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Danielle DiMartino Booth: Powell “wants to break the back of the market psyche”

Earlier this year, the combination of prolonged ultra-loose economic policy, broken supply chains and the tumultuous geopolitical landscape led to rocketing…

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Earlier this year, the combination of prolonged ultra-loose economic policy, broken supply chains and the tumultuous geopolitical landscape led to rocketing inflation in the United States, a country that had struggled to keep its head above the self-selected 2% target.

Facing eye-watering, four-decade highs in the CPI, Governor Powell began hiking rates in March. Since then, the Fed has raised the benchmark fed funds rate by 300 bps, settling on a corridor of 3% – 3.25% this month.

In last week’s meeting, the Fed raised rates by 75 bps for the third consecutive time, thrice the standard rate of monetary tightening.

As reported previously on Invezz, the latest CPI data registered a disappointing 8.3% with core inflation being above expectations.

Given the rate of rising prices, Krishna Guha, Vice-Chairman of Evercore ISI and previously, an Executive Vice President at the New York Fed, believes that,

The Fed has to do more on rates.

Although the Fed’s 75 bps hike was widely expected, the FOMC’s announcement at the September meeting shook markets as the S&P 500 plummeted to below 3,700 levels, tremendous volatility gripped the treasury market and the DXY sped to 114.0 at the time of writing.

The key driver for the panic was the Fed’s Summary of Economic Projections and in particular, the much-awaited dot-plot.

Source: Federal Reserve

Essentially, the dot-plot shows the opinion of each FOMC member as well as the presidents of each Fed bank, on where they think the Federal Funds rate should be headed.  To the dismay of the markets, rates appear to be on track to tighten by another 125 bps during this calendar year itself, i.e., is expected to reach 4.25-4.5% in the December meeting.

The plot further suggests that Fed leadership is expecting to hike in 2023 before settling near 5%.

This graph requires caution while interpreting and is only reflective of the opinions of the individual Fed participants. As announced many times before, the Fed is a data-driven institution, which means new developments could alter this path.

Do note that the dots are positioned at the mid-point of a range, and do not indicate a precise target rate.

Geoff Dennis, independent emerging markets commentator, adjunct Assistant Professor at St. Mary’s College of California, and previously Head of Global Emerging Markets Strategy at UBS in Boston, noted,

There was no need for the Fed to signal so overtly that Fed Funds would be raised by another 75 basis points (in the) next meeting before a potential slowdown to a 50 bps hike in the last meeting of 2022…. inflation is not accelerating; it is falling on both core and headline, just less rapidly than the market was assuming.

Source: US Bureau of Labor Statistics

In the most recent CPI data, high core inflation of 0.6% had caused the market to panic, even though there were four previous readings of above 0.6 – 0.7% in 2022.

What about the lag?

It is well-known that monetary policy transmission does not occur instantly in any economy. There is a lag between the Fed’s decision-making and the unravelling of the full impact on the ground.

The Federal Reserve Bank of San Francisco states that,

The lags can vary a lot, too. For example, the major effects on output can take anywhere from three months to two years. And the effects on inflation tend to involve even longer lags, perhaps one to three years, or more.

The difficulty is that with its emphasis on accelerated rate hikes, the Fed could quite conceivably hike too hard, too fast, and trigger an economic recession, or even worse.

For instance, Lacy Hunt, Chief Economist at Hoisington Investment Management Company said,

Inflation rate has clearly peaked and is heading downward.

However, some eminent names are in support of the Fed’s move to continue tightening.

Former Dallas Fed President Richard Fisher did not mince his words,

…they got work to do. The business of the landing, hard or soft, the greater evil is inflation if you’re a central banker.

Guha concurs, arguing that,

I think the Fed has no choice but to err in the direction of doing a bit too much because the cost of allowing high and variable inflation to become embedded in the US economy is greater, significantly than the cost of causing a recession…

Most interestingly, he believes that the Fed can bring prices in line with an acceptable trajectory in the medium to long run, noting:

…on a two to three-year time horizon and beyond, the Fed owns inflation in the US, period. 

Somewhat contrary to Fisher’s and Guha’s stance, the Fed itself appears to be reluctant to acknowledge the rising probability that a recession could occur at all.

According to Mike Shedlock, an investment advisor for SitkaPacific Capital Management who runs the popular blog MishTalk, monetary policymakers are,

Purposely and wimpishly ducking recession calls, the Fed never directly projects recessions. But from where we are now, their 2022 GDP forecast goes beyond wildly optimistic and implies no recession…. It’s much easier politically to keep hiking rates if you do not forecast a recession, than if you do. 

The Fed needs to think about slowing down

In an interview with Bloomberg, Danielle DiMartino Booth, CEO of Quill Intelligence, and an advisor to the Dallas Fed from 2006 to 2015 claimed that,

…(Jay Powell) knows (that) a year from now we are not going to be so crazy worried about inflation and yet he’s going to keep going.

Echoing Dennis, Hunt and Booth, the Federal Reserve Bank of New York’s Center for Microeconomic Data’s Survey of Consumer Expectations dated September 12th, found that both one-year and three-year-ahead inflation expectations declined steeply, while home price expectations fell below pre-pandemic levels.

As noted in my earlier article, shelter inflation in the US is calculated in a manner that usually causes the index to lag other components of the CPI. With housing accounting for two-fifths of the core CPI and having eased by two-thirds since April 2022, there is likely a lag adjustment period during which reported CPI figures will appear more durable than they are.

An incensed Jeremy Seigel, the Russell E. Palmer Professor Emeritus of Finance at Wharton, University of Pennsylvania, also pointed to falling commodity prices as part of the evidence that consumer prices are easing.

To keep up to date, check out Invezz’s latest research on global commodities.

But then why tighten so hard into a recession?

Knowing that monetary policy is a lagged enterprise and with signs of easing, is the Fed right to keep hiking as aggressively as they are indicating?

Over the weekend, Dennis noted,

 (I) was asked in a media interview if the Fed ‘wanted’ to drive the economy into recession. I said no, but sometimes you wonder… (there is) no reason for policy overkill… the risk of recession has materially increased.

One potential argument for the actions of the Fed is that it is tired of its waning market credibility.

In the run-up to the Fed meeting, despite Powell’s committed rhetoric, and the aggressive hawkishness at the Jackson Hole conference (commentary of which is available in my earlier article), markets still expected the Fed to ultimately capitulate and ease financial conditions, i.e., show weakness in their resolve to tackle high inflation.

This is the reality of the Fed put, the idea that if equity markets and other financial instruments begin to lose value too fast, monetary authorities will step in and provide support with highly accommodative policies no matter what.

As per Mott Capital Management, in a September 18th piece titled, “The Fed Needs to Break the Market at This Week’s Meeting”, fed funds futures markets continued to price in rate cuts before the end of 2023, contrary to Powell’s announcements.

Since the Fed can only take action on short-term rates, aggressive forward guidance would be needed to convince the markets that inflation will be brought down, and kept down at any cost. Where better to signal such intent than the September dot-plot?

Given the Fed’s shaky market credibility, Mott Capital Management argued that the September dot-plot had to communicate that rates would continue to be hiked and would stay high – a goal it seems to have met in an emphatic fashion.

Post the meeting, Booth went on to say:

I think the fed has already told us that they are going too far… It’s not inflation, he’s already seeing signs of disinflation in discretionary goods. We’ve all seen signs of housing turning…and that to me means he (Powell) wants to break the market psyche of the fed is always going to have your back.

To reiterate, Booth believes that Fed hawkishness is not about inflation, or at the least, not just about inflation.

This is an altogether different possibility. The Fed may continue to raise rates not to keep inflation in check, but to convince markets that they will not falter in that quest.

In short, the Fed wants to establish its independence from the market, and drive its own monetary policy in a break from collaborative and responsive central banking over the past decade.

In the recent past, the Fed has been especially weighed down by its inability to reach 2%, its premature policy reversal in 2019, and then its insistence that inflation was transient. To exorcise these ghosts, Powell would have to break the Fed put.

If Booth is correct, expect much more destruction in financial markets in the time to come.

The post Danielle DiMartino Booth: Powell “wants to break the back of the market psyche” appeared first on Invezz.

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First-ever social responsibility report of Chinese enterprises in Saudi Arabia incorporates BGI Genomics projects

On December 1, 2022, the Social Responsibility Report of Chinese Companies in Saudi Arabia was officially launched, which is the first such report released…

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On December 1, 2022, the Social Responsibility Report of Chinese Companies in Saudi Arabia was officially launched, which is the first such report released by the Contact Office of Chinese Companies in Saudi Arabia. BGI Genomics projects in the Kingdom have been incorporated into this report.

Credit: BGI Genomics

On December 1, 2022, the Social Responsibility Report of Chinese Companies in Saudi Arabia was officially launched, which is the first such report released by the Contact Office of Chinese Companies in Saudi Arabia. BGI Genomics projects in the Kingdom have been incorporated into this report.

This event was attended by around 150 representatives of Chinese and Saudi enterprises, Saudi government officials, experts in the field of sustainable development, CCTV, Xinhua News Agency, Saudi Press Agency, Arab News and other media professionals. This Report presents the key projects and best practices of Chinese enterprises to fulfil their social and environmental responsibilities while advancing the Kingdom’s industry development.

Chen Weiqing, the Chinese ambassador to Saudi Arabia, said in his video speech that the Report highlighted Chinese enterprises’ best practices in serving the local community, safe production, green and low-carbon development and promoting local employment. The release of the Report helps Chinese enterprises in the Kingdom to strengthen communication with the local community, laying a stronger foundation for future collaboration.

Epidemic control and accelerating post-COVID 19 recovery

BGI Genomics has been fulfilling its corporate social responsibilities and worked with the Saudi people to fight the COVID-19 epidemic.

In March 2020, Saudi Arabia was hit by the pandemic. The Saudi government decided to adopt BGI Genomics’ Huo-Yan laboratory solution in April 2020. At the forefront of the fight against the epidemic, the company has built six laboratories in Riyadh, Makkah, Madinah, Dammam and Asir within two months, with a total area of nearly 5,000 square meters and a maximum daily testing throughput of 50,000 samples.

By the end of December 2021, BGI Genomics had sent 14 groups of experts, engineers and laboratory technicians to Saudi Arabia, amounting to over 700 people, and tested more than 16 million virus samples, accounting for more than half of the tests conducted during this period. The company has successfully trained over 400 qualified Saudi technicians, and all laboratories have been transferred to local authorities for the operation.

In the post-epidemic era, the Huo-Yan laboratories can continue to make positive contributions to public health, working with local medical institutions and the public health system to make breakthroughs in areas such as reproductive health, tumour prevention and control, and prevention.

Enhancing genomic technology localization and testing capabilities

In July 2022, BGI Almanahil and Tibbiyah Holdings, a wholly owned subsidiary of the Saudi Faisaliah Group, announced a joint venture (JV) to establish an integrated, trans-omics medical testing company specializing in genetic testing.

This JV company will help improve Saudi Arabia’s local clinical and public health testing and manufacturing capabilities, promote the localization of strategic products that have long been imported, contribute to the implementation and realization of the Kingdom’s Vision 2030 roadmap, and significantly enhance local capacity for third-party medical testing services as well as local production of critical medical supplies.

BGI Genomics attaches great importance to fulfilling its corporate social responsibility and has released its social responsibility report for four consecutive years since 2017. Since its establishment, the company has always been guided by the goal of enhancing health outcomes for all, relying on its autonomous multi-omics platform to accelerate technological innovation, promote reproductive health, strengthen tumour prevention and control, and accurately cure infections, and is committed to becoming a global leader in precision medicine and covering the entire public health industry chain.

The company will continue to work together with all stakeholders to contribute to the Kingdom’s Vision 2030 and the Belt and Road Initiative and looks forward to growing with our partners.

 

About BGI Genomics

BGI Genomics, headquartered in Shenzhen China, is the world’s leading integrated solutions provider of precision medicine. Our services cover over 100 countries and regions, involving more than 2,300 medical institutions. In July 2017, as a subsidiary of BGI Group, BGI Genomics (300676.SZ) was officially listed on the Shenzhen Stock Exchange.

 


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Alcohol deaths in the UK rose to record level in 2021

Nearly 10,000 people died from alcohol in 2021.

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Deaths from alcohol in the UK have risen to their highest level since records began in 2001, according to the latest data from the Office for National Statistics (ONS). In 2021, 9,641 people (14.8 per 100,000) died as a result of alcohol: a rise of 7.4% from 2020.

The leading cause of alcohol-specific deaths (deaths caused by diseases known to be a direct consequence of alcohol) continues to be liver disease. More than three-quarters (78%) of all alcohol deaths in 2021 were attributed to this cause. The remainder of the deaths were due to “mental and behavioural disorders because of the use of alcohol” and “accidental poisoning by, and exposure to, alcohol”.

Although there is no such thing as a safe level of drinking, and many people would feel the health benefits of reducing consumption, most of the risks of developing health problems and dying are skewed towards those who drink the most.

Between 2012 and 2019 alcohol-specific deaths remained relatively stable. It is no coincidence that deaths rose sharply during the first two years of the pandemic: those that were already drinking at harmful levels increased their consumption further during this period. Although liver disease can take years to develop, this process is accelerated when those drinking at harmful levels increase their consumption further.

Other statistics show that unplanned alcohol-related hospital admissions decreased during this period, which may have meant missed opportunities to provide help for those people experiencing problems with alcohol.

Looking beyond the headline figures, there are important differences in various groups within the population. Alcohol-specific deaths were not spread equally. For example, men were twice as likely to die as women. In 2021, 20.1 men per 100,000 died compared with 9.9 women.

Where you live in the UK matters, too, as deaths in Scotland are the highest, followed by Northern Ireland, Wales then and England – although the gap between the nations seems to be narrowing.

In England, deaths are highest in the north-east of England (20.4 per 100,000), which is twice as high as those in London (10.2 per 100,000). Although rates have increased in all regions; for example, there was a rise of 38% in south-west England from 2019 to 2021. This reflects what is already known about the relationship between deprivation and harm from alcohol. There is a two to fivefold higher risk of dying among lower-income groups compared with those from the higher-income groups.

Reflecting the growing trend of young people drinking less than older age groups, it is those aged 50 to 64 that account for most deaths due to liver disease. In 2021, for example, 39 people aged 25 to 29 died from alcohol-related liver disease, compared with 1,326 of those aged 50 to 59. This is related to a greater number of years of drinking but is also a general reflection that when older adults were younger, they tended to drink more than younger people do now.

Numbers of alcohol-specific deaths, by five-year age group and individual cause. Office for National Statistics – Alcohol-specific deaths in the UK: registered in 2021, National Records of Scotland and the Northern Ireland Statistics and Research Agency

Addressing harms

So what can be done to begin to address alcohol harms? It has been estimated that almost a quarter of drinkers in the UK drink above the recommended low-risk drinking guidelines. So this is a health and social issue that requires a national response. Low-impact initiatives, such as education and awareness raising, may not be enough.

The costs of alcohol to society are significant. A recent review estimated this to be £27 billion annually, with only half of this offset by tax revenue on alcohol products.

Timely access to specialist treatment can help to reduce the health risks associated with alcohol. Unfortunately, there have been significant cuts to funding for this type of intervention.

Around 80% of people classed as dependent on alcohol in England are not currently getting treatment support. While there has recently been extra funding for drug services to try and correct historic cuts, this has not been extended to alcohol. Reversing this by investing in services could help to reduce the rising number dying prematurely from alcohol.

A new strategy is long overdue

The last government strategy for alcohol was published in 2012, so there is a pressing need for a new one. This must address all the ways that the harms from alcohol can be tackled, from marketing and pricing to specialist treatment and recovery services.

A group, led by Liverpool MP Dan Carden, with cross-party support, recently called on the government to initiate an independent review of alcohol harm, along the lines of the review led by Dame Carol Black, which had a significant influence on drug policy and treatment funding.

Without such a review and strategy based on it, the harms caused by alcohol including premature death will continue to rise year after year. So much has changed since the last alcohol strategy in 2012 not least the current cost of living crisis. The outlook for investment in public health looks bleak, added to which this government doesn’t seem willing to curtail the efforts of the alcohol industry in marketing and protecting its products.

Harry Sumnall receives and has received funding from grant awarding bodies for alcohol and other drug research. He sits on grant-awarding funding panels, and is an unpaid scientific adviser to the MIND Foundation.

Ian Hamilton does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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International

Alcohol deaths in the UK rose to record levels in 2021

Nearly 10,000 people died from alcohol in 2021.

Published

on

By

There has been a record rise in deaths from alcohol in the UK, according to the latest data from the Office for National Statistics (ONS). In 2021, 9,641 people died as a result of alcohol: a rise of 7.4% from 2020.

The leading cause of alcohol-specific deaths (deaths caused by diseases known to be a direct consequence of alcohol) continues to be liver disease. More than three-quarters (78%) of all alcohol deaths in 2021 were attributed to this cause. The remainder of the deaths were due to “mental and behavioural disorders because of the use of alcohol” and “accidental poisoning by, and exposure to, alcohol”.

Although there is no such thing as a safe level of drinking, and many people would feel the health benefits of reducing consumption, most of the risks of developing health problems and dying are skewed towards those who drink the most.

Between 2012 and 2019 alcohol-specific deaths remained relatively stable. It is no coincidence that deaths rose sharply during the first two years of the pandemic: those that were already drinking at harmful levels increased their consumption further during this period. Although liver disease can take years to develop, this process is accelerated when those drinking at harmful levels increase their consumption further.

Other statistics show that unplanned alcohol-related hospital admissions decreased during this period, which may have meant missed opportunities to provide help for those people experiencing problems with alcohol.

Looking beyond the headline figures, there are important differences in various groups within the population. Alcohol-specific deaths were not spread equally. For example, men were twice as likely to die as women. In 2021, 20.1 men per 100,000 died compared with 9.9 women.

Where you live in the UK matters, too, as deaths in Scotland are the highest, followed by Northern Ireland, Wales then and England – although the gap between the nations seems to be narrowing.

In England, deaths are highest in the north-east of England (20.4 per 100,000), which is twice as high as those in London (10.2 per 100,000). Although rates have increased in all regions; for example, there was a rise of 38% in south-west England from 2019 to 2021. This reflects what is already known about the relationship between deprivation and harm from alcohol. There is a two to fivefold higher risk of dying among lower-income groups compared with those from the higher-income groups.

Reflecting the growing trend of young people drinking less than older age groups, it is those aged 50 to 64 that account for most deaths due to liver disease. In 2021, for example, 39 people aged 25 to 29 died from alcohol-related liver disease, compared with 1,326 of those aged 50 to 59. This is related to a greater number of years of drinking but is also a general reflection that when older adults were younger, they tended to drink more than younger people do now.

Numbers of alcohol-specific deaths, by five-year age group and individual cause. Office for National Statistics – Alcohol-specific deaths in the UK: registered in 2021, National Records of Scotland and the Northern Ireland Statistics and Research Agency

Addressing harms

So what can be done to begin to address alcohol harms? It has been estimated that almost a quarter of drinkers in the UK drink above the recommended low-risk drinking guidelines. So this is a health and social issue that requires a national response. Low-impact initiatives, such as education and awareness raising, may not be enough.

The costs of alcohol to society are significant. A recent review estimated this to be £27 billion annually, with only half of this offset by tax revenue on alcohol products.

Timely access to specialist treatment can help to reduce the health risks associated with alcohol. Unfortunately, there have been significant cuts to funding for this type of intervention.

Around 80% of people classed as dependent on alcohol in England are not currently getting treatment support. While there has recently been extra funding for drug services to try and correct historic cuts, this has not been extended to alcohol. Reversing this by investing in services could help to reduce the rising number dying prematurely from alcohol.

A new strategy is long overdue

The last government strategy for alcohol was published in 2012, so there is a pressing need for a new one. This must address all the ways that the harms from alcohol can be tackled, from marketing and pricing to specialist treatment and recovery services.

A group, led by Liverpool MP Dan Carden, with cross-party support, recently called on the government to initiate an independent review of alcohol harm, along the lines of the review led by Dame Carol Black, which had a significant influence on drug policy and treatment funding.

Without such a review and strategy based on it, the harms caused by alcohol including premature death will continue to rise year after year. So much has changed since the last alcohol strategy in 2012 not least the current cost of living crisis. The outlook for investment in public health looks bleak, added to which this government doesn’t seem willing to curtail the efforts of the alcohol industry in marketing and protecting its products.

Harry Sumnall receives and has received funding from grant awarding bodies for alcohol and other drug research. He sits on grant-awarding funding panels, and is an unpaid scientific adviser to the MIND Foundation.

Ian Hamilton does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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