The Week in Business: The 10th Straight Rate Increase

In the wake of another bank failure and signs of slowdown in the economy, the Federal Reserve raised its benchmark rate a quarter point. It was the third consecutive increase of that size and the 10th straight rate increase since last March. The central bank’s move last week increased rates to a range of between 5 and 5.25 percent, a level not seen since the summer of 2007. In announcing the decision, Fed officials left the door open to a possible pause in the streak of aggressive rate increases at their next meeting. But later at a news conference, Jerome H. Powell, the Fed chair, made it clear that the door was open only a crack: Additional moves, he said, “may” be appropriate. Even this somewhat mild rhetoric represents a significant shift in the Fed’s stance. For months, it has been a question of how much, not if, the central bank would raise rates.

JPMorgan Chase, the nation’s biggest bank, took ownership of First Republic Bank last week, after the Federal Deposit Insurance Corporation seized First Republic to rescue it from a free fall, and to contain a wider banking crisis. First Republic, a midsize bank based in San Francisco, received a $30 billion lifeline from 11 of the largest U.S. banks in March, shortly after the collapse of Silicon Valley Bank and Signature Bank touched off panic across the banking sector. But that cash infusion just held off the inevitable: First Republic announced late last month that it had lost an eye-popping $102 billion in customer deposits. In taking over First Republic, Jamie Dimon, chief executive of JPMorgan, is reprising a role he played during the 2008 financial crisis, when he acquired Bear Stearns and Washington Mutual at federal regulators’ behest. JPMorgan said on Monday that it expected its latest acquisition to raise profits this year by $500 million.

After slowing significantly in the first quarter of the year, the number of jobs added in April unexpectedly picked up, blowing well past analysts’ predictions. According to the latest report from the Labor Department on Friday, employers added 235,000 jobs last month; analysts had forecast 170,000. The resilience of the labor market has confounded officials at the Fed, whose campaign of raising interest rates to tame inflation and cool the economy should have had more of an effect on jobs by now. In other bad news for the Fed, wage growth — used by central bankers as an indicator of inflation’s staying power — climbed by 4.4 percent in the year through April.

President Biden is expected to meet with congressional leaders on Tuesday to discuss raising the debt limit, which the United States technically hit in January, though the Treasury Department has been using accounting maneuvers to keep the government paying its bills. Last week, Treasury Secretary Janet Yellen said the country could run out of money as soon as June 1. This encroaching deadline presents a tricky political problem for Mr. Biden. Republicans are trying to extract concessions from Mr. Biden that would significantly undermine his agenda. Mr. Biden has a few options at his disposal. He could refuse to negotiate. He could negotiate spending cuts but divorce those discussions from the debt limit. Or he could try to win over a handful of moderate Republicans to raise the limit. There is one other possible option: a constitutional challenge to the debt limit, a long-shot plan that would rely on a clause in the 14th Amendment.