Tag Archives: United States

Russia warns UK and U.S. not to tempt fate in Black Sea

By Gabrielle Tétrault-Farber

MOSCOW (Reuters) -Russia warned Britain and the United States on Friday against “tempting fate” by sending warships to the Black Sea, and said it would defend its borders using all possible means including military force.

In a statement broadcast on state television, the Defense Ministry said it was ill-advised for British and U.S. vessels to approach the coast of Crimea, a peninsula Moscow annexed from Ukraine in 2014.

“We call on the Pentagon and the British navy, which are sending their warships into the Black Sea, not to tempt fate in vain,” Major General Igor Konashenkov, the ministry’s spokesperson, said.

HMS Defender, a British destroyer that sailed through waters off Crimea on Wednesday, was “not more than a target” for the Black Sea fleet’s defenses, he said.

Russia considers Crimea part of its territory, but the peninsula is internationally recognized as part of Ukraine.

Russia said on Wednesday it had fired warning shots and dropped bombs in the path of a British warship to chase it out of Black Sea waters off the coast of Crimea.

Britain rejected Russia’s account of the incident. It said it believed any shots fired were a pre-announced Russian “gunnery exercise”, and that no bombs had been dropped.

It confirmed HMS Defender had sailed through what it said were waters belonging to Ukraine.

The British embassy in Tbilisi, the capital of Georgian the South Caucasus, wrote on Twitter on Friday that HMS Defender was set to arrive in the port city of Batumi on the eastern coast of the Black Sea.

Deputy Foreign Minister Sergei Ryabkov said separately that Washington and London were sowing strife by failing to accept Crimea was part of Russia, and that Russia was ready to defend its borders using all means, including military force.

Moscow warned Britain on Thursday that it would bomb British naval vessels in the Black Sea if what it called provocative actions by the British navy were repeated off the Crimean coast.

Russia’s Defense Ministry said separately on Friday that it was beginning joint navy and air force exercises in the eastern Mediterranean, where Moscow operates an air base on Syria’s coast.

(Reporting by Anton Kolodyazhnyy, Alexander Marrow and Vladimir Soldatkin; Writing by Gabrielle Tétrault-Farber, Editing by Katya Golubkova, Timothy Heritage, William Maclean)

U.S. jobless claims dropping faster in states ending federal benefit

By Howard Schneider

WASHINGTON (Reuters) – Ongoing claims for U.S. unemployment insurance have dipped faster in recent weeks in states ending federal benefits this summer than in states keeping the $300 weekly supplement in place until the fall, according to government data through last week.

From the week ending May 1 through the week ending June 12, continuing claims for state unemployment benefits fell 17.8% in the 26 states ending benefits early, to 990,000, and by 12.6%, to 2.18 million, in the rest of the country, according to a Reuters analysis of weekly federal unemployment data.

The data do not yet answer the larger and arguably more important question of whether hiring will also accelerate in those states, the outcome an almost all-Republican group of governors says is the goal of cutting the benefits early.

Weekly data from small business time provider Homebase through the week ending June 20 in fact has shown no pickup in hiring in the states cancelling unemployment benefits. To the contrary the other states appear to have added jobs faster in recent weeks – a possible consequence of the fact that large Democratic-led states like California and New York have recently lifted most of the remaining restrictions put in place to fight the pandemic.

The states stopping benefits as a group have also pulled closer to their pre-pandemic levels of unemployment, suggesting less room for improvement.

The issue of how unemployment benefits are impacting the recovery of the U.S. job market has become a core concern among Federal Reserve and other policymakers as they try to determine how fast national employment might rebound to pre-pandemic levels, a judgment hard to make until the economy is fully reopened and benefit levels returned to normal.

Twelve states have already halted benefits in what has been a largely partisan split between Republican governors arguing that the pandemic emergency unemployment payments are now discouraging people from working, and Democratic governors who feel people still need support as the pandemic wanes.

The states stopping benefits early include the entire Deep South, where pandemic unemployment has fallen hard on the large Black population, but only one state, Louisiana, with a Democratic governor. Only two Republican-led states, Vermont and Massachusetts in the Northeast, plan to continue the payments until they end nationwide in September.

The data overall suggest “more downward momentum in initial and continuing claims over the next few weeks,” said Jefferies economist Thomas Simons. Sky-high unemployment claims have been a hallmark of the pandemic, topping 23 million at one point in the spring of 2020 as the coronavirus took hold, more than 10 times the level at the start of the year.

(Reporting by Howard Schneider; Editing by Andrea Ricci)

Russian security chief says Moscow will work with U.S. to find hackers

MOSCOW (Reuters) -Russia will work with the United States to track down cyber criminals, the head of the FSB security service said on Wednesday, a week after U.S. President Joe Biden and Russian President Vladimir Putin agreed to increase cooperation in certain areas.

“We will work together (on locating hackers) and hope for reciprocity,” the RIA news agency quoted FSB chief Alexander Bortnikov as saying at a security conference in Moscow.

Deputy Foreign Minister Sergei Ryabkov told an investor conference that Russia had been “able to establish a very thorough and down-to-earth exchange with the U.S. side” on cyber security.

Another senior ministry official said Moscow was awaiting an answer from Washington on starting consultations, TASS news agency reported.

Biden told Putin at the summit that certain critical infrastructure should be “off-limits” to cyber-attacks after hackers seeking ransom money triggered the brief closure of a major U.S. oil pipeline network.

Washington has said those responsible for some cyber-attacks in the United States have been working either directly for the Russian government or from Russian territory. The Kremlin has denied any state involvement.

Putin and Biden also agreed to embark on negotiations to lay the groundwork for arms control agreements and risk-reduction measures.

Defense Minister Sergei Shoigu said on Wednesday that Moscow had requested greater transparency about the deployment of missiles in Europe.

He said Putin had proposed measures such as a moratorium on the deployment of intermediate- and short-range missiles in Europe to build mutual trust. The Kremlin has accused NATO of dismissing the proposals.

“The overall situation in Europe is explosive, which requires concrete steps to de-escalate it,” Shoigu said. “We are ready to work towards this.”

Russia’s relations with the West are at post-Cold War lows, strained by issues ranging from Moscow’s 2014 annexation of Crimea from Ukraine to allegations of Russian hacking of U.S. elections.

(Reporting by Maria Kiselyova and Tom Balmforth; Writing by Olzhas Auyezov/Gabrielle Tétrault-Farber; Editing by Kevin Liffey)

What special relationship? Canada grimaces amid hail of U.S. trade blows

By David Ljunggren

OTTAWA (Reuters) – After Prime Minister Justin Trudeau held a cordial first meeting with U.S. President Joe Biden in February, marking an end to years of battles with the Trump administration, a relieved Canadian official said, “We feel we are off to the races here.”

But old trade disputes that flared up during the Trump years show no signs of fading.

Last month Washington announced plans to double duties on imports of Canadian lumber and requested a dispute panel on Canada’s dairy import quotas. Biden is also promising a Buy America procurement plan that could hurt Canadian exporters.

The timing is awkward for Trudeau ahead of a likely election later this year, especially since his ruling center-left Liberals have traditionally enjoyed better relationships with the Democrats than the opposition Conservative Party.

“Canada’s economic relationship with the United States is breaking down rapidly,” said Candice Bergen, deputy Conservative leader, noting that “for months the Liberals have been telling us how much they agree with the Americans.”

The Trump era was exhausting for Canada, which sends 75% of its goods exports to the United States. At one point Trump called Trudeau “dishonest and weak” and threatened to tear up the North American Free Trade Agreement unless it could be renegotiated.

But the new-found cordial atmosphere has not blunted a dispute over U.S. allegations Canada is unfairly limiting imports of dairy products. Another contentious issue is Canadian softwood lumber exports, which U.S. producers have long complained are unfairly subsidized.

On lumber, “the United States has not been willing to reach an agreement; We are,” Natural Resources Minister Seamus O’Regan tersely told legislators last month.

Signs of trouble emerged early. Within hours of taking power, Biden revoked the permit needed to build the Keystone XL oil pipeline, killing an $8 billion project that would have brought Canadian crude to U.S. markets.

Canadian officials now want the White House to help solve another energy challenge in Michigan, where the governor wants to close a pipeline operated by Canada’s Enbridge Inc. The Biden team has declined to intervene.

Yet despite the recent unhappiness, there are big differences between the two U.S. administrations, Canadian officials say.

Biden, unlike Trump, is not threatening to scrap continental free trade. He has also not imposed tariffs on Canadian aluminum and steel on national security grounds.

Canadian Foreign Minister Marc Garneau played down suggestions of a rift.

“We can’t eliminate all the different issues that are important for the Americans. We have to deal with them one by one,” he told a Montreal business audience this month. “There is always going to be a bit of back and forth between our two nations.”

In private, however, Canadian officials are even blunter.

“The idea the Biden administration is bad for us on trade is nonsense,” said one senior source with direct knowledge of government thinking. “The Canada-U.S. trading relationship is largely open and free flowing.”

Chris Sands, head of the Canada Institute at the Washington-based Wilson Center, said Ottawa had been too optimistic about the potential for cooperation.

“I do think expectations ran ahead of the likely way that the Biden administration would unfold… most people thought something different was going to emerge,” he told Reuters.

The headaches show no signs of easing. Last Friday, Canada requested a dispute settlement panel to address U.S. tariffs on Canadian solar products.

“These tariffs are unwarranted and damaging,” complained Trade Minister Mary Ng.

The U.S. Trade Representative’s office did not directly address questions about increasing tensions.

“We have a close relationship with Canada and routinely collaborate on a range of topics,” said spokesman Adam Hodge.

(Additional reporting by Steve Scherer in Ottawa and Nia Williams in Calgary; Editing by Steve Scherer and Dan Grebler)

North Korea warns U.S. misinterpreting signals risks disappointment

By Josh Smith

SEOUL (Reuters) -The sister of North Korean leader Kim Jong Un warned the United States on Tuesday not to seek comfort in comments by her brother as this would end in disappointment, while a U.S. envoy met South Korea’s president aiming to revive talks with North Korea.

Kim Yo Jong, who is also a senior official in North Korea’s ruling party, released a statement in state media saying the United States appeared to be interpreting signals from North Korea in the “wrong way.”

She was responding to U.S. national security adviser Jake Sullivan, who on Sunday said he saw as an “interesting signal” a recent speech by Kim Jong Un on preparing for both confrontation and diplomacy with the United States.

“It seems that the U.S. may interpret the situation in such a way as to seek a comfort for itself,” she said in the statement, carried by the North’s KCNA state news agency.

“The expectation, which they chose to harbor the wrong way, would plunge them into a greater disappointment.”

North Korea’s nuclear weapons program has been an intractable problem for Washington for years and in trying to change that, President Joe Biden’s administration conducted a review of policy and said it would seek “calibrated and practical” ways to persuade Pyongyang to denuclearize.

The U.S. special representative for North Korea, Sung Kim, has been visiting South Korea to meet senior officials, including President Moon Jae-in.

Moon told the U.S. envoy he would do his best to get inter-Korean and U.S.-North Korea relations back on track and expressed hopes for progress toward denuclearization and peace on the Korean peninsula, his spokeswoman Park Kyung-mee said.

Sung Kim reaffirmed Biden’s support for meaningful inter-Korean dialogue and engagement and said he would “do his best for resumption of U.S.-North Korea talks”, Park said.

On Monday, Sung Kim said he was willing to meet the North Koreans “anywhere, anytime without preconditions” and that he looks forward to a “positive response soon.”

A U.S. official in Washington told Reuters the United States was aware of Kim Yo Jong’s comments and added: “Ultimately, we hope (North Korea) will respond positively to our outreach.

“We will continue to wait to see if these comments are followed up with any more direct communications about a potential path forward.”

The official, who did not want to be otherwise identified, said U.S. policy was not aimed at hostility, but “at solutions and ultimately achieving the complete denuclearization of the Korean Peninsula.”

“The United States is prepared to engage in diplomacy towards that ultimate objective, while working on practical measures that can help make progress along the way.”

‘CLEVER MOVE’

In a sign seen in South Korea as a positive U.S. gesture, the allies discussed scrapping a joint “working group” that analysts say Seoul has seen as an irritant in relations.

Sung Kim and his South Korean counterpart Noh Kyu-duk agreed to “look into terminating the working group,” while reinforcing coordination at other levels, South Korea’s Foreign Ministry said.

The working group was set up in 2018 to help coordinate approaches to North Korea on issues such as denuclearization talks, humanitarian aid, sanctions enforcement and inter-Korean relations, amid a flurry of diplomatic engagement with Pyongyang at that time.

The Moon administration has made building ties with North Korea a top priority and a former aide to Moon told parliament last year the working group was seen as an obstacle to that.

“From a South Korean perspective, this was basically a mechanism for the U.S. to block inter-Korean projects during the Trump years,” said Ramon Pacheco Pardo, a Korea expert at King’s College London.

“It would be a clever political move for the Biden administration to end the group since consultation between Washington and Seoul will take place anyway.”

North Korea has rebuffed U.S. entreaties for diplomacy since Biden took over from Donald Trump, who had three summits with Kim, but failed to persuade him to give up his nuclear weapons.

(Reporting by Josh Smith; Additional reporting by Hyonhee Shin and Sangmi Cha in Seoul and David Brunnstrom in Washington; Editing by Michael Perry, Robert Birsel and Howard Goller)

Businesses fret as Canada extends ban on travel with U.S

By David Ljunggren

OTTAWA (Reuters) -Canada is extending a ban on non-essential travel with the United States and the rest of the world until July 21, Public Safety Minister Bill Blair said on Friday, prompting frustration from businesses worried about the economic damage.

Canada’s Liberal government is under increasing pressure from businesses and the tourism industry to ease the ban, which was first imposed in March 2020 to help contain spread of the coronavirus and has been renewed on a monthly basis ever since.

“In coordination with the U.S., we are extending restrictions on non-essential international travel and with the United States until July 21st, 2021,” Blair said on Twitter.

Ottawa will reveal on June 21 how it plans to start lifting the measures for fully vaccinated Canadians and others who are currently permitted to enter Canada, he added.

Although the ban does not affect trade in goods, it is hitting travel operators and the export of services.

The Canadian Chamber of Commerce – a national group that advocates for businesses – lamented what it said was Ottawa’s sluggishness, especially as around 75% of Canada’s population had already had at least one dose of a coronavirus vaccine.

“I’m disappointed … all of the science would say we should be moving ahead to reopen the border. We don’t even have a plan at this point,” said Perrin Beatty, the group’s president and chief executive.

“Unfortunately, Canada is the proverbial deer caught in the headlights … we are the world leader in terms of first shots and we are a world laggard when it comes to having a strategy,” he said in a phone interview.

The United States is Canada’s largest trading partner.

Health Minister Patty Hajdu last week said the federal government was preparing to lift quarantine protocols for citizens who had received their second dose of a vaccine.

The U.S. government has created working groups with both Mexico and Canada to discuss the restrictions. The groups held their initial meetings this week, sources told Reuters.

(Additional reporting by David Shepardson in Washington;Editing by Bill Berkrot and Paul Simao)

Five U.S. states had coronavirus infections even before first reported cases

By Mrinalika Roy

(Reuters) -At least seven people in five U.S. states were infected with the novel coronavirus weeks before those states reported their first cases, a large new government study showed, pointing to the presence of the virus in the country as early as December 2019.

Participants who reported antibodies against SARS-CoV-2 were likely exposed to the virus at least several weeks before their sample was taken, as the antibodies do not appear until about two weeks after a person has been infected, the researchers said.

The positive samples came from Illinois, Massachusetts, Mississippi, Pennsylvania and Wisconsin and were part of a study of more than 24,000 blood samples taken for a National Institutes of Health research program between Jan. 2 and March 18, 2020.

Of the seven samples, three were from Illinois, where the first confirmed coronavirus case was reported on Jan. 24, while the remaining four states had one case each. Samples from participants in Illinois were collected on Jan. 7 and Massachusetts on Jan. 8.

The data suggests that the coronavirus was circulating in U.S. states far from the initial hotspots and areas that were considered the virus’ points of entry into the country, the study noted.

The data also backs a Centers for Disease Control and Prevention study that suggested the virus may have been circulating in the United States well before the first COVID-19 case was diagnosed on Jan. 19, 2020.

“This study allows us to uncover more information about the beginning of the U.S. epidemic,” said Josh Denny, one of the authors of the study, which was published in the journal Clinical Infectious Diseases.

The United States has so far reported 33.6 million cases, according to a Reuters tally.

The infections were confirmed using two antibody tests, which were granted emergency use authorization by the U.S. Food & Drug Administration.

(Reporting by Mrinalika Roy in Bengaluru; Editing by Anil D’Silva)

Philippines again suspends scrapping of troop pact with U.S. amid China dispute

By Karen Lema and Idrees Ali

MANILA/WASHINGTON (Reuters) -The Philippines has again suspended a decision to scrap a crucial agreement governing the U.S. troop presence in the country, its foreign minister said on Monday, amid continuing maritime pressure from China.

The Pentagon welcomed the announcement from Manila – the third suspension of the decision covering the two-decade-old Visiting Forces Agreement (VFA) that had been due to expire in August – but analysts said there would be disappointment in both countries that it was not renewed.

Philippine Foreign Minister Teodoro Locsin said the suspension would be for a further six months while President Rodrigo Duterte “studies, and both sides further address his concerns regarding, particular aspects of the agreement.”

The Philippines is a U.S. treaty ally and several military agreements are dependent on the VFA, which provides rules for the rotation of thousands of U.S. troops in and out of the Philippines for war drills and exercises.

Having the ability to rotate in troops is important not only for the defense of the Philippines, but strategically for the United States when it comes to countering China’s increasingly assertive behavior in the region.

“The Department welcomes the government of the Philippines’ decision to again suspend termination of the Visiting Forces Agreement,” Pentagon spokesman John Kirby said in a statement.

“We value the Philippines as an equal, sovereign partner in our bilateral alliance. Our partnership contributes not only to the security of our two nations, but also strengthens the rules-based order that benefits all nations in the Indo-Pacific.”

MARITIME TENSIONS

Greg Poling, a maritime security expert at Washington’s Center for Strategic and International Studies, said there would be frustration in Washington and most of the Philippine government.

“It isn’t the worst possible scenario, obviously, but Philippine officials were really signaling that they were confident they had reached a deal Duterte would get on board with, and instead everyone has to remain in limbo for at least another six months,” he said.

Poling said he did not think there was any substantive issue holding up an agreement.

“It is now as simple as Duterte doesn’t seem to want it, but everyone else does. If he won’t reverse course but he also doesn’t want to waste political capital on an unpopular decision heading into election season, then kicking the can down the road is his preferred option.”

Duterte told Washington last year he was cancelling the deal amid outrage over a senator and ally being denied a U.S. visa, but he has repeatedly suspended the expiration date.

The latest suspension comes at a time of continued tensions between Manila and Beijing over disputed waters in the South China Sea and a U.S. announcement last week that the Philippines would be among countries that would receive millions of COVID-19 vaccines it is donating.

Ties between Washington and its former colony have been complicated by Duterte’s rise to power in 2016 and his frequent condemnation of U.S. foreign policy and embrace of China, which has nevertheless continued to pressure his country’s maritime boundaries.

Manila has repeatedly protested what it calls the “illegal” and “threatening” presence of hundreds of Chinese “maritime militia” vessels inside its exclusive economic zone.

Jose Manuel Romualdez, Manila’s ambassador to Washington, told Reuters this month the VFA had been revamped to make it “acceptable” and “mutually beneficial” to both countries.

Manila has in the past been unhappy about issues such as a lack of jurisdiction over U.S. personnel who commit crimes in the Philippines and environmental damage during maritime drills.

(Reporting by Karen Lema in Manila; additional reporting by Idrees Ali and David Brunnstrom in Washington; Editing by Nick Macfie and Alex Richardson)

U.S. COVID-19 deaths cross painful 600,000 milestone as country reopens

By Sharon Bernstein

(Reuters) – The United States has now lost over 600,000 mothers, fathers, children, siblings and friends to COVID-19, a painful reminder that death, sickness and grief continue even as the country begins to return to something resembling pre-pandemic normal.

A bride forced by the pandemic to have a Zoom wedding is planning a lavish in-person anniversary celebration this summer, but all of the guests must attest they are vaccinated.

A Houston artist, still deep in grief, is working on a collage of images of people who died in her community. Others crowd theaters and bars, saying it is time to move on.

“There will be no tears – not even happy tears,” said Ali Whitman, who will celebrate her first wedding anniversary in August by donning her gown and partying with 240 vaccinated friends and family members in New Hampshire.

COVID-19 nearly killed her mother. She spent her wedding day last year with 13 people in person while an aunt conducted the ceremony via Zoom.

“I would be remiss not to address how awful and how terrible the past year has been, but also the gratitude that I can be in a singular place with all the people in my life who mean so much to me,” said Whitman, 30.

The United States passed 600,000 COVID-19 deaths on Monday, about 15% of the world’s total coronavirus fatalities of around 4 million, a Reuters tally shows.

The rate of severe illness and death has dropped dramatically as more Americans have become vaccinated, creating something of a psychological whiplash that plagues the millions whose lives have been touched by the disease. Many are eager to emerge from more than a year of sickness and lockdown, yet they still suffer – from grief, lingering symptoms, economic trauma or the isolation of lockdown.

“We’ve all lived through this awful time, and all of us have been affected one way or another,” said Erika Stein, who has suffered from migraines, fatigue and cognitive issues since contracting COVID-19 last fall. “My world flipped upside down in the last year and a half – and that’s been hard.”

Stein, 34, was active and fit, working as a marketing executive and fitness instructor in Virginia outside Washington, D.C., before the initial illness and related syndrome known as long-COVID ravaged her life.

Like many, she has mixed feelings about how quickly cities and states have moved to lift pandemic restrictions and re-open.

‘FOR MY FAMILY, THERE IS NO NORMAL’

In New York, social worker Shyvonne Noboa still cries talking about the disease that ravaged her family, infecting 14 out of 17 relatives and killing her beloved grandfather, who died alone in a hospital where they could not visit him.

She breaks down when she goes to Target and sees the well-stocked aisles, recalling the pandemic’s depths, when she could not find hand sanitizer to protect her family.

“New York City is going back to quote-unquote ‘normal’ and opening up, but I can assure you that for my family there is no normal,” said Noboa, who lives in Queens, an early epicenter of the U.S. outbreak. She is vaccinated but still wears a mask when she is out, and plans to continue doing so in the near future.

In Houston, artist Joni Zavitsanos started looking up obituaries of people in Southeast Texas who had died in the pandemic’s early days, reading their stories and creating mixed-media memorials displaying their names and photographs. Around each person she painted a halo using gold leaf, an homage to the Byzantine art of the Greek Orthodox church she attends.

Zavitsanos has now created about 575 images, and plans to keep going, making as many as she can, each portrait on an eight-by-eight-inch piece of wood to be mounted together to form an installation. Her brother and three adult children contracted COVID-19 and recovered. A very close friend nearly died and is still struggling with rehabilitation.

Chris Kocher, who founded the support and advocacy group COVID Survivors for Change, urged sympathy and support for people who are still grieving.

“We’re being given this false choice where you can open up and celebrate, or you need to be locked down in grief,” he said. “Let’s be thankful that people are getting vaccinated, but let’s also acknowledge that going back to normal is not an option for millions of Americans.”

One way to acknowledge the toll that COVID-19 has taken is to incorporate the color yellow into celebrations and gatherings, or display a yellow heart, which for some has become a symbol of those lost to the disease, he said.

The bittersweet mix of grief at the pandemic’s toll with relief brought by its ebb was clear at Chicago’s O’Hare airport on Thursday, where Stephanie Aviles and her family waited for a cousin to arrive from Puerto Rico.

Aviles, 23, lost two close friends to the virus, and her father nearly died. And yet, here she was, greeting family she had not been able to see for 15 months as the pandemic raged.

“I’m grateful, but it’s a lot,” she said. “It’s a strange feeling to be normal again.”

(Reporting by Sharon Bernstein; Additional reporting by Brendan O’Brien; Editing by Bill Berkrot)

U.S. inflation will accelerate if recovery stays on track: Kemp

By John Kemp

LONDON (Reuters) – U.S. consumer prices are rising at the fastest rate for several years, as the economy recovers from the coronavirus recession and manufacturing supply chains struggle to keep up with demand.

But the rate of inflation is still being flattered by the relatively modest increase in energy prices, masking the impact of faster increases in food products and other commodities.

If energy prices rise further in the second half of 2021 and into 2022, as the expansion matures, inflation could prove more persistent than anticipated by officials at the Federal Reserve.

The U.S. consumer price index has increased at a compound annual rate of 2.55% over the last two years, the fastest for more than eight years, according to data from the U.S. Bureau of Labor Statistics.

But energy prices have risen at an average rate of only 2.20% over the same period, which uses 2019 rather than 2020 as a baseline to avoid distorted comparisons caused by the first wave of the epidemic last year.

Prices for non-energy items have increased at a rate of 2.59%, the fastest for more than 12 years since the financial crisis of 2008/09.

Inflation has accelerated most sharply in the goods sector, where manufacturers have struggled to meet the surge in demand, especially for motor vehicles and consumer electronics.

As a result, prices for merchandise other than food and energy are increasing at the fastest rate since the early 1990s.

INFLATION OUTLOOK

U.S. central bank officials have said they believe the acceleration will prove temporary, with price increases slowing in 2022 and 2023.

But inflationary pressures normally intensify as a business cycle becomes longer and more capacity constraints emerge.

It would be unusual for inflation to slow as employment rises, manufacturing capacity becomes more fully utilized and service sector output increases.

The relationship between inflation and the business cycle is often obscured because the cycle is presented as if it exists in only two states: recession and expansion.

The two-state model is a simplification. In fact, the rate of growth is highly variable; recessions are only the most pronounced slowdowns.

The long boom between 1991 and 2001 was almost derailed by a sharp mid-cycle slowdown in 1998/99 caused by the East Asia financial crisis, Russian debt default and failure of the Long-Term Capital Management hedge fund.

The expansion between 2001 and 2007 lost momentum in its early stages and threatened to stall in 2002/2003, prompting the Federal Reserve to cut interest rates again to try to entrench the recovery.

During the expansion of 2009 to 2020, a similar early-recovery stall occurred between 2010 and 2012, prompting the Fed to launch further rounds of bond buying.

Later in the same expansion, there was an even more serious mid-cycle slowdown (in effect an undeclared recession) in 2015/16, which contributed to the populist revolt and election of Donald Trump as U.S. president.

Experience suggests inflationary pressures are only likely to abate if the recovery threatens to stall or enters a mid-cycle slowdown.

If the U.S. economy avoids both in 2022/23, inflation will accelerate further and necessitate a tightening of monetary policy earlier than the central bank has indicated.

(Editing by Catherine Evans)