paperwork with the SEC relating to a proposed initial public offering of its ordinary shares. The paperwork is known as a registration statement on Form F-1 and is the latest sign that Klarnas IPO is coming sooner rather than later. It includes a preliminary prospectus that offers a detailed look into the company’s financial performance and potential risk factors. What is Klarna? Klarna is a fintech company based in Sweden. Though it has its fingers in several aspects of fintech, the company is best known for its Buy Now, Pay Later (BNPL) services. BNPL allows consumers to purchase an item today but pay for it in installmentsusually four spread over a number of months. Klarna says it has approximately 93 million active users and counts 675,000 merchants as partners across 26 countries as of 2024. The company says that in that same year, it helped facilitate $105 billion of gross merchandise volume. Klarna was originally founded as Kreditor in 2005, making the company 20 years old this year. Kreditor changed its name to Klarna in 2010. Interestingly, in its F-1 filing with the SEC, Klarna revealed it had remained a profitable company for the first 14 years of its existence. But then, it decided to expand into the U.S. in 2019. In 2019, we strategically decided to expand our successful operating model into additional geographies, with a particular focus on the United States, and in the following three years expanded into 12 additional markets, the company wrote. While our expansion in the United States has contributed to an increase in our GMV, it has also led to net losses in recent periods. In 2023, our operating loss started to decline and we began generating positive Transaction margin dollars in the United States, while continuing to grow our GMV and the number of active Klarna consumers and merchants worldwide. When is Klarnas IPO date? Klarna has not set an IPO date yet. There are still several steps it needs to go through before it can hold its actual IPO. The company had previously filed IPO paperwork confidentially with the SEC in November. What is Klarnas stock ticker? That is one of the few firm details we do know about Klarnas future IPO. Klarna stock will trade under the ticker KLAR. What stock exchange will Klarna trade on? Klarna intends to trade its shares on the New York Stock Exchange (NYSE). How much will Klarna seek to raise in its IPO? Klarna Hasnt officially announced that yet. However, Bloomberg reports that the Swedish company is seeking to raise at least $1 billion USD. What is Klarnas valuation? If the company raises around $1 billion in its IPO, Bloomberg says the companys valuation could be more than $15 billion.
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E-Commerce
The Trump administration has transferred hundreds of immigrants to El Salvador even as a federal judge issued an order temporarily barring the deportations under an 18th century wartime declaration targeting Venezuelan gang members, officials said Sunday. Flights were in the air at the time of the ruling.U.S. District Judge James E. Boasberg issued an order Saturday temporarily blocking the deportations, but lawyers told him there were already two planes with immigrants in the airone headed for El Salvador, the other for Honduras. Boasberg verbally ordered the planes be turned around, but they apparently were not and he did not include the directive in his written order.White House press secretary Karoline Leavitt, in a statement Sunday, responded to speculation about whether the administration was flouting court orders: “The administration did not ‘refuse to comply’ with a court order. The order, which had no lawful basis, was issued after terrorist TdA aliens had already been removed from U.S. territory.”The acronym refers to the Tren de Aragua gang, which Trump targeted in his unusual proclamation that was released Saturday.In a court filing Sunday, the Department of Justice, which has appealed Boasberg’s decision, said it would not use the Trump proclamation he blocked for further deportations if his decision is not overturned.Trump sidestepped a question over whether his administration violated a court order while speaking to reporters aboard Air Force One on Sunday evening.“I don’t know. You have to speak to the lawyers about that,” he said, although he defended the deportations. “I can tell you this. These were bad people.”Asked about invoking presidential powers used in times of war, Trump said, “This is a time of war,” describing the influx of criminal migrants as “an invasion.”Trump’s allies were gleeful over the results.“Oopsie . . . Too late,” Salvadoran President Nayib Bukele, who agreed to house about 300 immigrants for a year at a cost of $6 million in his country’s prisons, wrote on the social media site X above an article about Boasberg’s ruling. That post was recirculated by White House communications director Steven Cheung.Secretary of State Marco Rubio, who negotiated an earlier deal with Bukele to house immigrants, posted on the site: “We sent over 250 alien enemy members of Tren de Aragua which El Salvador has agreed to hold in their very good jails at a fair price that will also save our taxpayer dollars.”Steve Vladeck, a professor at the Georgetown University Law Center, said that Boasberg’s verbal directive to turn around the planes was not technically part of his final order but that the Trump administration clearly violated the “spirit” of it.“This just incentivizes future courts to be hyper specific in their orders and not give the government any wiggle room,” Vladeck said.The immigrants were deported after Trump’s declaration of the Alien Enemies Act of 1798, which has been used only three times in U.S. history.The law, invoked during the War of 1812 and World Wars I and II, requires a president to declare the United States is at war, giving him extraordinary powers to detain or remove foreigners who otherwise would have protections under immigration or criminal laws. It was last used to justify the detention of Japanese-American civilians during World War II.Venezuela’s government in a statement Sunday rejected the use of Trump’s declaration of the law, characterizing it as evocative of “the darkest episodes in human history, from slavery to the horror of the Nazi concentration camps.”Tren de Aragua originated in an infamously lawless prison in the central state of Aragua and accompanied an exodus of millions of Venezuelans, the overwhelming majority of whom were seeking better living conditions after their nation’s economy came undone during the past decade. Trump seized on the gang during his campaign to paint misleading pictures of communities that he contended were “taken over” by what were actually a handful of lawbreakers.The Trump administration has not identified the immigrants deported, provided any evidence they are in fact members of Tren de Aragua or that they committed any crimes in the United States. It also sent two top members of the Salvadoran MS-13 gang to El Salvador who had been arrested in the United States.Video released by El Salvador’s government Sunday showed men exiting airplanes onto an airport tarmac lined by officers in riot gear. The men, who had their hands and ankles shackled, struggled to walk as officers pushed their heads down to have them bend down at the waist.The video also showed the men being transported to prison in a large convoy of buses guarded by police and military vehicles and at least one helicopter. The men were shown kneeling on the ground as their heads were shaved before they changed into the prison’s all-white uniformknee-length shorts, T-shirt, socks, and rubber clogsand placed in cells.The immigrants were taken to the notorious CECOT facility, the centerpiece of Bukele’s push to pacify his once violence-wracked country through tough police measures and limits on basic rights.The Trump administration said the president actually signed the proclamation contending Tren de Aragua was invading the United States on Friday night but didn’t announce it until Saturday afternoon. Immigration lawyers said that, late Friday, they noticed Venezuelans who otherwise couldn’t be deported under immigration law being moved to Texas for deportation flights. They began to file lawsuits to halt the transfers.“Basically any Venezuelan citizen in the US may be removed on pretext of belonging to Tren de Aragua, with no chance at defense,” Adam Isacson of the Washington Office for Latin America, a human rights group, warned on X.The litigation that led to the hold on deportations was filed on behalf of five Venezuelans held in Texas who lawyers said were concerned they’d be falsely accused of being members of the gang. Once the act is invoked, they warned, Trump could simply declare anyone a Tren de Aragua member and remove them from the country.Boasberg barred those Venezuelans’ deportations Saturday morning when the suit was filed, but only broadened it to all people in federal custody who could be targeted by the act after his afternoon hearing. He noted that the law has never before been used outside of a congressionally declared war and that plaintiffs may successfully argue Trump exceeded his legal authority in invoking it.The bar on deportations stands for up to 14 days and the immigrants will remain in federal custody during that time. Boasberg has scheduled a hearing Friday to hear additional arguments in the case.He said he had to act because the immigrants whose deportations may actually violate the U.S. Constitution deserved a chance to have their pleas heard in court.“Once they’re out of the country,” Boasberg said, “there’s little I could do.” Cano reported from Caracas, Venezuela. Nicholas Riccardi and Regina Garcia Cano, Associated Press
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E-Commerce
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