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The week in business: the 10th rate increase in a row

    In the wake of yet another bank failure and signs of an economic slowdown, the Federal Reserve raised its benchmark interest rate by a quarter point. It was the third consecutive increase of that size and the 10th increase in a row since last March. The central bank’s decision last week raised interest rates to a range 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 series of aggressive rate hikes. at their next meeting. But later at a press conference, Fed Chairman Jerome H. Powell made it clear that the door was ajar: additional steps, he said, “may” be appropriate. Even this somewhat lenient rhetoric represents a significant shift in the Fed’s stance. For months, the question has been how much, not whether the central bank will raise interest rates.

    JPMorgan Chase, the nation’s largest bank, took possession of First Republic Bank last week after the Federal Deposit Insurance Corporation seized First Republic to save it from freefall and contain a wider banking crisis. First Republic, a medium-sized 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 sparked panic in the banking industry. But that cash injection just held back the inevitable: First Republic announced late last month that it had lost an eye-watering $102 billion in customer deposits. By acquiring First Republic, JPMorgan CEO Jamie Dimon is repeating a role he played during the 2008 financial crisis when he acquired Bear Stearns and Washington Mutual at the behest of federal regulators. JPMorgan said Monday it expected its latest acquisition to boost earnings by $500 million this year.

    After a significant slowdown in the first quarter of the year, the number of jobs added in April unexpectedly picked up, beating analysts’ forecasts. According to the Labor Department’s latest report on Friday, 235,000 jobs were added last month; analysts had expected 170,000. The resilience of the labor market has baffled Fed officials, whose campaign to raise rates to curb inflation and cool the economy should have had a greater impact on employment by now. In other bad news for the Fed, wage growth — used by central bankers as an indicator of inflation endurance — rose 4.4 percent in the year to April.

    President Biden is expected to meet with congressional leaders on Tuesday to discuss raising the debt limit, which the United States technically reached in January, though the Treasury Department has used accounting maneuvers to get the government to pay its bills. Last week, Treasury Secretary Janet Yellen said the country could run out of money from June 1. This approaching deadline poses a difficult political problem for Mr. Biden. Republicans are trying to force concessions from Mr Biden that would significantly undermine his agenda. Mr. Biden has a few options available to him. He can refuse to negotiate. He could negotiate cuts, but decouple those discussions from the debt limit. Or he could try to win over a handful of moderate Republicans to raise the limit. There is another possible option: a constitutional challenge to the debt limit, a long-term plan that would rely on a clause in the 14th Amendment.