Goldman Sachs and Bank of America said they expect the U.S. Federal Reserve to raise interest rates three more times this year, lifting their estimates after data pointed to persistent inflation and a resilient labor market.

Producer prices accelerated in January by the biggest margin in seven months, according to data on Thursday, while a Labor Department report showed the number of Americans filing new claims for unemployment benefits unexpectedly fell last week.

“In light of the stronger growth and firmer inflation news, we are adding a 25bp (basis points) rate hike in June to our Fed forecast, for a peak funds rate of 5.25%-5.5%,” Goldman Sachs economists led by Jan Hatzius said in a note dated Thursday.

Meanwhile, money markets are currently pricing in a terminal rate of 5.3% by July.

BofA Global Research also expects a 25bps hike in the Fed’s June meeting, pushing the terminal rate up to a 5.25%-5.5% range.

It had earlier pencilled in two rate hikes of 25 bps each in the March and May meetings.

“Resurgent inflation and solid employment gains mean the risks to this (only two interest rate hikes) outlook are too one-sided for our liking,” BofA wrote in a client note.

After the recent U.S. data, European investment bank UBS said it was expecting the Fed to raise rates by 25 bps at its March and May meetings, which may leave the Fed funds rate at the 5%-5.25% range.

In sharp contrast to its U.S. peers, however, UBS estimated that the Fed would ease interest rates at the September meeting this year.

Before the recent U.S. data, J.P. Morgan had forecast the terminal rate at 5.1% by the end of June.

A majority of economists polled by Reuters before the latest data said they expected the Fed to raise rates at least twice more in the coming months, with the risk of them going higher still. None of them are expecting a rate cut this year.

A group of Tesla workers in Buffalo, New York, have filed a complaint with the National Labor Relations Board accusing the electric carmaker of firing at least 30 workers in response to their union organizing efforts.

In a release, the group that calls itself Tesla Workers United, accuses Tesla and CEO Elon Musk of retaliating in direct response to the unionization drive, launched Feb. 14 at Tesla’s Buffalo Gigafactory 2. The affected workers are part of the Buffalo location’s autopilot group, where they ‘train’ Tesla’s artificial intelligence software by identifying images.

The group is asking for a federal injunction to protect the workers’ rights.

A Tesla representative could not be reached for comment.

The Tesla factory in Buffalo, N.Y., on Dec. 26, 2018.Andrew Harrer / Bloomberg via Getty Images file

The union drive is being spearheaded by a Rochester, New York-based unit of Workers United, which is an affiliate of the larger Service Employees International Union. Workers United is also the group that has been attempting to organize Starbucks locations.  

The NLRB has the power to order an employer to reinstate workers with back pay, though it cannot assess penalties. Tesla was cited in 2021 by the NLRB on accusations of ‘coercively interrogating’ and ‘threatening’ employees at its Fremont plant. The company was ordered to offer to reinstate a fired worker; Tesla has denied wrongdoing and is appealing the citation.

According to Tesla’s website, the Buffalo Gigafactory has created nearly 800 jobs, with plans to ultimately employ as many as 5,000.

Tesla is recalling 362,758 vehicles because a version of its ‘full self-driving’ software may increase the risk of crashes, according to the National Highway Traffic Safety Administration in response to a notice Tesla sent the agency on Wednesday.

According to the recall document, the FSD’s ‘beta’ release may cause affected Tesla vehicles to act unsafely around intersections. For example, it said, the software may cause the vehicles to travel ‘straight through an intersection while in a turn-only lane, [enter] a stop sign-controlled intersection without coming to a complete stop, or [proceed] into an intersection during a steady yellow traffic signal without due caution.’

In addition, it said, the system may not respond sufficiently to changes in posted speed limits, ‘or not adequately account for the driver’s adjustment of the vehicle’s speed to exceed posted speed limits.’

As a remedy, Tesla is releasing a free over-the-air software update to users.

The recall affects 2016-2023 Model S and Model X vehicles; 2017-2023 Model 3 vehicles; and 2020-2023 Model Y vehicles.

The recall comes a week after the National Transportation Safety Board said it found no evidence that Tesla’s autopilot driver-assistance feature was engaged at the time of a fatal 2021 crash in Texas.

But Tesla’s FSD and autopilot features remain under investigation by the NHTSA. According to Reuters, 830,000 vehicles are under review.

And last month, Tesla revealed in a Securities and Exchange Commission filing that the Justice Department had requested documents related to the features.

A Tesla representative could not be reached for comment.

Tesla shares have been among the best-performing stocks this year, having nearly doubled in price to about $211 after falling 32% over the past 12 months. In January, the company reported profits and revenues that beat analysts’ expectations, with CEO Elon Musk stating that January had seen ‘the strongest orders year-to-date ever in our history.’

As many shoppers trade down from pricier brand-name items for generic alternatives, grocers are increasingly pushing food suppliers to lower prices.

Government data released Tuesday showed grocery prices were 11.3% higher in January than the year before, as Russia’s invasion of Ukraine and unfavorable weather have driven up the costs of eating at home over the past year.

Food makers and supermarket suppliers have raised prices on many of their goods to cover higher costs, which grocers have frequently passed on to consumers.

So far, many shoppers have simply paid them. Coca-Cola, for example, reported higher-than-expected quarterly earnings Tuesday thanks to the higher prices it has been charging for certain beverages.

But consumers, as well as the grocery stores where they shop, are increasingly pushing back. At least two major retailers, Whole Foods and Walmart, are reported to be asking major suppliers to bring prices down. The much smaller regional grocer Hy-Vee said it and some of its peers are doing the same. (Whole Foods didn’t respond to a request for comment, and Walmart declined to comment.)

“We’re spending more time than we’ve spent in the past negotiating prices and negotiating cost increases — frankly, questioning cost increases and pushing back,” CEO Jeremy Gosch said.

An IT failure at Lufthansa stranded thousands of passengers and forced flights to Germany’s busiest airport to be canceled or diverted Wednesday, with the airline blaming botched railway engineering works that damaged broadband cables.

More than 200 flights were canceled in Frankfurt, a vital international transit hub and one of Europe’s biggest airports, a spokesperson for operator Fraport said.

Lufthansa later said its IT systems were rebooting and that flight departures had resumed from Frankfurt. The carrier expects the situation to stabilize by Wednesday evening.

Scores of flights were also delayed, data from FlightAware showed. Photos and videos from several German airports showed thousands of passengers waiting to be checked in.

“We wanted to go to the wizard convention in England, in Blackpool. And now we are stranded here,” Alexander Straub said at Frankfurt Airport. “We have eaten some pretzels and are still waiting,” said his fellow passenger Marc Weidel.

Lufthansa and Germany’s national train operator blamed the problem on third-party engineering works on a railway line extension that took place Tuesday evening, when a drill cut through a Deutsche Telekom fiber optic cable bundle.

That caused passenger check-in and boarding systems at Lufthansa to seize up Wednesday morning and prompted German air traffic control to suspend incoming flights, though these have since resumed.

Other airports also reported cancellations as a knock-on effect. Paris’ Charles de Gaulle Airport said two flights had been axed and a further two flights had to turn back around.

Amsterdam’s Schiphol Airport, among the world’s busiest, reported one cancellation of a flight to Frankfurt.

Pen and paper

Shares in Lufthansa, which also owns SWISS, Austrian Airlines, Brussels Airlines and Eurowings, recovered earlier losses and were up 0.2% as of 1518 GMT, while Fraport shares were down 0.2%.

Passengers said on social media the company was using pen and paper to organize flight boarding, and that it was unable to digitally process passengers’ luggage.

In a tweet, Lufthansa said: “As of this morning the airlines of the Lufthansa Group are affected by an IT outage, caused by construction work in the Frankfurt region.”

Deutsche Telekom said in a statement: “Two cables have already been repaired overnight by our technical team and many customers are already back online”, adding that the situation was improving continuously.

Deutsche Bahn apologized to Lufthansa passengers for the inconvenience caused.

The IT system failure comes two days ahead of planned strikes at seven German airports that are expected to lead to major disruptions, including potentially to the Munich Security Conference where world leaders are expected to gather.

Scandinavian airline SAS said it was hit by a cyber attack Tuesday evening and urged customers to refrain from using its app, but later said it had fixed the problem.

Unknown attackers cut cables belonging to Germany’s public railway in December in what was seen as a second act of sabotage against Deutsche Bahn in as many months.

Airlines canceled more than 1,300 flights and over 10,000 were delayed in the United States last month after the breakdown of a key government computer system.

With high inflation and rising interest rates on consumer debt, an increasing percentage of workers considered to be high-income earners now say they live paycheck to paycheck.

According to a recent survey by the banking firm LendingClub and the payments news website PYMNTS, 64% of a representative sample of nearly 4,000 U.S. consumers now say they are just getting by. That’s an increase from 61% the previous year.

Among the new cohort of people who say they are newly living paycheck to paycheck, 86% pull in more than $100,000 annually, the survey found. Given that the median household income in the U.S. is $70,784, the survey shows the soaring cost of living in America is catching up to even more well-off U.S. residents.

“The effects of inflation are eating into every American’s wallet, and as the Fed’s efforts to curb inflation drive up the cost of debt, we are seeing near-record numbers of Americans living paycheck to paycheck,” said Anuj Nayar, the financial health officer at LendingClub.

Tax filing and refund season appears to be coming early for many U.S. residents this year.

According to the latest data from the Internal Revenue Service, the total number of refunds sent to people who filed their taxes through the week ending Feb. 3 has nearly doubled from last year’s total through the same week: from about 4.3 million to nearly 8 million.

As a result, the total amount of money refunded at this point in the calendar has gone up by about two-thirds, from $9.5 billion last year to nearly $16 billion this year.

However, the average refund amount has shrunk because various pandemic-era stimulus programs have expired for some taxpayers, like the child tax credits and earned income tax credits that were temporarily expanded at the height of the pandemic. At the moment, the average tax refund amount stands at $1,963, compared with $2,201 this same time last year. The IRS previously warned about this occurrence in December.

Bank of America analysts cite several likely reasons for the data, noting the IRS has mostly worked through its pandemic backlog of unprocessed returns, ‘so it entered this season in a much cleaner position,’ the analysts write.

They also say more filers are likely trying to get their refunds earlier this year as they contend with a more difficult economic environment.

It’s not the case for everyone filing their taxes early, but some tend to have lower incomes and, as such, their returns are less complex. So, the average refund amount is likely to increase as the tax filing season progresses.

Bank of America expects low-income earners to benefit most from earlier refunds, but note the tailwind to the economy from that refund-fueled spending will ultimately prove short-lived as that money is spent.

Consumer prices increased at an annual rate of 6.4% in January — a slight slowdown from the 6.5% seen in December but above analysts’ prediction of 6.2%.

Food prices increased 10.1% from last January, the ninth-consecutive double-digit annual increase for that category, though still down from its August peak.

Shelter costs, which includes rent and the cost of homeownership, increased 7.9%. That’s the fastest annualized rate since 1982. Rent costs increased 8%, another new record.

Economists are increasingly of the belief that inflation has already peaked. But 6.4% is still well above the 2% that the Federal Reserve desires, given its mandate to promote stable prices and a low unemployment rate.

It’s one reason Fed Chairman Jerome Powell told an audience last week that he intends to keep interest rates higher until inflation gets closer to that 2% target. By maintaining those supersized interest rates, Powell hopes to increase the cost of borrowing and investing, thereby reducing overall demand in the economy and putting downward pressure on prices.

In the meantime, the Fed will make it more expensive to do everything from buying a house or an automobile to borrowing with a credit card or a personal loan.

There wasn’t much of a slowdown for prices in January, according to Pantheon Macroeconomics research group chief economist Ian Shepherdson. In a note to clients Monday, Shepherdson said rebounding gasoline prices and ongoing increases in rents kept overall prices higher last month. A sudden, if modest, increase in used vehicle prices — in contrast to recent steep declines — also pushed costs upward.

That means the Fed and Powell are likely to keep raising rates, he said.

‘We now expect a further hike in March, and we’re increasingly leaning towards expecting a final increase in May,’ Shepherdson wrote.

The U.S. economy is revealing itself to be difficult to slow down, Bank of America economists said in a note last week, citing an extraordinary 517,000 jobs added in January. That means any forthcoming recession is likely to be mild and wouldn’t happen until the second half of 2023, they suggested.

A man shops for fruit at a grocery store on Feb. 1, 2023, in New York.Leonardo Munoz / VIEWpress/Corbis via Getty Images

Still, there’s evidence that the economy is indeed slowing down. Monday, the New York Federal Reserve reported that the median expected growth in household income dropped from 4.6% to 3.3%. That is the largest one-month drop in the nearly 10-year history of the survey.

In other words, U.S. households are not only expecting a slowdown in income; they also expect that slowdown to be quite large.

And after seeing a surge in January, gas prices have already reversed course and are now nearly $0.06 lower than where they were a week ago.

But those changes weren’t going to be reflected in January’s price data. And it’s not clear whether they are the start of a new trend.

So, the Federal Reserve is going to hold those interest rates up a while longer.

“There has been an expectation that it [inflation] will go away quickly and painlessly — and I don’t think that’s at all guaranteed; that’s not the base case,” Powell said last week.

“The base case for me is that it will take some time, and we’ll have to do more rate increases, and then we’ll have to look around and see whether we’ve done enough.”