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Peer Into the Crystal Ball: Will BTC Halving Echo Fate of BCH and BSV?

Peer Into the Crystal Ball: Will BTC Halving Echo Fate of BCH and BSV?

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4 years ago

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With the Bitcoin halving less than three weeks away, pundits predict the hash rate distribution to revert to the optimized pre-halving state.

With the Bitcoin (BTC) halving only weeks away, anticipation appears to be building up as Google Trends data for the event show online searches reaching an all-time high. Bitcoin’s block reward halving comes following that of Bitcoin Cash (BCH) and Bitcoin SV (BSV), where miners moved their hashing power to the BTC Chain.

Several crypto pundits point to the halving potentially having a significant impact on the BTC spot price. Indeed, Bitcoin’s two previous halvings — November 2012 and July 2016 — have each been precursors to a new, all-time price high for BTC.

However, the situation in the crypto and mainstream market in 2020 differs greatly from the two other halvings. The economic downturn occasioned by the current COVID-19 pandemic has added to stressors such as the 2018 bear market, hash wars and a litany of stricter government regulations.

Lessons from the BCH and BSV halvings

As previously reported by Cointelegraph, the BCH and BSV halvings occurred this year on April 8 and April 10, respectively, as both chains reached their 630,000 block milestones. This event triggered a 50% reduction in the block reward for miners on the two networks.

Following the halving for both Bitcoin Cash and Bitcoin SV, miners reportedly moved their computing power to the Bitcoin chain, which is still operating under the 12.5 BTC block reward regime. The miner exodus resulted in a huge hash rate decline for the BCH and BSV blockchains, while BTC’s share of the hash rate distribution among all three chains increased significantly.

The hash rate decline also temporarily left both chains susceptible to 51% attacks in which, theoretically, a rogue actor controlling more than 50% of the network could have rolled back transactions and double-spent tokens. Since the halving, data from Crypto51.app — a platform that monitors the vulnerability of proof-of-work blockchains like BCH to such attacks — has shown an increase in the theoretical cost of a 51% attack of both chains.

Despite the hash rate decline, miners with a vested interest in either chain continued to dedicate their computing power to secure the networks. Given the significantly higher profitability for miners on the BTC chain as opposed to the other two networks, some crypto pundits characterized miners’ decision to remain on BCH and BSV as “crypto socialism.”

In an email to Cointelegraph at the time, Alex Speirs, head of communication at the Bitcoin Association, countered the notion of crypto socialism and irrational mining. According to Speirs, Bitcoin creator Satoshi Nakamoto only intended for block subsidies to be a temporary reward for miners, with transaction fees being the actual long-term incentives to remain on the network.

On the price side, the halving did not trigger any meaningful upward momentum, as both BCH and BSV declined following the event. Since the halving, the BCH and BSV spot price has lost even more ground, declining by 15% and 10% respectively.

What happens to the hash rate distribution after the Bitcoin halving?

The halving events for Bitcoin Cash and Bitcoin SV saw similar trends emerging in the immediate aftermath, bringing up the question of whether both events provided an early indicator for the Bitcoin halving in May. Once the Bitcoin halving is complete, all three chains will operate on the same block reward amount — 6.25 units of their individual native currency — with mining profitability likely to once again be the major determining factor in deciding the chain chosen by miners.

Ali Beikverdi, CEO of Seoul-based crypto exchange deployment service bitHolla, thinks the reaction of miners to the Bitcoin halving will be different from the trend observed in the earlier BCH and BSV halvings. In a conversation with Cointelegraph, Beikverdi characterized both BSV and BCH as suffering from “extreme centralization,” and thus unsuitable for being used as an indicator of the likely result of the upcoming BTC halving. Criticisms over the perceived centralization of BSV and BCH are usually centered on the relatively larger block sizes of both chains in comparison to BTC.

This perceived centralization also covers the mining arena. For BCH, pools either owned or backed by heavyweights like Roger Ver and Bitmain’s Jihan Wu control the greater majority of the network’s hash rate distribution. For BSV, the situation is very similar, with pools affiliated to Bitcoin SV proponents like self-proclaimed Bitcoin creator Craig Wright and billionaire Calvin Ayre dominating the arena.

Indeed, the block size debate has been at the heart of the hard forks that led to the creation of both Bitcoin Cash and Bitcoin SV. In theory, larger block sizes lead to more centralization, as the resources required to run nodes, such as bandwidth and disk space, could restrict a significant number of participants on the network.

The miner exodus from BSV and BCH caused the Bitcoin share of the hash rate distribution across the three chains to hover between 96% and 99%. More than a week has passed since the two halvings, and the miners are still devoting their hash power to the BTC chain. Following the Bitcoin Cash and Bitcoin SV halvings, some pundits who spoke to Cointelegraph characterized the movement of hashing power to BTC as only a temporary trend that would revert itself once Bitcoin’s own block reward reduced by 50%.

According to Sonny Meraban, CEO of Bitcoin of America — a Bitcoin ATM operator and United States-licensed crypto exchange — the hash rate distribution will revert to the established pre-halving paradigm. In a conversation with Cointelegraph, Meraban opined:

“There’ll likely be a rebalance back towards where we stood pre-halving (which was about 3% for BCH and BSV, 94% for BTC), maybe slightly up for the smaller coins short-term but not much more than that. Hash rate balances were fairly optimized towards profitability pre-halvings, and the nature of the halvings means that they should be back in that same balance after it.”

Mining giants loading up

The upcoming Bitcoin halving also presents a new challenge for miners, as energy efficiency is likely to be a major focus for market participants. With the block reward dropping from 12.5 BTC to 6.25 BTC, Bitcoin miners will be looking to deploy hardware solutions with a significantly lower watt per terahash ratio.

The W/T ratio refers to the amount of electricity required by a Bitcoin mining machine to complete one terahash of computing on the network. Within the crypto mining market, this ratio is a measure of the efficiency of a cryptocurrency mining machine.

Already, Chinese BTC miners such as Bitmain and MicroBT are reportedly set to deploy new mining hardware with lower W/T ratios, which means greater efficiency. Market rivals are looking to leverage improvements in chipset technology to deliver configurations that ensure gross profit margins do not decline due to the reduced block reward subsidy scheme brought on by the halving.

At the intersection of lower block rewards and newer hardware, smaller miners could find their ability to compete coming under increasing threat. Beikverdi highlighted the coming struggles for some BTC miners, stating that the halving will squeeze out some miners, as “the life cycle of Bitcoin miners always gets a huge shock after each halving but tends to take time as miners slowly unpack their operations.” For the bitHolla CEO, the departure of these smaller capacity miners will not happen overnight. He added:

“It is important to note that miners don’t have a quick way to unwind their business operations and generally have to follow their energy contracts. This means it could take 6–12 months for miners to finish the energy contracts that they have. It isn’t like a normal operation where you pay month-by-month. Mining is typically longer 6 to 12 months business cycles which takes time for weaker miners to fold.”

The current price struggles in the oil market could also play a role in the destinies of Bitcoin miners. In recent times, a key business relationship appears to have emerged between miners and energy producers, with the former becoming a “buyer of last resort” for the latter.

Taking upstream oil companies as an example, amid measures to curb gas flaring due to environmental considerations, some Bitcoin mining firms in North America have used the excess gas from these oil wells to power their data centers. On April 20, 2020, the price of West Texas Intermediate crude futures fell below $0. Should the price of the futures on other crude grades take a beating, wells could shut down in several locations, impacting the activity of some Bitcoin miners.

However, with China accounting for the greater majority of the Bitcoin hash rate, a price crash in the oil market might do little to affect the operations of BTC miners. While more than 71% of China’s electricity is generated from nonrenewable sources, this amount is spread among coal and natural gas, to mention a few.

Hash rate recovery and pre-halving hodling

Back in March, Cointelegraph reported that the Bitcoin hash rate had declined by about 45% from its 2020 peak. The reduction in the computing power expended to secure the network came at a time when the BTC spot price was still in recovery from the “Black Thursday” crash that saw Bitcoin briefly fall to $3,800 on March 12, 2020.

Following the hash rate plunge, the Bitcoin network saw its mining difficulty decline by 16% — the second-largest downward difficulty adjustment. The blockchain’s mining fundamentals have improved significantly since the events of late March 2020, with the current hash rate almost erasing the earlier drop.

Related: Hash Rate Spike Relates to BTC Price, but Halving Throws Miners Off Their Game

While miners are providing computing power to secure the network, Bitcoin holders appear to be storing up BTC in expectation of a post-halving price boom. Earlier in April, Cointelegraph reported that crypto exchanges are recording large outflows, which could indicate a pivot toward long-term holding by Bitcoin owners.

Additionally, it is possible that some U.S.-based crypto owners may have been using their COVID-19 stimulus checks to buy Bitcoin. Data from Coinbase showed a four-fold increase in crypto purchases worth $1,200, the exact sum of the stimulus payments.

For Joe DiPasquale, CEO of crypto hedge fund BitBull Capital, the upcoming halving will largely follow historical precedents in having a positive impact on the BTC spot price. In a conversation with Cointelegraph, DiPasquale remarked:

“The upcoming Bitcoin halving is likely to have a positive impact on BTC’s price in the next 12 to 18 months. The last two halvings saw massive price appreciation in the same periods, with the first posing a 1000x gain in a year while the second taking longer, but delivering even bigger returns.”

The BitBull Capital chief, however, tempered expectations citing the tightening of crypto regulations and the emergence of central bank digital currencies, but is overall expecting some upward momentum for Bitcoin, adding that “the halving is a positive milestone for Bitcoin, especially in contrast to inflationary fiat currencies.” Meraban also offered a similarly subdued forecast for the Bitcoin price performance after the May halving, stating:

“BTC should experience tremendous growth over the next 12–18 months, but it will be perhaps slower than people might tend to expect; we actually saw that already in 2016, but it could easily be even slower this time. Cryptocurrencies are retail-driven markets more than anything else, and there’s just too many uncertainties as of yet over what the implications in retail demand in both Western and Asian markets for cryptocurrencies will be with regards to the current global climate.”

Since falling to $3,800 in mid-March, the top-ranked crypto by market capitalization has been unable to regain its 2020 starting price of $7,200. Bitcoin has seen over half a dozen rejections between the $7,100 and $7,500 resistance levels with each attempt causing a drawdown back to the $6,800 price mark.

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Profits over patients: For-profit nursing home chains are draining resources from care while shifting huge sums to owners’ pockets

Owners of midsize nursing home chains harm the elderly and drain huge sums of money from facilities using opaque accounting practices while government…

Published

31 mins ago

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March 18, 2024

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The for-profit nursing home sector is growing, and it places a premium on cost cutting and big profits, which has led to low staffing and patient neglect and mistreatment. picture alliance via Getty Images

The care at Landmark of Louisville Rehabilitation and Nursing was abysmal when state inspectors filed their survey report of the Kentucky facility on July 3, 2021.

Residents wandered the halls in a facility that can house up to 250 people, yelling at each other and stealing blankets. One resident beat a roommate with a stick, causing bruising and skin tears. Another was found in bed with a broken finger and a bloody forehead gash. That person was allowed to roam and enter the beds of other residents. In another case, there was sexual touching in the dayroom between residents, according to the report.

Meals were served from filthy meal carts on plastic foam trays, and residents struggled to cut their food with dull plastic cutlery. Broken tiles lined showers, and a mysterious black gunk marred the floors. The director of housekeeping reported that the dining room was unsanitary. Overall, there was a critical lack of training, staff and supervision.

The inspectors tagged Landmark as deficient in 29 areas, including six that put residents in immediate jeopardy of serious harm and three where actual harm was found. The issues were so severe that the government slapped Landmark with a fine of over US$319,000 − more than 29 times the average for a nursing home in 2021 − and suspended payments to the home from federal Medicaid and Medicare funds.

But problems persisted. Five months later, inspectors levied six additional deficiencies of immediate jeopardy − the highest level.

Landmark is just one of the 58 facilities run by parent company Infinity Healthcare Management across five states. The government issued penalties to the company almost 4½ times the national average, according to bimonthly data that the Centers for Medicare & Medicaid Services first started to make available in late 2022. All told, Infinity paid nearly $10 million in fines since 2021, the highest among nursing home chains with fewer than 100 facilities.

Infinity Healthcare Management and its executives did not respond to multiple requests for comment.

Race to the bottom

Such sanctions are nothing new for Infinity or other for-profit nursing home chains that have dominated an industry long known for cutting corners in pursuit of profits for private owners. But this race to the bottom to extract profits is accelerating, despite demands by government officials, health care experts and advocacy groups to protect the nation’s most vulnerable citizens.

To uncover the reasons why, The Conversation delved into the nursing home industry, where for-profit facilities make up more than 72% of the nation’s nearly 14,900 facilities. The probe, which paired an academic expert with an investigative reporter, used the most recent government data on ownership, facility information and penalties, combined with CMS data on affiliated entities for nursing homes.

The investigation revealed an industry that places a premium on cost cutting and big profits, with low staffing and poor quality, often to the detriment of patient well-being. Operating under weak and poorly enforced regulations with financially insignificant penalties, the for-profit sector fosters an environment where corners are frequently cut, compromising the quality of care and endangering patient health.

Meanwhile, owners make the facilities look less profitable by siphoning money from the homes through byzantine networks of interconnected corporations. Federal regulators have neglected the problem as each year likely billions of dollars are funneled out of nursing homes through related parties and into owners’ pockets.

More trouble at midsize

Analyzing newly released government data, our investigation found that these problems are most pronounced in nursing homes like Infinity − midsize chains that operate between 11 and 100 facilities. This subsection of the industry has higher average fines per home, lower overall quality ratings, and are more likely to be tagged with resident abuse compared with both the larger and smaller networks. Indeed, while such chains account for about 39% of all facilities, they operate 11 of the 15 most-fined facilities.

With few impediments, private investors who own the midsize chains have swooped in to purchase underperforming homes, expanding their holdings even as larger chains divest and close facilities.

“They are really bad, but the names − we don’t know these names,” said Toby Edelman, senior policy attorney with the Center for Medicare Advocacy, a nonprofit law organization.

In response to The Conversation’s findings on nursing homes and request for an interview, a CMS spokesperson emailed a statement that said the CMS is “unwavering in its commitment to improve safety and quality of care for the more than 1.2 million residents receiving care in Medicare- and Medicaid-certified nursing homes.”

“We support transparency and accountability,” the American Health Care Association/National Center for Assisted Living, a trade organization representing the nursing home industry, wrote in response to The Conversation‘s request for comment. “But neither ownership nor line items on a budget sheet prove whether a nursing home is committed to its residents.”

Ripe for abuse

It often takes years to improve a poor nursing home − or run one into the ground. The analysis of midsize chains shows that most owners have been associated with their current facilities for less than eight years, making it difficult to separate operators who have taken long-term investments in resident care from those who are looking to quickly extract money and resources before closing them down or moving on. These chains control roughly 41% of nursing home beds in the U.S., according to CMS’s provider data, making the lack of transparency especially ripe for abuse.

A churn of nursing home purchases even during the pandemic shows that investors view the sector as highly profitable, especially when staffing costs are kept low and fines for poor care can easily be covered by the money extracted from residents, their families and taxpayers.

A March 2024 study from Lehigh University and the University of California, Los Angeles also shows that costs were inflated when nursing home owners switched to contractors they controlled directly or indirectly. Overall, spending on real estate increased 20.4% and spending on management increased 24.6% when the businesses were affiliated, the research showed.

“This is the model of their care: They come in, they understaff and they make their money,” said Sam Brooks, director of public policy at the Consumer Voice, a national resident advocacy organization. “Then they multiply it over a series of different facilities.”

This is a condensed version of an article from The Conversation’s investigative unit. To find out more about the rise of for-profit nursing homes, financial trickery and what could make the nation’s most vulnerable citizens safer, read the complete version.

Campbell is an adjunct assistant professor at Columbia University and a contributing writer at the Garrison Project, an independent news organization that focuses on mass incarceration and criminal justice.

Harrington is an advisory board member of the nonprofit Veteran's Health Policy Institute and a board member of the nonprofit Center for Health Information and Policy. Harrington served as an expert witness on nursing home litigation cases by residents against facilities owned or operated by Brius and Shlomo Rechnitz in the past and in 2022. She also served as an expert witness in a case against The Citadel Salisbury in North Carolina in 2021.

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Key Events This Week: Central Banks Galore Including A Historic Rate Hike By The BOJ

Key Events This Week: Central Banks Galore Including A Historic Rate Hike By The BOJ

According to DB’s Jim Reid, "this could be a landmark…

Published

2 hours ago

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March 18, 2024

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Key Events This Week: Central Banks Galore Including A Historic Rate Hike By The BOJ

According to DB's Jim Reid, "this could be a landmark week in markets as the last global holdout on negative rates looks set to be removed as the BoJ likely hikes rates from -0.1% tomorrow." That will likely overshadow the FOMC that concludes on Wednesday that will have its own signalling intrigue given recent strong inflation. We also have the RBA meeting tomorrow and the SNB and BoE meetings on Thursday to close out a big week for global central bankers with many EM countries also deciding on policy. We’ll preview the main meetings in more depth below but outside of this we have the global flash PMIs on Thursday as well as inflation reports in Japan (Thursday) and the UK (Wednesday). US housing data also permeates through the week as you'll see in the full global day-by-day week ahead at the end as usual.

Let’s go into detail now, starting with the BoJ tomorrow. We’ve had negative base rates now for 8 years which if is the longest run ever seen for any country in the history of mankind. In fact it is doubtful that pre-historic man was as generous as to charge negative interest rates on lending money prior to this! It also might be one of the longest global runs without any interest rate hikes given the 17 year run that could end tomorrow. So, as Reid puts it, a landmark event.

DB's Chief Japan economist expects the central bank to revise its policy and abandon both NIRP and the multi-tiered current account structure and set rates on all excess reserves at 0.1%. He also sees both the yield curve control (YCC) and the inflation-overshooting commitment ending, replaced by a benchmark for the pace of the bank’s JGB purchasing activity. The house view forecast of 50bps of hikes through 2025 is more hawkish than the market but risks are still tilted to the upside. On Friday, the Japan Trade Union Confederation (Rengo) announced the first tally of the results of this year's shunto spring wage negotiation. The wage increase rate, including the seniority-based wage hike, is 5.28%, which was significantly higher than expected. This year will probably see the highest wage settlements since 1991 which given Japan’s recent history is an incredible turnaround. This wage data news has firmed up expectations for tomorrow.

With regards to the FOMC which concludes on Wednesday, DB economists expect only minor revisions to the meeting statement that saw an overhaul last meeting. With regards to the SEP, the growth and unemployment forecasts are unlikely to change but the 2024 inflation forecasts potentially could; elsewhere, expect the Fed to revise up their 2024 core PCE inflation forecast by a tenth to 2.5%, although they see meaningful risks that it gets revised up even higher to 2.6%. In our economists' view, a 2.5% core PCE reading would allow just enough wiggle room to keep the 2024 fed funds rate at 4.6% (75bps of cuts). However, if core PCE inflation were revised up to 2.6%, it would likely entail the Fed moving their base case back to 50bps of cuts, as this would essentially reflect the same forecasts as the September 2023 SEP.

Beyond 2024, DB expect officials to build in less policy easing due to a higher r-star. If two of the eight officials currently at 2.5% move up by 25bps, then the long-run median forecast would edge up to 2.6%. This could be justified by a one-tenth upgrade to the long-run growth forecast. After all this information is released the presser from Powell will of course be heavily scrutinised, especially on how Powell sees recent inflation data. Powell should also provide an update on discussions around QT but it is unlikely they are ready yet to release updated guidance.

One additional global highlight this week might be a big fall in UK inflation on Wednesday, suggesting that headline CPI will slow to 3.4% (vs 4% in January) and core to 4.5% (5.1%). Elsewhere there is plenty of ECB speaker appearances including President Lagarde on Wednesday. They are all highlighted in the day-by-day guide at the end.

Courtesy of DB, here is a day-by-day calendar of events

Monday March 18

  • Data: US March New York Fed services business activity, NAHB housing market index, China February retail sales, industrial production, property investment, Eurozone January trade balance, Canada February raw materials, industrial product price index, existing home sales

Tuesday March 19

  • Data: US January total net TIC flows, February housing starts, building permits, Japan January capacity utilization, Germany and Eurozone March Zew survey, Eurozone Q4 labour costs, Canada February CPI
  • Central banks: BoJ decision, ECB's Guindos speaks, RBA decision
  • Auctions: US 20-yr Bond ($13bn, reopening)

Wednesday March 20

  • Data: UK February CPI, PPI, RPI, January house price index, China 1-yr and 5-yr loan prime rates, Japan February trade balance, Italy January industrial production, Germany February PPI, Eurozone March consumer confidence, January construction output
  • Central banks: Fed's decision, ECB's Lagarde, Lane, De Cos, Schnabel, Nagel and Holzmann speak, BoC summary of deliberations
  • Earnings: Tencent, Micron

Thursday March 21

  • Data: US, UK, Japan, Germany, France and Eurozone March PMIs, US March Philadelphia Fed business outlook, February leading index, existing home sales, Q4 current account balance, initial jobless claims, UK February public finances, Japan February national CPI, Italy January current account balance, France March manufacturing confidence, February retail sales, ECB January current account, EU27 February new car registrations
  • Central banks: BoE decision, SNB decision
  • Earnings: Nike, FedEx, Lululemon, BMW, Enel
  • Auctions: US 10-yr TIPS ($16bn, reopening)
  • Other: European Union summit, through March 22

Friday March 22

  • Data: UK March GfK consumer confidence, February retail sales, Germany March Ifo survey, January import price index, Canada January retail sales

* * *

Finally, looking at just the US, Goldman notes that the key economic data releases this week are the Philadelphia Fed manufacturing index and existing home sales reports on Thursday. The March FOMC meeting is on Wednesday. The post-meeting statement will be released at 2:00 PM ET, followed by Chair Powell’s press conference at 2:30 PM. There are several speaking engagements from Fed officials this week, including Chair Powell, Vice Chair for Supervision Barr, and President Bostic.

Monday, March 18

  • There are no major economic data releases scheduled.

Tuesday, March 19

  • 08:30 AM Housing starts, February (GS +9.4%, consensus +7.4%, last -14.8%); Building permits, February (consensus +2.0%, last -0.3%)

Wednesday, March 20

  • 02:00 PM FOMC statement, March 19 – March 20 meeting: As discussed in our FOMC preview, we continue to expect the committee to target a first cut in June, but we now expect 3 cuts in 2024 in June, September, and December (vs. 4 previously) given the slightly higher inflation path. We continue to expect 4 cuts in 2025 and now expect 1 final cut in 2026 to an unchanged terminal rate forecast of 3.25-3.5%. The main risk to our expectation is that FOMC participants might be more concerned about the recent inflation data and less convinced that inflation will resume its earlier soft trend. In that case, they might bump up their 2024 core PCE inflation forecast to 2.5% and show a 2-cut median.

Thursday, March 21

  • 08:30 AM Current account balance, Q4 (consensus -$209.5bn, last -$200.3bn)
  • 08:30 AM Philadelphia Fed manufacturing index, March (GS 3.2, consensus -1.3, last 5.2): We estimate that the Philadelphia Fed manufacturing index fell 2pt to 3.2 in March. While the measure is elevated relative to other surveys, we expect a boost from the rebound in foreign manufacturing activity and the pickup in US production and freight activity.
  • 08:30 AM Initial jobless claims, week ended March 16 (GS 210k, consensus 215k, last 209k): Continuing jobless claims, week ended March 9 (consensus 1,815k, last 1,811k)
  • 09:45 AM S&P Global US manufacturing PMI, March preliminary (consensus 51.8, last 52.2): S&P Global US services PMI, March preliminary (consensus 52.0, last 52.3)
  • 10:00 AM Existing home sales, February (GS +1.2%, consensus -1.6%, last +3.1%)
  • 02:00 PM Federal Reserve Vice Chair for Supervision Barr speaks: Federal Reserve Vice Chair Michael for Supervision Barr will participate in a fireside chat in Ann Arbor, MI with students and faculty. A moderated Q&A is expected. On February 14, Barr said the Fed is “confident we are on a path to 2% inflation,” but the recent report showing prices rose faster than anticipated in January “is a reminder that the path back to 2% inflation may be a bumpy one.” Barr also noted that “we need to see continued good data before we can begin the process of reducing the federal funds rate.”

Friday, March 22

  • 09:00 AM Fed Reserve Chair Powell speaks: The Federal Reserve Board will host a Fed Listens event in Washington D.C. on “Transitioning to the Post-Pandemic Economy.” Chair Powell will deliver opening remarks. Vice Chair Phillip Jefferson and Fed Governor Michelle Bowman will moderate conversations with leaders from various organizations. On March 6, Chair Powell noted in his congressional testimony that if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year.
  • 12:00 PM Federal Reserve Vice Chair for Supervision Barr speaks: Federal Reserve Vice Chair for Supervision Michael Barr will participate in a virtual event on “International Economic and Monetary Design.” A moderated Q&A is expected.
  • 04:00 PM Atlanta Fed President Bostic (FOMC voter) speaks: Atlanta Fed President Raphael Bostic will participate in a moderated conversation at the 2024 Household Finance Conference in Atlanta. On March 4, Bostic said, “I need to see more progress to feel fully confident that inflation is on a sure path to averaging 2% over time.” Bostic also noted, “I expect the first interest rate cut, which I have penciled in for the third quarter, will be followed by a pause in the following meeting.”

Source: DB, Goldman, BofA

Tyler Durden Mon, 03/18/2024 - 09:59

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Key Events This Week: Central Banks Galore Including A Historic Rate Hike By The BOJ

Key Events This Week: Central Banks Galore Including A Historic Rate Hike By The BOJ

According to DB’s Jim Reid, "this could be a landmark…

Published

2 hours ago

on

March 18, 2024

By

Key Events This Week: Central Banks Galore Including A Historic Rate Hike By The BOJ

According to DB's Jim Reid, "this could be a landmark week in markets as the last global holdout on negative rates looks set to be removed as the BoJ likely hikes rates from -0.1% tomorrow." That will likely overshadow the FOMC that concludes on Wednesday that will have its own signalling intrigue given recent strong inflation. We also have the RBA meeting tomorrow and the SNB and BoE meetings on Thursday to close out a big week for global central bankers with many EM countries also deciding on policy. We’ll preview the main meetings in more depth below but outside of this we have the global flash PMIs on Thursday as well as inflation reports in Japan (Thursday) and the UK (Wednesday). US housing data also permeates through the week as you'll see in the full global day-by-day week ahead at the end as usual.

Let’s go into detail now, starting with the BoJ tomorrow. We’ve had negative base rates now for 8 years which if is the longest run ever seen for any country in the history of mankind. In fact it is doubtful that pre-historic man was as generous as to charge negative interest rates on lending money prior to this! It also might be one of the longest global runs without any interest rate hikes given the 17 year run that could end tomorrow. So, as Reid puts it, a landmark event.

DB's Chief Japan economist expects the central bank to revise its policy and abandon both NIRP and the multi-tiered current account structure and set rates on all excess reserves at 0.1%. He also sees both the yield curve control (YCC) and the inflation-overshooting commitment ending, replaced by a benchmark for the pace of the bank’s JGB purchasing activity. The house view forecast of 50bps of hikes through 2025 is more hawkish than the market but risks are still tilted to the upside. On Friday, the Japan Trade Union Confederation (Rengo) announced the first tally of the results of this year's shunto spring wage negotiation. The wage increase rate, including the seniority-based wage hike, is 5.28%, which was significantly higher than expected. This year will probably see the highest wage settlements since 1991 which given Japan’s recent history is an incredible turnaround. This wage data news has firmed up expectations for tomorrow.

With regards to the FOMC which concludes on Wednesday, DB economists expect only minor revisions to the meeting statement that saw an overhaul last meeting. With regards to the SEP, the growth and unemployment forecasts are unlikely to change but the 2024 inflation forecasts potentially could; elsewhere, expect the Fed to revise up their 2024 core PCE inflation forecast by a tenth to 2.5%, although they see meaningful risks that it gets revised up even higher to 2.6%. In our economists' view, a 2.5% core PCE reading would allow just enough wiggle room to keep the 2024 fed funds rate at 4.6% (75bps of cuts). However, if core PCE inflation were revised up to 2.6%, it would likely entail the Fed moving their base case back to 50bps of cuts, as this would essentially reflect the same forecasts as the September 2023 SEP.

Beyond 2024, DB expect officials to build in less policy easing due to a higher r-star. If two of the eight officials currently at 2.5% move up by 25bps, then the long-run median forecast would edge up to 2.6%. This could be justified by a one-tenth upgrade to the long-run growth forecast. After all this information is released the presser from Powell will of course be heavily scrutinised, especially on how Powell sees recent inflation data. Powell should also provide an update on discussions around QT but it is unlikely they are ready yet to release updated guidance.

One additional global highlight this week might be a big fall in UK inflation on Wednesday, suggesting that headline CPI will slow to 3.4% (vs 4% in January) and core to 4.5% (5.1%). Elsewhere there is plenty of ECB speaker appearances including President Lagarde on Wednesday. They are all highlighted in the day-by-day guide at the end.

Courtesy of DB, here is a day-by-day calendar of events

Monday March 18

  • Data: US March New York Fed services business activity, NAHB housing market index, China February retail sales, industrial production, property investment, Eurozone January trade balance, Canada February raw materials, industrial product price index, existing home sales

Tuesday March 19

  • Data: US January total net TIC flows, February housing starts, building permits, Japan January capacity utilization, Germany and Eurozone March Zew survey, Eurozone Q4 labour costs, Canada February CPI
  • Central banks: BoJ decision, ECB's Guindos speaks, RBA decision
  • Auctions: US 20-yr Bond ($13bn, reopening)

Wednesday March 20

  • Data: UK February CPI, PPI, RPI, January house price index, China 1-yr and 5-yr loan prime rates, Japan February trade balance, Italy January industrial production, Germany February PPI, Eurozone March consumer confidence, January construction output
  • Central banks: Fed's decision, ECB's Lagarde, Lane, De Cos, Schnabel, Nagel and Holzmann speak, BoC summary of deliberations
  • Earnings: Tencent, Micron

Thursday March 21

  • Data: US, UK, Japan, Germany, France and Eurozone March PMIs, US March Philadelphia Fed business outlook, February leading index, existing home sales, Q4 current account balance, initial jobless claims, UK February public finances, Japan February national CPI, Italy January current account balance, France March manufacturing confidence, February retail sales, ECB January current account, EU27 February new car registrations
  • Central banks: BoE decision, SNB decision
  • Earnings: Nike, FedEx, Lululemon, BMW, Enel
  • Auctions: US 10-yr TIPS ($16bn, reopening)
  • Other: European Union summit, through March 22

Friday March 22

  • Data: UK March GfK consumer confidence, February retail sales, Germany March Ifo survey, January import price index, Canada January retail sales

* * *

Finally, looking at just the US, Goldman notes that the key economic data releases this week are the Philadelphia Fed manufacturing index and existing home sales reports on Thursday. The March FOMC meeting is on Wednesday. The post-meeting statement will be released at 2:00 PM ET, followed by Chair Powell’s press conference at 2:30 PM. There are several speaking engagements from Fed officials this week, including Chair Powell, Vice Chair for Supervision Barr, and President Bostic.

Monday, March 18

  • There are no major economic data releases scheduled.

Tuesday, March 19

  • 08:30 AM Housing starts, February (GS +9.4%, consensus +7.4%, last -14.8%); Building permits, February (consensus +2.0%, last -0.3%)

Wednesday, March 20

  • 02:00 PM FOMC statement, March 19 – March 20 meeting: As discussed in our FOMC preview, we continue to expect the committee to target a first cut in June, but we now expect 3 cuts in 2024 in June, September, and December (vs. 4 previously) given the slightly higher inflation path. We continue to expect 4 cuts in 2025 and now expect 1 final cut in 2026 to an unchanged terminal rate forecast of 3.25-3.5%. The main risk to our expectation is that FOMC participants might be more concerned about the recent inflation data and less convinced that inflation will resume its earlier soft trend. In that case, they might bump up their 2024 core PCE inflation forecast to 2.5% and show a 2-cut median.

Thursday, March 21

  • 08:30 AM Current account balance, Q4 (consensus -$209.5bn, last -$200.3bn)
  • 08:30 AM Philadelphia Fed manufacturing index, March (GS 3.2, consensus -1.3, last 5.2): We estimate that the Philadelphia Fed manufacturing index fell 2pt to 3.2 in March. While the measure is elevated relative to other surveys, we expect a boost from the rebound in foreign manufacturing activity and the pickup in US production and freight activity.
  • 08:30 AM Initial jobless claims, week ended March 16 (GS 210k, consensus 215k, last 209k): Continuing jobless claims, week ended March 9 (consensus 1,815k, last 1,811k)
  • 09:45 AM S&P Global US manufacturing PMI, March preliminary (consensus 51.8, last 52.2): S&P Global US services PMI, March preliminary (consensus 52.0, last 52.3)
  • 10:00 AM Existing home sales, February (GS +1.2%, consensus -1.6%, last +3.1%)
  • 02:00 PM Federal Reserve Vice Chair for Supervision Barr speaks: Federal Reserve Vice Chair Michael for Supervision Barr will participate in a fireside chat in Ann Arbor, MI with students and faculty. A moderated Q&A is expected. On February 14, Barr said the Fed is “confident we are on a path to 2% inflation,” but the recent report showing prices rose faster than anticipated in January “is a reminder that the path back to 2% inflation may be a bumpy one.” Barr also noted that “we need to see continued good data before we can begin the process of reducing the federal funds rate.”

Friday, March 22

  • 09:00 AM Fed Reserve Chair Powell speaks: The Federal Reserve Board will host a Fed Listens event in Washington D.C. on “Transitioning to the Post-Pandemic Economy.” Chair Powell will deliver opening remarks. Vice Chair Phillip Jefferson and Fed Governor Michelle Bowman will moderate conversations with leaders from various organizations. On March 6, Chair Powell noted in his congressional testimony that if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year.
  • 12:00 PM Federal Reserve Vice Chair for Supervision Barr speaks: Federal Reserve Vice Chair for Supervision Michael Barr will participate in a virtual event on “International Economic and Monetary Design.” A moderated Q&A is expected.
  • 04:00 PM Atlanta Fed President Bostic (FOMC voter) speaks: Atlanta Fed President Raphael Bostic will participate in a moderated conversation at the 2024 Household Finance Conference in Atlanta. On March 4, Bostic said, “I need to see more progress to feel fully confident that inflation is on a sure path to averaging 2% over time.” Bostic also noted, “I expect the first interest rate cut, which I have penciled in for the third quarter, will be followed by a pause in the following meeting.”

Source: DB, Goldman, BofA

Tyler Durden Mon, 03/18/2024 - 09:59

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