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Congressional Budget Office says inflation to last into 2023

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WASHINGTON (AP) — The Congressional Budget Office released an economic outlook Wednesday saying that high inflation will persist into next year, likely causing the federal government to pay higher interest rates on its debt.

The nonpartisan agency expects that the consumer price index will rise 6.1% this year and 3.1% in 2023. This forecast suggests that inflation will slow from current annual levels of 8.3%, yet it would still be dramatically above a long-term baseline of 2.3%.

The 10-year estimates do contain positive news as this year’s annual budget deficit will be $118 billion lower than forecast last year. That’s a byproduct of the end of pandemic-related spending and the solid job growth it helped to spur. As a share of the total economy, publicly held debt will drop through 2023. Still, the accumulated federal debt will likely continue to grow over the next decade to be equal to roughly 110% of U.S. gross domestic product.

The Federal Reserve has been trying to reduce inflation by raising its benchmark interest rates, causing the interest charged on 10-year U.S. Treasury notes to increase substantially in recent months. One consequence is that the government will be spending more money this year to service its debt. By 2032, the yearly interest payments will nearly be $1.2 trillion, or more than what the federal government spends on defense.

Still, the CBO cautions that its numbers “are subject to considerable uncertainty, in part because of the ongoing pandemic and other world events,” including Russia’s ongoing war in Ukraine. The report accounts at least for the first few months of the war, according to CBO.

Economists have said coronavirus relief programs issued by both the Biden and Trump administrations have contributed to higher inflation levels. But high prices have also been fueled by a delay in action by the Fed, supply chain disruptions and the tumult produced after Russia invaded Ukraine in February.

Ben Harris, the Treasury Department’s assistant secretary for economic policy, tweeted on Tuesday that the factors driving inflation also include soaring corporate profits, driven by a lack of business competition — as well as business not being fully prepared for the reopening of the economy as pandemic restrictions were lifted. The administration has emphasized that its plan put the U.S. economy into a stronger place relative to the rest of the world because unemployment is a low 3.6%.

“The American Rescue Plan has fostered an extraordinarily fast recovery and leaves us in a strong position to address the global challenges posed from supply chains and the economic fallout from Russia’s invasion of Ukraine,” he tweeted.

The report says beyond 2032, “if current laws remained generally unchanged, deficits would continue to grow relative to the size of the economy over the following 20 years, keeping debt measured as a percentage of GDP on an upward trajectory throughout that period.”

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, told The Associated Press ahead of the release that the pandemic, war in Ukraine and other factors point to the importance of reducing the annual deficit.

“Unfortunately, the underlying story here is one of fiscally unsustainable positions and on top of that, we have this added challenge of inflation and a reminder that external shocks continue to come at us,” she said.

Fatima Hussein, The Associated Press

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Armed man demanding savings takes Beirut bank staff hostage

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BEIRUT (AP) — A Lebanese man with a shotgun took up to 10 employees and customers hostage at a Beirut bank Thursday and threatened to set himself on fire with gasoline unless he was allowed to withdraw some of his trapped savings to pay his father’s medical bills.

Soldiers and police converged on the area and sought to negotiate an end to the standoff.

The hostage drama in Beirut’s bustling Hamra district was the latest painful episode in Lebanon’s economic free-fall, now in its third year. Lebanon’s cash-strapped banks since 2019 have put strict limits on withdrawals of foreign currency assets, effectively trapping the savings of millions of people.

The gunman, identified as 42 year-old Bassam al-Sheikh Hussein, entered a branch of the Federal Bank carrying a canister of gasoline, said a security official who spoke on condition of anonymity in line with regulations. The man fired three warning shots, the official said.

George al-Haj, head of the Bank Employees Syndicate, told local media that seven or eight bank employees were taken hostage along with two customers. The gunman released one hostage, who was taken away by ambulance.

A bank customer who fled the building told local media that the gunman was demanding to withdraw $2,000 to pay his hospitalized father’s medical bills. Local media reported that he had about $200,000 stuck in the bank.

Hussein’s brother Atef, standing outside the bank, told The Associated Press that his brother would be willing to turn himself in if the bank gave him money to help with his father’s medical bills and family expenses.

“My brother is not a scoundrel. He is a decent man,” Atef al-Sheikh Hussein said. “He takes what he has from his own pocket to give to others.”

Lebanese army soldiers, police officers from the country’s Internal Security Forces and intelligence agents surrounded the area.

Cellphone video showed the man with his shotgun, demanding his money. In another video, two police officers outside the locked bank entrance asked him to release at least one of the hostages, but he refused.

Lebanon is suffering from the worst economic crisis in its modern history. Three-quarters of the population has plunged into poverty, and the Lebanese pound has declined in value by more than 90% against the U.S. dollar.

Dozens of protesters gathered in the area during the standoff, chanting slogans against the Lebanese government and banks, hoping that the gunman would receive his savings. Some bystanders hailed him as a hero.

“What led us to this situation is the state’s failure to resolve this economic crisis and the banks’ and Central Bank’s actions, where people can only retrieve some of their own money as if it’s a weekly allowance,” said Dina Abou Zor, a lawyer with the advocacy group Depositors’ Union who was among the protesters. “And this has led to people taking matters into their own hands.”

Abou Zor said Hussein’s wife told her the family is heavily indebted and struggling to make ends meet.

Dania Sharif said her sister, who serves coffee and tea at the bank, was among the hostages and had not been harmed by the gunman. “He just wants his money,” Sharif said, standing outside the bank. “I will not leave until my sister comes out.”

In January, a coffee shop owner withdrew $50,000 trapped in a bank in Lebanon after taking employees hostage and threatening to kill them.

Kareem Chehayeb And Fay Abuelgasim, The Associated Press

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