(NEW YORK) — PepsiCo Inc. is recalling hundreds of Starbucks espresso bottles that were sold in a handful of states due to possible contamination of metal particles, the U.S. Food and Drug Administration announced.
The agency said 221 cases of Starbucks Vanilla Espresso Triple Shot, 15 ounces, that were sold in Arkansas, Arizona, Florida, Illinois, Indiana, Oklahoma and Texas are affected. Each case has 12 bottles.
Consumers who have purchased the recalled product are urged to stop consuming the product and return it to the place of purchase.
The recall was initiated on Aug. 15 but posted by the FDA on Sept. 8.
(NEW YORK) — A hotter-than-expected inflation report on Tuesday sent the stock market tumbling.
The Dow Jones Industrial Average fell more than 1,200 points, which amounted to a nearly 4% drop, making it the index’s worst day since June 2020. Meanwhile, the S&P 500 — the index to which many 401(k)s are pegged — dropped more than 4%, its worst day of 2022. The tech-heavy Nasdaq plummeted more than 5%.
Inflation data released on Tuesday revealed that prices rose slightly in August, worsening the cost woes for U.S. households as the Federal Reserve readies to decide on another interest rate hike next week.
The data calls into question whether inflation has peaked.
On a monthly basis, the consumer price index rose 0.1% in August, inching upward from the flat month-to-month movement in July, according to the Bureau of Labor Statistics.
The consumer price index, or CPI, rose 8.3% over the past year in August, a slight slowdown from 8.5% in July, according to the bureau.
The CPI continued to show one major bright spot: gasoline prices. The cost of gas continued to fall significantly, dropping 10.6% in August.
Prices rose broadly outside of the energy sector. Food prices rose 0.8% on a monthly basis, slowing from their monthly increase in July but remaining highly elevated.
Measures of the consumer prices for shelter, new vehicles and apparel all rose at a faster rate in August than they had over the month prior.
The data arrives little more than a week before Federal Reserve officials meet to determine what investors expect to be another borrowing cost increase aimed at fighting inflation.
The Fed has instituted a series of aggressive interest rate hikes in recent months as it tries to slash price increases by slowing the economy and choking off demand. But the approach risks tipping the U.S. into an economic downturn and putting millions out of work.
The rate increases appear to have slowed key sectors of the economy, sending mortgage rates higher and slowing the construction of new homes, for instance.
But other indicators suggest the U.S. economy continues to hum. U.S. hiring fell from its breakneck pace but remained robust in August, with the economy adding 315,000 jobs and the unemployment rate rising to 3.7% as more people sought work, according to data released by the Bureau of Labor Statistics in early September.
Speaking at a conference held by the conservative-leaning Cato Institute, Fed Chair Jerome Powell said Thursday that the central bank must act “forthrightly, strongly” to dial back inflation, leading many economists to expect another 75-basis point interest rate hike from the central bank later this month.
The Fed is performing a “delicate balancing act,” said Scott Schuh, an economics professor at the University of West Virginia. “The Fed is raising rates but trying to avoid an increase in the unemployment rate.”
“It seems somewhat reasonable to expect the inflation rate to continue to come down for the next few months and quarters,” he added.
Prices in some areas of the economy have already fallen significantly.
The national average price for a gallon of gas stood at $3.72 on Monday, having fallen well below a peak of $5.01 in mid-June, according to AAA.
Consumer expectations for inflation have fallen significantly too, according to data released by the New York Federal Reserve on Monday.
In August, the median of consumer responses showed that they expect inflation to fall to 5.7% in one year and 2.8% in three years, a New York Federal Reserve survey showed. Those figures were down from 6.2% and 3.2%, respectively, in July.
(NEW YORK) — A gunman in Aurora, Colorado, who killed 12 people in a mass shooting at a movie theater, in 2012, legally acquired weapons and ammunition using a credit card.
So did a shooter in Orlando, Florida, in 2016, who killed 49 people at a nightclub. After a shooting at a music festival in Las Vegas, in 2017, which left 59 dead, police found credit cards on the countertop in the shooter’s hotel room.
In recent years, gun reform advocates and some lawmakers have called on credit card companies and banks to bolster their tracking and reporting of unusual purchase activity tied to firearms in the hopes that it would help authorities identify potential mass shooters before they carry out attacks.
Late last week, major credit companies took a step that could allow them to do just that. Visa, Mastercard and American Express announced plans to use a specific code for categorizing credit and debit card purchases made at gun stores.
The move follows a decision from the International Organization for Standardization, or ISO, a group that makes guidelines for such transactions, which said on Friday that it would create the unique code that allows gun stores to mark credit and debit card purchases.
Gun reform advocates applauded the step, while gun rights groups, such as the National Rifle Association, condemned it. Experts told ABC News the move may help authorities intervene before a mass shooting, but its effectiveness depends on how banks and credit card companies implement the new tool.
Here’s how the credit card code works and what happens next:
What do credit cards have to do with mass shootings?
Many mass shooters have legally purchased weapons and ammunition using credit or debit cards.
Between 2007 and 2018, there were 13 mass shootings that killed 10 or more people, the New York Times found. Of those 13 shootings, the killers financed their attacks with credit cards in eight of them, the Times said.
It remains unclear whether the credit cards found in the hotel room of the Las Vegas shooter were used to purchase guns, since government officials have not disclosed how the guns were purchased, beyond saying that some were bought with cash and some online, the Times reported.
The new purchase code will help banks and law enforcement discover unusual purchases, and provide an additional means for identifying and stopping potential attackers before a mass shooting, said Adam Skaggs, chief counsel and policy director of the Giffords Law Center to Prevent Gun Violence.
“It’s significant,” Skaggs told ABC News. “This creates a tool that will allow suspicious activity around illegal gun trafficking and around mass shootings to be detected and flagged to the authorities.”
How does the new credit card code work?
Nearly every category of a retailer in the U.S. has a code, called a merchant category code, or MCC, that marks each credit card transaction. For instance, purchases at grocery stores, movie theaters, and hair salons each carry a different code.
Until late last week, sellers of guns and other gun-related products shared a code with sporting goods stores.
“There was no way to tell whether somebody spent a thousand dollars on guns and ammo or on soccer balls and hockey sticks,” Skaggs said.
Now, credit and debit card transactions at gun sellers will carry a unique code that marks them as such.
Gun advocates hope the new code will push banks to report some gun purchases, since a law passed in the aftermath of the Sept. 11 attacks requires the banks to alert authorities to suspicious transaction activity. For example, banks use algorithms to flag unusual activity that may indicate money laundering or human trafficking, Skaggs said.
It remains unclear if and how credit card companies and banks will apply a standard that deems some gun-related purchases worthy of flagging, especially when the code only shows that a purchase was made at a gun seller but not the products that were purchased, said Kevin Sullivan, a former fraud investigator with the New York Police and founder of the Anti-Money Laundering Training Academy.
“The bank is aware you shopped at a gun store — now what?” Sullivan told ABC News. “What are the parameters going to be now? What are the lines you’re going to cross?”
What are the credit card companies saying?
Late last week major credit card companies said they plan to use the code, including Visa, Mastercard and American Express. The companies did not respond directly to a question about how the new code will be enforced.
“Following ISO’s decision to establish a new merchant category code, Visa will proceed with next steps, while ensuring we protect all legal commerce on the Visa network in accordance with our long-standing rules,” Visa told ABC News in a statement.
Similarly, Mastercard said the company would implement the new code as it would for any other category of retailer.
“With ISO approving the proposed MCC, we now turn our focus to how it will be implemented by merchants and their banks as we continue to support lawful purchases on our network while protecting the privacy and decisions of individual cardholders,” Mastercard told ABC News in a statement.
“This is exactly how we would manage the process for any other appropriate MCC, like a bicycle shop or sporting goods store,” the company added.
Likewise, American Express told ABC News in a statement that it would move forward with putting the code in place.
“When ISO develops a new Merchant Category Code, we follow our usual business practices and will work with our third-party processors and partners on implementation,” the company said.
“It is important to note that MCC codes are one of many data points that help us understand the industries in which our merchants operate,” the company added. “We are focused on ensuring that we have the right controls in place to meet our regulatory and fiduciary responsibilities, as well as prevent illegal activity on our network.”
How have gun rights groups responded?
The National Rifle Association condemned the new code for credit and debit card transactions at gun stores.
“The ISO’s decision to create a firearm-specific code is nothing more than a capitulation to anti-gun politicians and activists bent on eroding the rights of law-abiding Americans one transaction at a time,” NRA Spokesman Lars Dalseide told ABC News in a statement.
“This is not about tracking or prevention or any virtuous motivation – it’s about creating a national registry of gun owners,” he added.
Skaggs, of the Giffords Law Center to Prevent Gun Violence, rebuked that characterization of the new merchant category code.
“There are merchant category codes for bookstores, newspapers and religious institutions,” he said. “Making a contribution to your faith institution on your credit card or purchasing books from a church-affiliated bookstore, those are all coded differently and those are all constitutionally protected rights that are widely practiced and respected in this country.”
(WASHINGTON) — A whistleblower on Tuesday detailed a slate of explosive allegations against Twitter to congressional lawmakers, describing what he said were widespread security failures and vulnerabilities at the popular social media giant and an effort inside the company to overlook those risks in order to keep the platform viable and profitable.
As Twitter’s head of security, Peiter Zatko was a member of its executive team from late 2020 until he was fired earlier this year for alleged “ineffective leadership and poor performance” and Twitter has said he’s out to harm the company.
He told lawmakers he arrived at Twitter and discovered the company “was over a decade behind industry security standards” and prioritized monetizing advertising at the expense of widespread security vulnerabilities.
“I’m here today because Twitter leadership is misleading the public, lawmakers, regulators and even its own board of directors,” Zatko testified before the Senate Judiciary Committee. “The company’s cybersecurity failures make it vulnerable to exploitation, causing real harm to real people and when an influential media platform can be compromised by teenagers, thieves and spies, and the company repeatedly creates security problems on their own — this is a big deal for all of us.”
Zatko said that Twitter executives overlooked data vulnerabilities because data is the genesis of its profits.
“The executive in charge of sales very shortly after I joined [said], ‘This is a big internal conundrum, because we’re making too much money from these sales are not going to stop. We need something that will make the employees more comfortable with the fact that we’re doing this,'” Zatko said. “In a nutshell, it was, ‘We’re already in bed, it would be problematic if we lost that revenue stream, so figure out a way to make people comfortable with it.'”
Zatko also gave an illustrative example for senators, warning there are not safeguards in place to prevent a single Twitter employee from simultaneously taking control of every senator’s verified Twitter account — creating a national security emergency. He was hired shortly after several high-profile accounts were compromised.
“I discovered two basic issues. First, they don’t know what data they have, where it lives, or where it came from, and so unsurprisingly, they can’t protect it,” Zatko testified. “And this leads to the second problem, which is the employees then have to have too much access to too much data and too many systems. You can think of it this way, which is it doesn’t matter who has keys if you don’t have any locks on the doors, and this kind of vulnerability is not in the abstract. It’s not far-fetched to say that employee inside the company could take over the accounts of all of the senators in this room.”
Last month, Zatko brought his allegations to Congress and federal regulators, contending that Twitter misled regulators about its cybersecurity capabilities and efforts to control millions of fake accounts. Becoming visibly emotional Tuesday, Zatko lamented the impact his decision to become a whistleblower has had on his reputation and his family.
“Given to the real harm given the real harm to users and national security, I determined it was necessary to take on the personal and professional risks to myself and to my family of becoming a whistleblower,” he said, pausing to regain his composure. “I did not make my whistleblower disclosures out of spite or to harm Twitter.”
After the allegations became public last month, the Senate Judiciary Committee subpoenaed Zatko to tesitfy, warning that his allegations “raise serious concerns” and potentially “show dangerous data privacy and security risks for Twitter users around the world.”
Zatko was hired in 2020, reporting directly to Twitter CEO Jack Dorsey. His review of the platform contended that Twitter may currently have foreign intelligence agents on its payroll, among other alleged security vulnerabilities.
After learning of the scope of the spam accounts and other alleged security failures, billionaire Elon Musk has attempted to back out of a his $44 billion offer to acquire Twitter.
Senators bemoaned the absence of a Twitter representative, after Dorsey declined an invitation to testify amid his case against Musk.
“Unfortunately, this committee will not be able to get answers,” Sen. Charles Grassley, the ranking Republican said of Dorsey’s absence. “He rejected this committee’s invitation to appear by claiming that it would jeopardize Twitter ongoing litigations with Mr. Musk.”
This is a developing story, Please check back for updates.
(NEW YORK) — Americans are finally starting to see the red-hot rental market begin to cool off, after record growth.
A combination of strong demand, low supply and high inflation have kept pressure on rental prices nationwide, but for the first time in 20 months, asking rental prices saw negative growth, falling 0.1% from July to August, according to CoStar Group.
CoStar Group, a provider of online real estate marketplaces, information and analytics, said this points toward a “deteriorating rental market” in its report.
It is welcome relief for renters who have seen their rents rise while dealing with inflation.
Rent prices climbed during the first half of 2022, hitting a national average of $2,495, according to HouseCanary’s National Rental Report.
While rental prices are still rising year-over-year, the pace of growth is slowing. Asking rents fell to 7.1% in August, down from 8.4% at the end of July, according to CoStar.
Cities that saw the fastest growth in rents in 2021 are now witnessing the largest pullback.
Palm Beach, Floridda saw the most dramatic slowdown in growth, where asking rents decreased from 30.6% in the fourth quarter of 2021 to 8.2% at the end of August, according to CoStar. Phoenix followed close behind with year-over-year rents dropping to 5.2% in August compared to 21% at the end of 2021. Rents in Tampa, Florida have also seen decreases and Las Vegas also fell double digits so far this year.
Still, nearly half of all renters in the U.S. are paying 30% or more of their annual income on rent, according to a report from Harvard University’s Joint Center for Housing Studies.
Marissa DuBee remembers having “sticker shock” when searching for a rental this summer.
DuBee, a 30-year-old social media marketer, and her fiance Troy, a commercial truck driver, had been renting a fully-furnished, 1,700 square foot, three-bedroom home in Greentown, Pennsylvania, for $1,250 a month. However, she told ABC News that their landlord decided to cash in on the hot-housing market this spring and sell the home, which meant they had to move into the basement of her mother’s house until they could find an affordable rental.
“It’s always tough to go back once you’ve been out on your own,” she said. “And we were very fortunate and lucky enough that my mom let us live there with open arms.”
DuBee said they currently pay $1,300 a month for a much smaller rental in the same town; a single-wide mobile home with three bedrooms. She said the two are trying to save as much as they can for their November 2023 wedding.
“The both of us are working as hard as we can to make ends meet to plan the wedding of our dreams. It definitely is challenging especially with the cost of everything just going up, but in the end we know it’ll all be worth it,” DuBee said.
Housing accounts for about one-third of inflation. The Consumer Price Index reached an annual rate of 8.3% in August, the highest in nearly 40 years, the Labor Department said. Average hourly earnings rose 5.2% in August from a year ago.
With a rental income of $4,000 a month, 22-year-old Grace Villiano thought she and her roommate would have plenty of options when they were looking for an apartment in Manhattan, New York. What they found instead was intense competition and bidding wars for too few apartments.
“Every apartment we would schedule an open house to see would be sent into contract within 20 minutes of us contacting the property,” Villiano said. “We would have people walking in front of us offering multiple thousands above asking. It was honestly, overall, very frustrating that we felt we could barely get our foot in the door and that we would ultimately have to agree to an apartment without being able to see it or perhaps even see a floor plan.”
While rent prices are showing signs of stabilizing in some markets, New York City rents remain at a record high. This summer, the average monthly rent in Manhattan topped $5,000 for the first time, according to a report by the real estate appraiser, Miller Samuel.
A New York City property manager, with over 2,000 rental units in Manhattan, said inflation is also impacting landlords. Speaking with ABC News on the condition of anonymity, the property manager said, “We’re paying more for utilities like water and gas, more for maintenance and staff, which is the main reason why rents have remained elevated.”
The property manager also said current rents in the city may seem artificially higher than they truly are because they are being compared with prices during the height of the pandemic, when many landlords were slashing rents and offering major perks to lure renters back to big cities.
For many Americans, rising mortgage rates continue to complicate the question of whether to buy or rent, experts said. In some markets, mortgage payments are the highest on record relative to monthly rent.
According to the Mortgage Bankers Association, the median monthly mortgage payment was almost one-and-a-half-times as much as the median monthly asking rent in the second quarter.
Analysts said that may have forced many people, especially first-time home buyers, to hold off on buying a home, adding further pressure on rental prices.
But there are reasons for optimism. Analysts said a record volume of apartment construction over the next year could help ease a supply crunch, which in turn, would work to keep rental prices in check.
CoStar projects rent growth will continue to slow in the coming months, ending the year 6.2% higher than last year. Things are expected to decelerate even further in 2023, when CoStar projects rents to rise 4.9%.
While renters don’t have much control over rising prices, experts said renewing your current lease will likely give you the smallest increase in rent, since renewal rates typically tend to be lower than rents being offered to new renters. They they also recommend locking in a longer-term lease to avoid higher annual rent increases.
(WASHINGTON) — Inflation data released on Tuesday revealed that prices rose slightly in August, worsening the cost woes for U.S. households as the Federal Reserve readies to decide on another interest rate hike next week.
The data calls into question whether inflation has peaked.
On a monthly basis, the consumer price index rose 0.1% in August, inching upward from the flat month-to-month movement in July, according to the Bureau of Labor Statistics.
The consumer price index, or CPI, rose 8.3% over the past year in August, a slight slowdown from 8.5% in July, according to the bureau.
The data arrives a little more than a week before Federal Reserve officials meet to determine what investors expect to be another borrowing cost increase aimed at fighting inflation.
The Fed has instituted a series of aggressive interest rate hikes in recent months as it tries to slash price increases by slowing the economy and choking off demand. But the approach risks tipping the U.S. into an economic downturn and putting millions out of work.
The rate increases appear to have slowed key sectors of the economy, sending mortgage rates higher and slowing the construction of new homes, for instance.
But other indicators suggest the U.S. economy continues to hum. U.S. hiring fell from its breakneck pace but remained robust in August, with the economy adding 315,000 jobs and the unemployment rate rising to 3.7% as more people sought work, according to data released by the Bureau of Labor Statistics in early September.
Speaking at a conference held by the conservative-leaning Cato Institute, Fed Chair Jerome Powell said Thursday that the central bank must act “forthrightly, strongly” to dial back inflation, leading many economists to expect another 75-basis point interest rate hike from the central bank later this month.
The Fed is performing a “delicate balancing act,” said Scott Schuh, an economics professor at the University of West Virginia. “The Fed is raising rates but trying to avoid an increase in the unemployment rate.”
“It seems somewhat reasonable to expect the inflation rate to continue to come down for the next few months and quarters,” he added.
Prices in some areas of the economy have already fallen significantly.
The national average price for a gallon of gas stood at $3.72 on Monday, having fallen well below a peak of $5.01 in mid-June, according to AAA.
Consumer expectations for inflation have fallen significantly too, according to data released by the New York Federal Reserve on Monday.
In August, the median of consumer responses showed that they expect inflation to fall to 5.7% in one year and 2.8% in three years, a New York Federal Reserve survey showed. Those figures were down from 6.2% and 3.2%, respectively, in July.
(WASHINGTON) — The release of inflation data on Tuesday will show whether near-historic inflation in the nation continues to slow.
The data, which will reveal how prices moved in August, arrives little more than a week before Federal Reserve officials meet to determine what investors expect to be another borrowing cost increase aimed at fighting inflation.
The most recent data from the consumer price index, or CPI, showed a slowdown of price increases. The CPI rose 8.5% over the past year as of July, a marked slowdown from 9.1% in June, according to the Bureau of Labor Statistics.
The August report is expected to show that the CPI rose 8% year-over-year in August, continuing its descent from the peak in June, according to a Bloomberg survey of economists.
The Fed has instituted a series of aggressive interest rate hikes in recent months as it tries to slash price increases by slowing the economy and choking off demand. But the approach risks tipping the U.S. into an economic downturn and putting millions out of work.
The rate increases appear to have slowed key sectors of the economy, sending mortgage rates higher and slowing the construction of new homes, for instance.
But other indicators suggest the U.S. economy continues to hum. U.S. hiring fell from its breakneck pace but remained robust in August, with the economy adding 315,000 jobs and the unemployment rate rising to 3.7% as more people sought work, according to data released by the Bureau of Labor Statistics in early September.
Speaking at a conference held by the conservative-leaning Cato Institute, Fed Chair Jerome Powell said Thursday that the central bank must act “forthrightly, strongly” to dial back inflation, leading many economists to expect another 75-basis point interest rate hike from the central bank later this month.
The Fed is performing a “delicate balancing act,” said Scott Schuh, an economics professor at the University of West Virginia. “The Fed is raising rates but trying to avoid an increase in the unemployment rate.”
“It seems somewhat reasonable to expect the inflation rate to continue to come down for the next few months and quarters,” he added.
Prices in some areas of the economy have already fallen significantly.
The national average price for a gallon of gas stood at $3.72 on Monday, having fallen well below a peak of $5.01 in mid-June, according to AAA.
Consumer expectations for inflation have fallen significantly too, according to data released by the New York Federal Reserve on Monday.
In August, the median of consumer responses showed that they expect inflation to fall to 5.7% in one year and 2.8% in three years, a New York Federal Reserve survey showed. Those figures were down from 6.2% and 3.2%, respectively, in July.
(WASHINGTON) — The U.S. Department of Agriculture’s Food Safety and Inspection Service issued a public health alert Saturday over ground beef products in HelloFresh meal kits that were shipped in July over a possible E. coli contamination.
The meal kits containing the affected ground beef packages were shipped to consumers from July 2 to July 21, according to the alert.
Consumers should look for the Hello Fresh 10-ounce plastic vacuum-sealed packages containing “GROUND BEEF 85% LEAN/15% FAT” with codes “EST#46841 L1 22 155” or “EST#46841 L5 22 155” on the side of the packaging, the FSIS said.
“The ground beef packages bear ‘EST.46841’ inside the USDA mark of inspection and on the plastic ground beef package,” the statement read.
The FSIS said it isn’t issuing a recall because the affected products are no longer available for purchase, but the agency said it has concerns for anyone who still has the package in their freezers. If so, they are asked not to cook or eat the product and throw it away immediately.
The FSIS said it is investigating an E. coli outbreak and that raw ground beef is the probable source of the reported illnesses.
(LONDON) — British rail and postal workers on Thursday canceled scheduled strikes after Queen Elizabeth II died earlier that day.
The moves pause worker protests that in recent months have involved hundreds of thousands of workers and at times disrupted train and mail services across England.
The Communication Workers Union, or CWU, which represents 115,000 workers at the Royal Mail, called off a 48-hour strike that began on Thursday and was scheduled to continue on Friday.
“Following the very sad news of the passing of the Queen and out of respect for her service to the country and her family, the union has decided to call off tomorrow’s planned strike action,” the Communication Workers Union said in a tweet on Thursday.
A strike by the postal workers late last month across 1,500 locations, the first of several strikes planned for the ensuing weeks, marked the biggest work stoppage in England since 2009.
Postal workers are seeking a wage increase amid the country’s near-historic inflation, which reached a 40-year high of 10.1% in July.
CWU said its members would not accept an “imposed” 2% pay raise, the BBC reported. Royal Mail said that the workers rejected an offer with raises of up to 5.5%.
Meanwhile, roughly 40,000 rail workers with the National Union of Rail, Maritime and Transport Workers, or RMT, canceled a two-day strike set for Sept. 15 and 17.
“RMT joins the whole nation in paying its respects to Queen Elizabeth,” the union said in a statement. “We express our deepest condolences to her family, friends and the country.”
The rail workers, who work at Network Rail and 14 train operators, have carried out intermittent strikes since June, when it appeared that their employers would reject a demand for a 7% pay raise.
Network Rail made an offer in July with raises worth more than 5%, but it depended on workers accepting “modernising reforms,” the BBC reported. RMT rejected the offer, saying it amounted to a pay cut in inflation-adjusted terms and would require cutting a third of front-line maintenance roles.
In a statement, Network Rail confirmed that RMT had called off the strike, saying it would alert riders “when we receive more information on any confirmed or proposed industrial action.”
(LONDON) — New British Prime Minister Liz Truss on Thursday responded to skyrocketing energy prices in dramatic fashion with plans for a freeze on natural gas and electricity bills for millions of households that face massive rate increases as the winter months approach.
The policy could amount to one of the country’s largest government interventions in recent history, costing tens of billions of pounds and reducing prices on a wide scale.
The plan arrives amid an energy shortage brought about by the Russia-Ukraine war, which has worsened Britain’s inflation crisis, helping send price increases in the country soaring to a 40-year high of 10.1%.
Britain is hardly alone with its inflation woes. Sky-high inflation has strained economies and household budgets across the world, including in the United States, where cost hikes have slowed but remain near decades-long highs.
Rather than price controls, U.S. inflation policy has relied on a series of aggressive borrowing cost increases as the Federal Reserve tries to slash price increases by slowing the economy and choking off demand. But the approach risks tipping the U.S. into an economic downturn and putting millions out of work.
Economists who spoke with ABC News acknowledged the potential effectiveness of the British policy as a means of targeting that nation’s energy price spike but they differed sharply on whether the plan offers a blueprint that the U.S. should consider for sectors of high inflation.
Here’s how the British policy will work, and whether experts think it could be implemented in the U.S.:
What does Britain’s energy price cap do?
The plan, which would go into effect next month and last two years, caps the annual cost of natural gas and electricity for a typical British household at £2,500. The plan would do the same for many non-domestic institutions, such as schools; but those price caps only last six months.
The average annual cost for natural gas and electricity was otherwise scheduled to spike next month from £1,971 to £3,549, and thereby take up a sizable proportion of monthly spending for many British households.
Under the plan, the British government will pay energy suppliers the shortfall leftover from the reduction in the retail price. Truss, a member of the Conservative party, has not announced the cost of the measure but some estimates put the cost at roughly £150 billion, making it more than twice the size of the initiative that allowed British companies to keep paying workers amid COVID.
“This is a huge piece of state intervention ironically overseen by a conservative government suspicious of the state,” said Matthew Goodwin, a London-based professor of politics at the University of Kent.
Moreover, energy suppliers will receive the same amount of payment for their goods that they would have if the retail price had jumped, since the government is covering the shortfall.
This payment mechanism causes the large price tag for the British government and differentiates the policy from the price controls imposed in the U.S. during World War II, for instance, in which companies were asked to sacrifice profits for the war effort, said Hal Singer, a managing director at the consulting firm Econ One and adjunct professor at Georgetown’s McDonough School of Business.
“The reason why the U.K. policy is costly is because Truss is insisting that energy suppliers continue to be compensated at market rates,” Singer told ABC News.
Should a policy like this be implemented in the U.S.?
The energy crisis caused by the Russia-Ukraine war has not impacted the U.S. as much as many countries, especially those in Europe.
However, overall inflation in the U.S. remains historically high, with price hikes for goods such such as rent and groceries far worse than cost increases in other areas of the economy. That dynamic raises the question of whether an approach like the one announced by Britain could work to address particularly severe areas of U.S. inflation.
Singer, of Econ One, said the U.S. should pursue such a strategy to bring down costs like skyrocketing rents, which result in part from the outsized market control retained by landlords.
“We absolutely should be pursuing these alternative remedies to address what many of us are starting to see now as the exercise of market power,” he said. “There’s a comparable crisis in the U.S. in terms of rents for apartments and homes.”
But Orazem sharply disagreed, saying that price controls would worsen the root problem behind inflation: a supply shortage. Price controls risk undercutting the incentive that high prices give to companies for increased investment and ramped up supply, which in theory should bring the market to equilibrium, he said.
“Creating supply shortages in the middle of inflation that’s created by supply shortages seems ludicrous to me,” he said. “You’re not solving the problem by exacerbating the problem.”
