USA Outlook, October 10 to 14, 2022

Weekly newsletter October 10 to October 14

October 10, 2022

October 11, 2022

‘The worst is yet to come’: IMF issues stark recession warning The International Monetary Fund has once again downgraded its forecast for the global economy with a sharp warning: “The worst is yet to come, and for many people 2023 will feel like a recession.”

The agency said Tuesday that it expects global growth to slump to 2.7% next year, with a 25% probability it could fall below 2%. That compares with projected growth of 3.2% this year.

Photo: Bloomberg

It’s Official: The Fed’s in the Red The Federal Reserve is posting its first operating loss in years as interest rates soar and demand for US bonds craters. Fed data show the central bank reporting earnings remittances due to the US Treasury of negative $2.9 billion as of Oct. 5.

It’s a stark, though not unexpected, turn of events for a central bank which made billions in extra interest income from its expanding balance sheet in the years since the financial crisis. Of course, the Fed isn’t a “normal” investor. It cannot go bankrupt and any operational losses stemming from its vast portfolio of bonds will simply mean it remits less money to the US Treasury.

“More than a third of the global economy will contract this year or next, while the three largest economies — the United States, the European Union, and China — will continue to stall,” said Pierre-Olivier Gourinchas, the IMF’s chief economist. The figure for next year is 0.2 percentage points lower than the IMF’s July outlook, as Russia’s war in Ukraine, high inflation and a slowdown in China drag on activity.

The IMF said that higher rates, while necessary, are creating instability, particularly for emerging markets with high levels of debt. The latest forecasts included some notable downgrades for big economies. The United States is now expected to grow by just 1.6% this year and is set to expand by only 1% in 2023.

“The Fed's interest expense — the interest it pays banks and RRP counterparties — increases with each rate hike,” says Joseph Wang, a former trader on the central bank’s open markets desk and the founder of the Fed Guy blog. “The 75-basis point September rate hike pushed the Fed into an operating loss. With expectations for a ‘higher for longer’ Fed, the operating loss is likely to significantly increase in the coming months.”

Photo: CNN Philippines Source: https://www.bloomberg.com/news/articles/2022-10-10/it-s-official-the-fed-s-in-thered

Source: https://edition.cnn.com/2022/10/11/economy/imf-world-economicoutlook/index.html

October 12, 2022

October 13, 2022

Social Security recipients get 8.7% cost-of-living increase, the highest in more than 40 years Social Security recipients will receive an annual cost-of-living adjustment of 8.7% next year, the largest increase since 1981, the Social Security Administration announced Thursday. The spike will boost retirees’ monthly payments by $146 to an estimated average of $1,827 for 2023.

Photo: WWMT

FDA clears updated COVID boosters for kids as young as 5 years old The Food and Drug Administration announced Wednesday that it had granted emergency use authorization for updated COVID-19 vaccine boosters for Americans as young as 5 years old. The boosters can be given at least two months after their previous shot of the vaccine.

The Centers for Disease Control and Prevention is expected to sign off on the shots soon, clearing the final hurdle before eligibility for the bivalent vaccines can be expanded to these younger age groups. A CDC spokesperson said the agency's outside vaccine advisers have "already reviewed the relevant data" at a previous meeting and would not need to be reconvened, "in order to avert delays" in expanding eligibility for the shots.

The hefty increase, which follows a 5.9% adjustment for this year, is aimed at helping Social Security’s roughly 70 million recipients contend with the high inflation that’s been plaguing the US since last year. “Will the COLA be enough to “The underlying problem that has existed for so long with the COLA since the mid’70s [when] the formula was put into place is that it does not reflect actual cost of living changes as they apply to seniors,” said Max Richtman, CEO of the National Committee to Preserve Social Security and Medicare Association.

Social Security and Medicare policy analyst at The Senior Citizens League, an advocacy group.

“It depends on what inflation is going to do from October onwards.” The maximum earnings subject to the Social Security tax will rise to $160,200 for 2023, up from $147,000 this year.

"Since children have gone back to school in person and people are resuming pre-pandemic behaviors and activities, there is the potential for increased risk of exposure to the virus that causes COVID-19," Dr. Peter Marks, the FDA's top vaccines official, said in a statement.

Photo: CNN News Source: cbsnews.com/news/covid-vaccine-boosters-children-age-5-up/

Source: https://edition.cnn.com/2022/10/13/business/money/social-security-cost-of-livingadjustment-cola-increase/index.html

October 13, 2022

Photo: US News

Inflation Remains High in September, Rising 0.4% on Broad-Based Price Increases Consumer prices rose 0.4% in September, showing inflation is providing a stubborn problem for the Federal Reserve, the Bureau of Labor Statistics reported on Thursday. Overall inflation rose at an annual rate of 8.2%, following August’s 8.3% increase, while core inflation that excludes energy and food costs rose 0.6% for the month and 6.6% for the year.

“The most surprising number was the September core CPI (year-over-year) number: it came in at 6.6%, higher than both last month’s number and the expected (6.5%) number,” said Peter C. Earle, economist, American Institute for Economic Research. The Fed appeared surprised by the intransigence of inflation in the minutes of its September meeting released Wednesday, especially considering the aggressive stance it has taken since March in raising interest rates to what it now describes as a “restrictive” level.

Nonetheless, the Fed is having some success in slowing the economy. Stock prices have fallen about 25% from year-ago levels and the housing sector is rapidly slowing from its red-hot pace of 2021. Meanwhile, the number of Americans filing first-time claims for unemployment benefits rose by 9,000 to 228,000, the Labor Department reported on Thursday.

Source: https://www.usnews.com/news/economy/articles/2022-10-13/inflation-remains-highin-september-rising-0-4-on-broad-based-price-increases