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“Stick A Fork In Inflation”… “Tomorrow Is The Last Hike This Cycle”: A Stunned Wall Street Reacts To The CPI Miss

"Stick A Fork In Inflation"… "Tomorrow Is The Last Hike This Cycle": A Stunned Wall Street Reacts To The CPI Miss

Well, it’s official: the…



"Stick A Fork In Inflation"... "Tomorrow Is The Last Hike This Cycle": A Stunned Wall Street Reacts To The CPI Miss

Well, it's official: the inflation peak of the post-covid era is now behind us (that we will get another reflationary ascent is a question of when not if, but for now it's over the horizon), and as BBG's Chris Antsey writes, today's 0.2% reading for core monthly CPI takes us back to “old normal” for now. That was the most common figure for this indicator before the pandemic. In fact, for 53 straight months until Covid-19 hit in spring 2020, the median forecast in Bloomberg surveys was consistently 0.2%. More than four years. Furthermore, digging into the numbers shows that core CPI ex-shelter was actually a deflationary -0.13%, and since shelter/OER tracks market data with a real-time lag, the US is now in disinflation and Powell should be cutting rates tomorrow (spoiler alert: that won't happen, and instead the Fed will push the US economy into an even deeper recession).

Meanwhile, just as Goldman wrote in its CPI preview (which everyone should have read as it predicted today's move to a tee), the weakness was broad based, and not just food and energy (although there was a bizarre 0.2% M/M increase in apparel prices which makes no sense since online price data from Adobe shows a 15.5% decline in apparel prices over the course of November on a not-seasonally-adjusted basis).

Of course, the question now is what does Powell make of all of this, and until we get the answer in a little over 24 hours, here is a snapshot of kneejerk reactions from Wall Street's best and brightest.

Peter Tchir, chief strategist at Academy Securities

"Many say 50 for next meeting. I’m betting 0, but maybe it will be 25. I’m in the camp that tomorrow is the last hike in this cycle.... These low CPI prints were still too high based on the 0.6 increase in shelter (largely owners equivalent rent). OER was up 0.7, just off of last month’s allegedly record pace. Zillow, which publishes some data that I find more credible, had the lowest monthly rent increase, going back to 2015 (with the exception of the COVID lockdown). Just look at the chart! Zillow peaked in the summer of 2021 which is far more logical than peaking in October of 2022 (with November, apparently a close second)"

Omair Sharif, founder of Inflation Insights

“Today’s 0.2% core print might overstate the softness in core inflation modestly, but I’ll repeat what I said after the October CPI: This is not an outlier. In fact, today’s report showed a fairly broad-based slowdown, and core CPI ex-shelter was -0.13%.”

Florian Ielpo, head of macro research at Lombard Odier Asset Management

"This is the first time core inflation is showing a decline. This is consistent with a large cross-section of data in the US now: Inflation in the US is likely to be a problem of the past.”

Chris Antsey, Fed reporter at Bloomberg News

"This should give Powell some confidence tomorrow if he had planned on signaling a further step down in the magnitude of rate hikes to 25 basis points in February, after the 50 basis points that’s expected on Wednesday....The one proviso for the Fed is that this risk-asset rally  undercuts the Fed’s tightening campaign. And indeed they’re not finished yet, with multiple rate hikes yet to come. To the extent that financial conditions ease up, that would be counterproductive."

Ira Jersey, Bloomberg Intelligence Chief US Rates Strategist

"The better-than-expected core CPI number gives the Fed the cover it needs to signal hikes will be coming to an end. However, we still think the Fed will signal it will maintain rates near the peak for longer than the market is pricing, which means the front-end knee-jerk rally may not have legs, while the long end may retest recent yield lows flattening the curve a bit further.”

Matthew Luzzetti, strategist at Deutsche Bank

"while the CPI print is cooler than expected, the Fed will still be careful. Inflation, after all, is still high. A big question is how PCE and CPI will converge a lot next year."

Dave Lutz, JonesTrading:

"The print says one thing: The worst of inflation has likely passed. This validates an anticipated slowing in the pace of Fed interest-rate hikes."

Seema Shah, global strategist at Principal Asset Management

“It also raises hopes that the inflation surge may actually be tamed within the next 12 months. Certainly, with important components such as shelter inflation and core goods inflation moving lower, it is reasonable to expect inflation to continue falling over coming months.”

April LaRusse, head of investment specialists at Insight Investments

“The slightly softer CPI numbers are almost entirely driven by the retracement we have seen in food and energy prices. With global growth decelerating it is not a surprise to see these components rolling over first. The key thing to watch is core service inflation which has yet to moderate. Without services and wages under control, we are not out of the woods yet on inflationary risks.”

Rubeela Farooqi, chief US economist at High Frequency Economics

"Overall, prices are moving in the right direction, although annual rates of change remain elevated, well above the 2% target. In terms of the upcoming rate decision, a deceleration will be welcome news and will support a slower pace of rate hikes going forward.We expect the FOMC to raise the target range by 50 basis points tomorrow. Further sustained improvement over coming months could see the Fed downshift further over coming meetings.”

Ellen Zentner, chief economist at Morgan Stanley

"From here on out the labor market may now become the key metric, rather than CPI: With the downtrend in inflation becoming entrenched, the FOMC can set its sights squarely on the labor market. In our forecasts, a slowdown in jobs growth over the coming months sets the stage for, first, a further step down to a 25 basis-point increase in the February meeting. As jobs growth trends towards the 100,000 mark, we expect no further interest rate hikes at the March FOMC, leaving the peak fed funds rate at 4.625%.”

Ian Lyngen, rates strategist at BMO Capital Markets

“The knee-jerk rally that has followed resonates with the peak-inflation narrative gaining steam. We’re on board with the steepening in 5s/30s as this print suggests a materially higher terminal rate may not be required, and from here this afternoon’s long bond auction will serve as a minor distraction ahead of the Fed tomorrow and the all-but-assured 50 bp hike.”

Katherine Judge, economist at CIBC Capital Markets

"The deceleration in price pressures was concentrated in a few components, and the labor market remains tight. The softer core reading was driven by an easing in core goods prices, specifically used cars, reflecting supply-chain improvements, and drops in medical care and transportation services. That masked price pressures in core services, with the shelter sub-index continuing to increase strongly, although the pace of monthly shelter increases subsided.”

Phillip Neuhart, economist at First Citizens Bank Wealth Management

“For the second consecutive month, inflation came in below expectations. This is good news for markets and the Federal Reserve. Should this downtrend persist, it allows the Fed to slow the pace of interest rate hikes and eventually pause in the first half of next year.”

Jason Pride, Glenmede

“Investors should be careful not to over-extrapolate these results and temper their expectations for a premature pivot from the Fed. Consumer inflation is still far from the Fed’s price stability goals, and the 1970s provide case-in-point as to the risks of claiming victory on inflation too early.”

Chris Zaccarelli, chief investment officer at Independent Advisor Alliance

“The market was clearly offside with bearish positioning leaving many shorts vulnerable to a downside surprise on inflation, which we now have. Stocks are going to rally and the path of least resistance will be higher with so many people forecasting an imminent recession. Just as inflation has remained higher for longer, it is also possible that the economy remains resilient for longer.”

Paul Ashworth, Capital Economics:

“Stick a fork in it, inflation is done. The 0.2% m/m increase in core consumer prices in November provides strong support to our long-held view that mounting disinflation will soon persuade the Fed to move to the side line after one 25 basis-point hike in early February.”

Source: Bloomberg

Tyler Durden Tue, 12/13/2022 - 10:15

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The ONS has published its final COVID infection survey – here’s why it’s been such a valuable resource

The ONS’ Coronavirus Infection Survey has ceased after three years. Two experts explain why it was a uniquely useful source of data.



March 24 marked the publication of the final bulletin of the Office for National Statistics’ (ONS) Coronavirus Infection Survey after nearly three years of tracking COVID infections in the UK. The first bulletin was published on May 14 2020 and we’ve seen new releases almost every week since.

The survey was based primarily on data from many thousands of people in randomly selected households across the UK who agreed to take regular COVID tests. The ONS used the results to estimate how many people were infected with the virus in any given week.

In the survey’s first six months, we had results from 1.2 million samples taken from 280,000 people. Although the number of people participating each month declined over time, the survey has continued to be a highly valuable tool as we navigate the pandemic.

In particular, because the ONS bulletins were based on surveying a large, random sample of all UK residents, it offered the least biased surveillance system of COVID infections in the UK. We are not aware of any similar study anywhere else in the world. And, while estimating the prevalence of infections was the survey’s main output, it gave us a lot of other useful information about the virus too.

Unbiased surveillance

An important advantage of the ONS survey was its ability to detect COVID infections among many people who had no symptoms, or were not yet displaying symptoms.

Certainly other data sets existed (and some continue to exist) to give a sense of how many people were testing positive. For example, earlier in the pandemic, case numbers were reported at daily national press conferences. Figures continue to be published on the Department of Health and Social Care website.

But these totals have usually only encompassed people who tested because they had reason to suspect they may have been infected (for example because of symptoms or their work). We know many people had such minor symptoms that they had no reason to suspect they had COVID. Further, people who took a home test may or may not have reported the result.

Similarly, case counts from hospital admissions or emergency room attendances only captured a very small percentage of positive cases, even if many of these same people had severe healthcare needs.

Symptom-tracking applications such as the ZOE app or online surveys have been useful but tend to over-represent people who are most technologically competent, engaged and symptom-aware.

Testing wastewater samples to track COVID spread in a community has proved difficult to reliably link to infection numbers.

Read more: The tide of the COVID pandemic is going out – but that doesn't mean big waves still can't catch us

What else the survey told us

Aside from swab samples to test for COVID infections, the ONS survey collected blood samples from some participants to measure antibodies. This was a very useful aspect of the infection survey, providing insights into immunity against the virus in the population and individuals.

Beginning in June 2021, the ONS survey also published reports on the “characteristics of people testing positive”. Arguably these analyses were even more valuable than the simple infection rate estimates.

For example, the ONS data gave practical insights into changing risk factors from November 21 2021 to May 7 2022. In November 2021, living in a house with someone under 16 was a risk factor for testing positive but by the end of that period it seemed to be protective. Travel abroad was not an important risk factor in December 2021 but by April 2022 it was a major risk. Wearing a mask in December 2021 was protective against testing positive but by April 2022 there was no significant association.

We shouldn’t find this changing picture of risk factors particularly surprising when concurrently we had different variants emerging (during that period most notably omicron) and evolving population resistance that came with vaccination programmes and waves of natural infection.

Also, in any pandemic the value of non-pharmaceutical interventions such wearing masks and social distancing declines as the infection becomes endemic. At that point the infection rate is driven more by the rate at which immunity is lost.

A woman wearing a face mask receives a vaccine.
The survey gave us insights into the protection offered by vaccines and non-pharmaceutical interventions. Paul Maguire/Shutterstock

The ONS characteristics analyses also offered evidence about the protective effects of vaccination and prior infection. The bulletin from May 25 2022 showed that vaccination provided protection against infection but probably for not much more than 90 days, whereas a prior infection generally conferred protection for longer.

After May 2022, the focused shifted to reinfections. The analyses confirmed that even in people who had already been infected, vaccination protects against reinfection, but again probably only for about 90 days.

It’s important to note the ONS survey only measured infections and not severe disease. We know from other work that vaccination is much better at protecting against severe disease and death than against infection.

Read more: How will the COVID pandemic end?

A hugely valuable resource

The main shortcoming of the ONS survey was that its reports were always published one to three weeks later than other data sets due to the time needed to collect and test the samples and then model the results.

That said, the value of this infection survey has been enormous. The ONS survey improved understanding and management of the epidemic in the UK on multiple levels. But it’s probably appropriate now to bring it to an end in the fourth year of the pandemic, especially as participation rates have been falling over the past year.

Our one disappointment is that so few of the important findings from the ONS survey have been published in peer-reviewed literature, and so the survey has had less of an impact internationally than it deserves.

Paul Hunter consults for the World Health Organization. He receives funding from National Institute for Health Research, the World Health Organization and the European Regional Development Fund.

Julii Brainard receives funding from the NIHR Health Protection and Research Unit in Emergency Preparedness.

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Candida auris: what you need to know about the deadly fungus spreading through US hospitals

A drug-resistant fungus is a threat to human health.




A fungal superbug called Candida auris is spreading rapidly through hospitals and nursing homes in the US. The first case was identified in 2016. Since then, it has spread to half the country’s 50 states. And, according to a new report, infections tripled between 2019 and 2021. This is hugely concerning because Candida auris is resistant to many drugs, making this fungal infection one of the hardest to treat.

Candida auris is a yeast-type fungus that is the first to have multiple international health alerts associated with it. It has been found in over 30 countries, including the UK, since it was first identified in Japan in 2009.

It is related to other types of yeast that can cause infections, like Candida albicans which causes thrush. However, Candida auris is very different to these other fungi and in some ways, highly unusual.

First, it can grow, or “colonise”, human skin. Unlike many other Candida species that like to grow in our guts as part of the microbiome, Candida auris does not grow in this environment and seems to prefer the skin. This means that people who are colonised with Candida auris can shed lots of yeast from their skin, and this contaminates bed clothes and surfaces with the fungus. This can lead to outbreaks.

It is unusual for a fungal infection to spread from person to person, but that seems to be how Candida auris infections spread. Outbreaks can happen with this fungus, especially in intensive care units (ICU) and nursing homes where people are at a higher risk for getting fungal infections generally.

The fungus can live on surfaces for several weeks, and getting rid of it can be difficult. Enhanced cleaning and hand washing is needed to try and limit the spread of the fungus and exposure to patients who get ill from it.

Most people who are colonised with Candida auris will not get ill from it, or even know it is there. It causes infections when it gets into surgical wounds or the blood from an intravenous line. Once it gets into the body, it can infect organs and the blood causing a very serious and potentially fatal disease.

The mortality rate for people infected (as opposed to colonised) with the fungus is between 30 and 60%. But a precise mortality rate can be hard to pin down as people who are infected are often critically ill with other conditions.

Diagnosing an infection can be difficult as there can be a wide range of symptoms including fever, chills, headaches and nausea. It is for this reason that we need to keep a close eye on Candida auris as it can easily be confused with other conditions.

In the last few years, new tests to help identify this fungus accurately have been developed.

Candida auris can get into the body via an infected IV line. Tyler Olson/Shutterstock

The first Candida auris infection was reported in the UK in 2013. However, there may have been other cases before this – there is evidence that some early cases were misidentified as unrelated yeasts.

The UK has so far managed to stop any major outbreaks, and most cases have been limited in their spread.

Most patients who have become ill from Candida auris in the UK had recently travelled to parts of the world where the fungus is more common or has been circulating for longer.

Spurred by COVID

Rising numbers of Candida auris infections are thought to be partially linked to the COVID pandemic. People who become very ill from COVID may need mechanical ventilation and long stays in the ICU, which are both risk factors for Candida auris colonisation and infection.

It will take some time to figure out exactly how the pandemic has affected rates and numbers of fungal infections around the world, but these are important questions to answer to help predict how Candida auris cases might fluctuate in the future.

As for most life-threatening fungal infections, treatment is difficult and limited. We have only a handful of antifungal drugs to fight these infections, so when a species is resistant to one or more of these drugs, the options for treatment are extremely limited. Some Candida auris infections are resistant to all three types of antifungal drug.

Healthcare professionals must remain vigilant to this drug-resistant fungus. Without close monitoring and enhanced awareness of this infection, we could see more outbreaks and serious disease associated with Candida auris in the future.

Rebecca A. Drummond receives funding from the Medical Research Council.

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Four global problems that will be aggravated by the UK’s recent cuts to international aid

The UK is among countries cutting international aid payments, which could affect the world in four key areas: poverty, extremism, democracy and refuge…




Flags fly outside the UN building in New York. Andrew F. Kazmierski/Shutterstock

UK economic forecasts have improved markedly since the September 2022 mini-budget. The economic recession may now be more shallow and public borrowing lower than previously expected.

However, faced with persistently high inflation and continued uncertainty caused by Russia’s war in Ukraine, financial cuts remained the order of the day in the UK government’s spring 2023 budget announcement.

While Chancellor Jeremy Hunt introduced a £5 billion increase to military spending over the next two years, the international aid budget was cut for the third time in three years. This is part of an increasingly concerning international trend.

UK aid has been deceasing since 2019. And the country is not alone in cutting its aid commitments. Sweden – one of the world’s leading donors in this area – is also set to abolish its target of spending 1% of GDP on aid. Across several European countries, recent cuts have largely been driven by the Ukraine war, as well as national pressures caused by the COVID pandemic.

And yet aid is sorely needed if the world is to meet the 2030 Agenda for Sustainable Development, a plan to end world poverty agreed by UN members in 2015. The “great finance divide” – which sees some countries struggle to access resources and affordable finance for economic investment – continues to grow, according to the UN, leaving developing countries in Asia, Africa and Latin America more susceptible to shocks.

The UK and Europe’s support for Ukraine is admirable and much-needed. But when countries are faced with important domestic political and financial challenges, governments tend to look inwards – often in an attempt to rally their electorate.

Cuts to aid budgets are one example of this. For the UK in particular, neglecting multilateral solutions to important global challenges could actually exacerbate what are thought of as “domestic issues”. Our research highlights four such issues that could be affected by the UK’s budget cuts.

1. Increasing poverty could affect global stability

While the exact direction of the relationship remains up for debate, poverty is an important cause and effect of war. We know that up to two-thirds of the world’s extreme poor (defined as people earning less than $1.90 a day) will be concentrated in fragile and conflict-affected countries by 2030.

Research shows that aid promotes economic growth. So, reducing international aid will only exacerbate these recent negative trends. According to the chief executive of Oxfam GB, aid is an investment in a more stable world – something that is in all of our interests.

2. Extremism could spread as western influence falls

Violent extremism is on the rise in Africa. It reduces international investment and undermines the rights of minority groups, women and girls. This goes against important UN sustainable development goals aimed at building peace and prosperity for the planet and its people.

Reducing international aid will create opportunities for new political actors to emerge and influence the direction of countries with weak government institutions. Cutting back western influence in international architecture (especially while these countries support a conflict in their own continent) may also be resented by countries in other parts of the world that would like more support.

3. Democracy could be threatened in some countries

When aid is provided in the right way, it can give a boost to democratic outcomes. Again, if western, democratic and liberal states don’t support countries struggling to tackle poverty and extremism, other actors could step in.

Russia’s increasing involvement in the Central African Republic and Burkina Faso are recent examples. Equally, China’s Belt and Road Initiative (through which it lends money to other countries to build infrastructure) has significantly broadened its economic and political influence in many parts of the world. But some experts fear that China is laying a debt trap for borrowing governments, whereby the contracts agreed allow it to seize strategic assets when debtor countries run into financial problems.

The growing influence of both states may explain global trends towards democratic backsliding because research shows democratic stability is often undermined in waves. In recent UN votes, Russia and China’s growing influence via such aid has been seen to bear fruit. For example, in October 2022 Uzbekistan and Kazakhstan –- both temporary members of the UN Human Rights council –- voted against a decision to discuss human rights concerns in China’s Muslim-majority Xinjiang region.

4. More countries could struggle to welcome refugees

People flee their homes for many reasons but mostly due to conflict, violent extremism and poverty. Most refugees do not travel to western countries such as the UK, although the number of people arriving in small boats across the English Channel has risen substantially recently.

But there are more “internationally displaced people” than refugees. That is, most people fleeing war remain in their country, while refugees tend to remain in neighbouring states.

Turkey receives the highest numbers of refugees due to its proximity to the ongoing war in Syria, and Poland welcomed the highest number of refugees fleeing the war in Ukraine.

This, combined with the fact that countries most likely to experience conflict are geographically distant from the UK, indicates that numbers seeking asylum in the UK will remain relatively low. But reducing aid will impose further pressures on poor countries that are already struggling to accommodate refugee flows, as well as increasing push factors for migration from fragile regions.

International aid should be one of many solutions

Failure to tackle global problems like poverty, extremism, and democratic backsliding could further destabilise fragile regions. This will have human costs including increased numbers of desperate people attempting to cross the channel.

Aid is an investment in a more stable world. Deals with France or the risk of deportation to Rwanda will have limited impact on reducing the number of people arriving on small boats if the root causes of their migration are not tackled.

In our globalised world, looking inwards can only exacerbate these problems. It is crucial that states adopt multilateral solutions – including funding international aid programmes – to tackle global problems.

Patricia Justino receives funding from the UK Economic and Social Research Council.

Kit Rickard 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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