Latin America, which led the developing world in adopting the market-friendly model of economic development, may now be leading the world away from it. On Sunday, voters in Peru could elect as president Pedro Castillo, leader of a Marxist party that seeks to nationalize foreign-owned mines, invokes Lenin and Fidel Castro, and questions democratic institutions such as a free press.

On the same day, Mexicans will decide how much control over Congress to give their leftist president, Andrés Manuel López Obrador. Since taking office in 2018, he has expanded state control of oil, gas and electricity while undercutting the independence of the judiciary. And just weeks ago, Chileans elected a far-left slate of delegates to rewrite their constitution. A leftist already governs Argentina and polls suggest one could win Brazil’s presidential election next year.

While Latin America is no stranger to economic and political turmoil, the circumstances this time are quite...

Bank of Japan policy board member Seiji Adachi said potential post-pandemic demand could provide a chance for Japan to finally achieve its longstanding 2% inflation target.

The services industry, especially restaurants and accommodations, should continue to pay higher costs for preventing infections, while the nation’s aging population might raise demand for better-quality goods and services—even at higher prices, Mr. Adachi said. Wages of workers capable of providing such high-quality services will likely be set higher,...

The People’s Bank of China is getting restive about the strength of the Chinese yuan. That is something to keep an eye on: Any attempt to prevent it from rallying further would provide fresh fuel for a clash between Beijing and Washington over currency manipulation.

At around 6.38 to the U.S. dollar, the yuan is at its strongest level since 2018. The currency needs to rise by only a little over 5% to hit a historical high. It has rallied by almost 12% in the past year already.

The PBOC said Monday that it would raise foreign-exchange reserve requirements for banks after a former central-bank official suggested to state media over the weekend that the currency’s recent strength wasn’t sustainable or desirable.

Given the central bank’s clear discomfort with the rally, the fact that China’s foreign-exchange reserves have barely risen in the past year is eyebrow raising. In the 2000s and early 2010s, China’s large trade surpluses were mirrored by large...

Consumer prices across the rich world rose at the fastest pace in more than 12 years during April, as central bankers try to figure out whether shortages that have emerged as the global economy reopens will prove transitory or have long-lasting consequences.

The Organization for Economic Cooperation and Development Wednesday said consumer prices in its 36 members, which are mostly rich countries, were 3.3% higher than in April 2020. That was the largest increase since October 2008.

Across the Group of 20 leading economies, which account for about four-fifths of global economic activity, the annual rate of inflation rose to 3.8% from 3.1% in March, reaching its highest level in over a year.

The jump in some prices over recent months has unsettled investors used to a long period of sluggish inflation. In the U.S. those concerns have been compounded by the Biden administration’s fiscal stimulus package, which is unmatched in any other part of the world...

Some Federal Reserve officials are struggling to find common ground on one of the fundamental questions surrounding the economic recovery from the coronavirus pandemic: Is the job market tight or loose?

Over recent weeks, bank leaders and economists at the regional level have staked out the view that the job market may be tighter than it looks based on traditional metrics such as the unemployment rate. That camp includes the leaders of the Dallas and St. Louis Fed banks. By contrast, a research note from the San Francisco...

The annual rate of inflation in the eurozone rose in May to hit the European Central Bank’s target for the first time since late 2018, as energy prices surged in response to a strengthening recovery in the global economy.

The pickup in price rises comes before a June 10 meeting of policy makers at the eurozone’s central bank, which will consider new economic forecasts and whether to continue stimulus programs launched early in the pandemic.

The central bank’s March forecasts saw inflation reaching 2% only in the final three months of this year. But figures released by the European Union’s statistics office Tuesday showed that inflation had already reached that level.

The central bank targets an inflation rate of just under 2%.

Consumer prices were falling as recently as December. The speed of the turnaround will likely energize a debate among policy makers about whether the pickup is a temporary consequence of economies reopening—or...

The Federal Reserve should keep a steady approach to monetary policy in the coming months but be prepared to adjust if needed, a top central-bank official said Tuesday.

“While we are far from our goals, we are seeing welcome progress, and I expect to see further progress in coming months,” Federal Reserve governor Lael Brainard said in prepared remarks for a speech to the Economic Club of New York. She called for the Fed to “be steady and transparent” in its policy approach “while remaining attentive to the evolution of the...

Federal Reserve Bank of Minneapolis leader Neel Kashkari on Tuesday pushed back against those who believe the central bank and broader government stimulus are setting the stage for a major inflation problem.

“If the White House is wrong and if we’re wrong, if I’m misreading the labor market and we are actually at full potential and these inflation readings are here to stay, the Federal Reserve has the tools to adjust interest rates to keep inflation in check and to prevent it from spiraling out of control,” Mr. Kashkari said...

The labor-market recovery after the coronavirus pandemic and related shutdowns is playing out unevenly across the U.S., from states where there are five openings for every unemployed worker to several where historically high jobless rates persist.

In some regions, including less populated areas that imposed fewer Covid-19 restrictions—states such as Utah and the Dakotas—the labor market is red hot, with many employers struggling to fill open jobs. Elsewhere, including in urban areas and tourist hubs that have been slower to ease restrictions—such as New York and Hawaii—labor demand is rebounding more gradually, making the shortages of workers less acute.

As investors weigh and reweigh the chances that the U.S. economy will run too hot, they should remember that the rest of the world isn’t close to recovering from the pandemic.

Globally, the economic outlook has improved, thanks to the ramp-up in vaccinations. On Tuesday, the Organization for Economic Cooperation and Development upgraded its forecasts for growth in world gross domestic product to 5.8% for this year and 4.4% for next year, compared with December projections of 4.2% and 3.7%, respectively.

Markets fear at least a small chance that the economy could overheat, given that Washington’s fiscal transfers have left the average American household with more disposable income than before. Measures of inflation have shot up in the U.S. and are on the rise in the eurozone, too, hitting a three-year high of 2% in May, data showed Tuesday. Surveys of manufacturing purchasing managers, which recorded their highest reading ever, pointed to supply-chain...

Investigations into data breaches at the Reserve Bank of New Zealand found that the central bank was ill-equipped to handle market-sensitive information despite its crucial role in the economy and financial markets.

RBNZ Gov. Adrian Orr said on Monday that the bank accepts the findings of the two reports it requested from outside auditors and is implementing their recommendations.

Between...

SYDNEY—The Reserve Bank of Australia remained dovish in its guidance to financial markets at its board meeting Tuesday, but stayed on track to potentially announce major changes to its policy approach in July against the backdrop of an economy that continues to heat up.

The RBA left its official cash rate and its target for three-year government bonds at 0.10%, retaining its guidance that official interest rates won’t be raised until 2024 at the earliest.

“Progress...

BEIJING—An official gauge of Chinese factory activity slipped in May on weaker export demand and higher commodity prices, while the country’s nonmanufacturing sector was bolstered by stronger construction and holiday spending.

China’s official manufacturing purchasing managers index slipped slightly to 51.0 in May from the previous month’s 51.1 reading, according to data released Monday by the National Bureau of Statistics.

The result was largely in line with the 51.1 median forecast expected by economists polled by The Wall Street Journal, and marked the 15th straight month that the gauge came in above the 50 mark that separates expansion from contraction.

A recent surge in prices for raw materials such as iron ore, crude oil and coal sent the subindex for input prices to 72.8 in May, the highest level since November 2010, while output prices notched up a record-high reading of 60.6, according to Monday’s PMI data.

The soaring raw-material...

A decade ago Germany’s intransigence over bailouts and borrowing prolonged the eurozone’s sovereign debt crisis, one reason the region’s economic recovery lagged behind the U.S.’s.

Another crisis, another lagging recovery for Europe, and again the size of fiscal stimulus is a factor. But Germany isn’t the obstacle it once was, and the rise of its Green Party could further push both country and continent toward the U.S. model of aggressive government stimulus.

Angela Merkel, the conservative chancellor who has led Germany since 2005, has already eased some of her past opposition to borrowing. She isn’t running for re-election this September and polls put the Greens in second place, close behind Ms. Merkel’s Christian Democratic Union-led alliance. They could emerge as either junior partner or even leader of the next governing coalition.

The Greens have evolved from an antinuclear pacifist party to a pragmatic left-of-center group that regularly...

Federal Reserve Chairman Jerome Powell discussed the central bank’s decision to hold interest rates near zero and maintain its pace of asset purchases, the outlook for inflation and the economic recovery, the housing market and bank supervision during a virtual press conference Wednesday after the Fed’s monetary policy meeting. Here is a transcript, lightly edited for clarity and length.

JEROME H. POWELL: Good afternoon. At the Federal Reserve, we are strongly committed to achieving the monetary policy goals that Congress has given us—maximum employment and price stability. Today, my colleagues on the FOMC and I kept interest rates near zero and maintained our sizable asset purchases. These measures, along with our strong guidance on interest rates and on our balance sheet, will ensure that monetary policy will continue to deliver powerful support to the economy until the recovery is complete.

Widespread vaccinations along with unprecedented fiscal policy...

Jobless claims fell again to the lowest level since the pandemic took hold more than a year ago, another sign the labor market is rebounding this spring.

Initial unemployment claims, a proxy for layoffs, fell by 13,000 last week to a seasonally adjusted 553,000, the Labor Department said on Thursday. The previous week’s figure was revised up to 566,000. The latest reading marked the third straight week jobless claims were below 600,000, their lowest levels since early 2020. The four-week moving average, which smooths out volatility in the weekly figures, was 611,750, also a pandemic low.

U.S. gross domestic product rose at a 6.4% annual rate in the first quarter, expanding a consumer-led rebound from the pandemic.

The U.S. economy appears to have expanded rapidly in the first quarter, extending what economists project will be a robust, consumer-led recovery from the pandemic this year.

Output grew at a 4.3% rate in the fourth quarter of last year after rising at a 33.4% clip in the third. The rebound from a steep downturn last spring early in the pandemic was quicker than what many economists expected but still left the economy in a hole. For all of last year, the economy shrank by 2.4% when comparing fourth-quarter output to a year earlier—the first contraction since the 2007-09 recession.

In the first quarter as more people received a Covid-19 vaccine, states and cities lifted business restrictions, and stimulus payments landed in bank accounts. Consumer confidence rose in April to the highest level in 14 months, the Conference...

The U.S. economy appears to have expanded rapidly in the first quarter, extending what economists project will be a robust, consumer-led recovery from the pandemic this year.

Fueled by a flood of federal cash to households and rising vaccinations, the nation’s gross domestic product likely grew at a 6.5% seasonally adjusted, annual rate in the first three months of 2021, according to economists surveyed by The Wall Street Journal. Official figures on GDP—the broadest measure of goods and services produced across the U.S—are set to be released by the Commerce Department on Thursday at 8:30 a.m. ET.

New applications for unemployment benefits are projected to show a further easing to the lowest level since the Covid-19 pandemic took hold in the U.S. more than a year ago.

A decline would be consistent with other signs that the labor market is rebounding this spring.

Initial jobless claims, a proxy for layoffs, have trended downward in recent weeks to around 550,000. Economists polled by The Wall Street Journal forecast 528,000 claims were filed last week. Those levels are well below the millions of claims filed weekly a year ago, but still more than double the roughly 200,000 weekly applications submitted in the months before the pandemic began.

Fewer workers being laid off comes as hiring is picking up, with states lifting restrictions on gatherings at restaurants, baseball stadiums and tourist venues. Americans, who are increasingly vaccinated against Covid-19, are more willing to spend time and money outside their homes. Consumer spending is the...

Federal Reserve Chairman Jerome Powell expressed no worry Wednesday about a range of data showing multiyear highs in the projected path of inflation.

In fact, Mr. Powell said the Fed wants higher inflation expectations, in light of the central bank’s desire to see inflation overshoot its 2% target to make up for periods when readings have fallen short.

“Inflation...

WASHINGTON—The Federal Reserve held its key interest rate near zero and said it plans to continue supporting the economic recovery, while acknowledging recent progress in growth and employment.

Fed officials voted unanimously Wednesday to maintain the central bank’s policies, aimed at holding down borrowing costs, until the economy heals further from the effects of the Covid-19 pandemic.

“Amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened,” the Fed said in a statement released after the conclusion of its two-day policy meeting. “The sectors most adversely affected by the pandemic remain weak but have shown improvement. Inflation has risen, largely reflecting transitory factors.”

The Fed has held overnight interest rates near zero since March 2020, when the Covid-19 pandemic and related restrictions delivered a severe blow to the economy. Since June, the central bank has also been...

WASHINGTON—The Federal Reserve held its key interest rate near zero and said it plans to continue supporting the economic recovery, while acknowledging recent progress in growth and employment.

Fed officials voted unanimously Wednesday to maintain the central bank’s policies, aimed at holding down borrowing costs, until the economy heals further from the effects of the Covid-19 pandemic.

“Amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened,” the Fed said in a statement released after the conclusion of its two-day policy meeting. “The sectors most adversely affected by the pandemic remain weak but have shown improvement. Inflation has risen, largely reflecting transitory factors.”

The Fed has held overnight interest rates near zero since March 2020, when the Covid-19 pandemic and related restrictions delivered a severe blow to the economy. Since June, the central bank has...

A decade ago Germany’s intransigence over bailouts and borrowing prolonged the eurozone’s sovereign debt crisis, one reason the region’s economic recovery lagged behind the U.S.’s.

Another crisis, another lagging recovery for Europe, and again the size of fiscal stimulus is a factor. But Germany isn’t the obstacle it once was, and the rise of its Green Party could further push both country and continent toward the U.S. model of aggressive government stimulus.

Angela Merkel, the conservative chancellor who has led Germany since 2005, has already eased some of her past opposition to borrowing. She isn’t running for re-election this September and polls put the Greens in second place, close behind Ms. Merkel’s Christian Democratic Union-led alliance. They could emerge as either junior partner or even leader of the next governing coalition.

The Greens have evolved from an antinuclear pacifist party to a pragmatic left-of-center group that regularly...

Consumers’ confidence in the U.S. economy rose sharply in April, marking the fourth straight month of gains as more people received vaccinations, stimulus payments reached households and businesses more fully reopened.

The consumer confidence index increased to 121.7 in April from a revised 109.0 in March, the Conference Board said Tuesday.

Recent improvements led the index to a more than one-year high, with the indicator approaching the pre-pandemic level of 132.6 in February 2020.

“Consumers were more upbeat about their income prospects, perhaps due to the improving job market and the recent round of stimulus checks,” said Lynn Franco, senior director of economic indicators at the Conference Board.

The labor market has recently shown signs of accelerating. Employers created more than 900,000 new jobs in March and the unemployment rate ticked down to 6%. Worker filings for unemployment claims have also declined to pandemic lows in recent...