Fed officials expressed caution about lowering rates too quickly at last meeting, minutes show

WASHINGTON – Federal Reserve officials indicated at their last meeting that they were in no hurry to cut interest rates and expressed both optimism and caution on inflation, according to minutes from the session released Wednesday.

The discussion came as policymakers not only decided to leave their key overnight borrowing rate unchanged but also altered the post-meeting statement to indicate that no cuts would be coming until the rate-setting Federal Open Market Committee held “greater confidence” that inflation was receding.

“Most participants noted the risks of moving too quickly to ease the stance of policy and emphasized the importance of carefully assessing incoming data in judging whether inflation is moving down sustainably to 2 percent,” the minutes stated.

The meeting summary did indicate a general sense of optimism that the Fed’s policy moves had succeeded in lowering the rate of inflation, which in mid-2022 hit its highest level in more than 40 years.

However, officials noted that they wanted to see more before starting to ease policy, while saying that rate hikes are likely over.

“In discussing the policy outlook, participants judged that the policy rate was likely at its peak for this tightening cycle,” the minutes stated. But, “Participants generally noted that they did not expect it would be appropriate to reduce the target range for the federal funds rate until they had gained greater confidence that inflation was moving sustainably toward 2 percent.”

Before the meeting, a string of reports showed that inflation, while still elevated, was moving back toward the Fed’s 2% target. While the minutes assessed the “solid progress” being made, the committee viewed some of that progress as “idiosyncratic” and possibly due to factors that won’t last.

Consequently, members said they will “carefully assess” incoming data to judge where inflation is heading over the longer term. Officials noted both upside and downside risks and worried about lowering rates too quickly.

Questions over how quickly to move

“Participants highlighted the uncertainty associated with how long a restrictive monetary policy stance would need to be maintained,” the summary said.

Officials “remained concerned that elevated inflation continued to harm households, especially those with limited means to absorb higher prices,” the minutes said. “While the inflation data had indicated significant disinflation in the second half of last year, participants observed that they would be carefully assessing incoming data in judging whether inflation was moving down sustainably toward 2 percent.”

The minutes reflected an internal debate over how quickly the Fed will want to move considering the uncertainty about the outlook.

Since the Jan. 30-31 meeting, the cautionary approach has borne out as separate readings on consumer and producer prices showed inflation running hotter than expected and still well ahead of the Fed’s 2% 12-month target.

Multiple officials in recent weeks have indicated a patient approach toward loosening monetary policy. A stable economy, which grew at a 2.5% annualized pace in 2023, has encouraged FOMC members that the succession of 11 interest rate hikes implemented in 2022 and 2023 have not substantially hampered growth.

To the contrary, the U.S. labor market has continued to expand at a brisk pace, adding 353,000 nonfarm payroll positions in January. First-quarter economic data thus far is pointing to GDP growth of 2.9%, according to the Atlanta Fed.

Along with the discussion on rates, members also brought up the bond holdings on the Fed’s balance sheet. Since June 2022, the central bank has allowed more than $1.3 trillion in Treasurys and mortgage-backed securities to roll off rather than reinvesting proceeds as usual.

‘Ample level of reserves’

The minutes indicated that a more in-depth discussion will take place at the March meeting. Policymakers also indicated at the January meeting that they are likely to take a go-slow approach on a process nicknamed “quantitative tightening.” The pertinent question is how high reserve holdings will need to be to satisfy banks’ needs. The Fed characterizes the current level as “ample.”

“Some participants remarked that, given the uncertainty surrounding estimates of the ample level of reserves, slowing the pace of runoff could help smooth the transition to that level of reserves or could allow the Committee to continue balance sheet runoff for longer,” the minutes said. “In addition, a few participants noted that the process of balance sheet runoff could continue for some time even after the Committee begins to reduce the target range for the federal funds rate.”

Fed officials consider current policy to be restrictive, so the big question going forward will be how much it will need to be relaxed both to support growth and control inflation.

There is some concern that growth continues to be too fast.

The consumer price index rose 3.1% on a 12-month basis in January – 3.9% when excluding food and energy, the latter of which posted a big decline during the month. So-called sticky CPI, which weighs toward housing and other prices that don’t fluctuate as much, rose 4.6%, according to the Atlanta Fed. Producer prices increased 0.3% on a monthly basis, well above Wall Street expectations.

In an interview on CBS’ “60 Minutes” that aired just a few days after the FOMC meeting, Chair Jerome Powell said, “With the economy strong like that, we feel like we can approach the question of when to begin to reduce interest rates carefully.” He added that he is looking for “more evidence that inflation is moving sustainably down to 2%.”

Markets have since had to recalibrate their expectations for rate cuts.

Where traders in the fed funds futures market had been pricing in a near lock for a March cut, that has been pushed out to June. The expected level of cuts for the full year had been reduced to four from six. FOMC officials in December projected three.

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Biogen revenue and profit shrink on Aduhelm costs, slumping sales of multiple sclerosis therapies

A Biogen facility in Cambridge, Massachusetts.

Brian Snyder | Reuters

Biogen on Tuesday reported fourth-quarter revenue and profit that shrank from a year ago, as it recorded charges related to dropping its controversial Alzheimer’s drug Aduhelm and as sales slumped in its multiple sclerosis therapies, the company’s biggest drug category.

Biogen booked sales of $2.39 billion for the quarter, down 6% from the same period a year ago. It reported net income of $249.7 million, or $1.71 per share, for the fourth quarter, down from net income of $550.4 million, or $3.79 per share, for the same period a year ago. Adjusting for one-time items, the company reported $2.95 per share.

The drugmaker’s fourth-quarter earnings per share, both unadjusted and adjusted, saw a negative impact of 35 cents associated with previously disclosed costs of pulling Aduhelm, which had a polarizing approval and rollout in the U.S.

Biogen is cutting costs while pinning its hopes on its other Alzheimer’s drugs, including its closely watched treatment Leqembi, and other newly launched products to replace declining revenue from its multiple sclerosis therapies.

Shares of Biogen closed more than 7% lower on Tuesday.

Here’s what Biogen reported for the fourth quarter compared with what Wall Street was expecting, based on a survey of analysts by LSEG, formerly known as Refinitiv: 

  • Earnings per share: $2.95 adjusted vs. $3.18 expected
  • Revenue: $2.39 billion vs. $2.47 billion expected

Also on Tuesday, Biogen issued full-year 2024 guidance that calls for adjusted earnings of $15 to $16 per share. Analysts surveyed by LSEG had expected full-year earnings guidance of $15.65 per share.

The drugmaker said it expects 2024 sales to decline by a low to mid-single digit percentage compared with last year. But the company anticipates its pharmaceutical revenue, which includes product revenue and its 50% share of Leqembi sales, to be flat this year compared with 2023.

Multiple sclerosis drug sales slump

Biogen’s fourth-quarter revenue from multiple sclerosis products fell 8% to $1.17 billion as some of the therapies face competition from cheaper generics.

The company’s once-blockbuster drug Tecfidera, which is facing competition from a generic rival, posted revenue that fell 17.8% to $244.3 million in the fourth quarter. Analysts had expected that drug to book sales of $233.1 million, according to FactSet.

Vumerity, an oral medication for relapsing forms of multiple sclerosis, generated $156.4 million in sales. That came in below analysts’ estimates of $174.4 million, FactSet estimates said. 

“We’ve had several years of declining revenue and profit, which is not unusual when you’re dealing with patent expirations,” Biogen CEO Christopher Viehbacher told reporters on a media call Tuesday. He added that one of the key ways Biogen will return to growth is to “reposition the company away from our legacy franchise of multiple sclerosis towards new products.”

Meanwhile, Biogen’s rare disease drugs recorded $471.8 million in sales, up 3% from the same period a year ago. 

Spinraza, a medication used to treat a rare neuromuscular disorder called spinal muscular atrophy, recorded $412.6 million in sales. That came under analysts’ estimate of $443.4 million in revenue, according to FactSet. 

Biogen’s biosimilar drugs booked $188.2 million in sales, up 8% from the year-earlier period. Analysts had expected sales of $196.7 million from those medicines.

Leqembi, other new drugs

The results come amid the rollout of Biogen and Eisai’s Leqembi, which became the first drug found to slow the progression of Alzheimer’s disease to win approval in the U.S. in July.

Eisai, which reported earnings last week, recorded $7 million in fourth-quarter revenue and $10 million in full-year sales from Leqembi.

Biogen CEO Viehbacher told reporters on the media call Tuesday that there are around 2,000 patients currently on Leqembi. That makes Biogen’s target of 10,000 patients by the end of March 2024 look increasingly difficult to hit, but Viehbacher emphasized that the company is focused more on the long-term reach of Leqembi rather than meeting that benchmark. 

“I think what’s important is we are now making progress,” he told reporters. “The 10,000 isn’t really hard and I think we are now really focusing on commercial plans — how do we get to the next 100,000?”

Notably, the low rate of adoption isn’t due to lack of demand: There are some 8,000 U.S. patients currently waiting to get on treatment, executives from Eisai said on an earnings call last week. 

More CNBC health coverage

The companies are also working toward Food and Drug Administration approval of an injectable version of Leqembi, which showed promising initial results in a clinical trial in October. 

Leqembi is currently administered twice monthly through the veins, a method known as intravenous infusion. The injectable form would be a new and more convenient option for administering the antibody treatment to patients, which could pave the way for higher uptake. 

But investors also have their eyes on other newly launched drugs. 

That includes Skyclarys from Biogen’s acquisition of Reata Pharmaceuticals in July. That drug brought in $56 million in fourth-quarter revenue, according to Biogen.

The FDA cleared Skyclarys last year, making it the first approved treatment for Friedreich ataxia, a rare inherited degenerative disease that can impair walking and coordination in children as young as 5.

On Monday, European Union regulators approved Skyclarys for the treatment of Friedreich ataxia in patients ages 16 and up. 

Biogen has also partnered with Sage Therapeutics on the first pill for postpartum depression, which won FDA approval in August. But the agency declined to clear the drug for major depressive disorder, which is a far larger commercial opportunity. 

Biogen said that pill, called Zurzuvae, generated roughly $2 million in sales for the fourth-quarter.

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Fed holds rates steady, indicates it is not ready to start cutting

WASHINGTON — The Federal Reserve on Wednesday sent a tepid signal that it is done raising interest rates but made it clear that it is not ready to start cutting, with a March move lower increasingly unlikely.

In a substantially changed statement that concluded the central bank’s two-day meeting this week, the Federal Open Market Committee removed language that had indicated a willingness to keep raising interest rates until inflation had been brought under control and was on its way toward the Fed’s 2% inflation goal. 

However, it also said there are no plans yet to cut rates with inflation still running above the central bank’s target. The statement further provided limited guidance that it was done hiking, only outlining factors that will go into “adjustments” to policy.

“The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent,” the statement said.

During Fed Chair Jerome Powell‘s news conference, he said policymakers are waiting to see additional data to verify that the trends are continuing. He also noted that a March rate cut is unlikely.

“I don’t think it’s likely that the committee will reach a level of confidence by the” March meeting, Powell said.

“We want to see more good data. It’s not that we’re looking for better data, we’re looking for a continuation of the good data we’ve been seeing,” he added.

Markets initially took the news in stride but slid following Powell’s comments casting doubt on a March cut. The Dow Jones Industrial Average surrendered more than 300 points in the session while Treasury yields plunged. Futures pricing also swung, with the market assigning about a 64% chance the Fed would stay put at its March 19-20 meeting, according to CME Group calculations.

While the committee’s statement did condense the factors that policymakers would consider when assessing policy, it did not explicitly rule out more increases. One notable change was removing as a consideration the lagged effects of monetary policy. Officials largely believe it takes at least 12 to 18 months for adjustments to take effect; the Fed last hiked in July 2023 after starting the tightening cycle in March 2022.

“In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks,” the statement said. That language replaced a bevy of factors including “the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”

‘Moving into better balance’

Those changes were part of an overhaul in which the Fed seeks to chart a course ahead, with inflation moving lower and economic growth proving resilient. The statement indicated that economic growth has been “solid” and noted the progress made on inflation.

“The Committee judges that the risks to achieving its employment and inflation goals are moving into better balance,” the FOMC missive said. “The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks.”

Gone from the statement was a key clause that had referenced “the extent of any additional policy firming” that might come. Some Fed watchers had been looking for language to emphasize that additional rate hikes were unlikely, but the statement left the question at least somewhat open.

Going into the meeting, markets had expected the Fed could begin reducing its benchmark overnight borrowing rate as soon as March, with May also a possible launching point. Immediately after the decision, stocks fell to session lows.

Policymakers, though, have been more circumspect about their intentions, cautioning that they see no need to move quickly as they watch the data unfold. Committee members in December indicated a likelihood of three quarter-percentage point rate cuts this year, less ambitious than the six that futures markets are pricing, according to the CME Group.

More immediately, the committee, for the fourth consecutive time, unanimously voted not to raise the fed funds rate. The key rate is targeted in a range between 5.25%-5.5%, the highest in nearly 23 years.

The Fed has been riding a wave of decelerating inflation, a strong labor market and solid economic growth, giving it both leeway to start easing up on monetary policy and caution about growth that could reaccelerate and drive prices higher again. Along with 11 rate hikes, the Fed also has been allowing its bond holdings to roll off, a process that has shaved more than $1.2 trillion off the central bank balance sheet. The statement indicated that the balance sheet runoff will continue apace.

The ‘soft-landing’ narrative

Many economists now are adopting a soft-landing narrative where the Fed can bring inflation down without torpedoing economic growth.

Separate reports Wednesday indicated that the labor market is softening, but so are wages. Payrolls processing firm ADP reported that private companies added just 107,000 new workers in January, a number that was below market expectations but still indicative of an expanding labor market. Also, the Labor Department reported that the employment cost index, a gauge the Fed watches closely for signals of inflation coming through wages, increased just 0.9% in the fourth quarter, the smallest rise since the second quarter of 2021.

More broadly, inflation as measured through core personal consumption expenditures prices rose 2.9% in December from the prior year, the lowest since March 2021. On a six- and three-month basis, core PCE prices both ran at or below the Fed’s target.

In a separate matter, the Fed also announced it was altering its investment policy both for high-ranking officials and staff. The changes expand the scope of those covered to include anyone with access to “confidential FOMC information” and said some staff might be required to submit brokerage statements or other documents to verify the accuracy of disclosures.

The changes follow controversy over multiple Fed officials trading from private accounts at a time when the central bank was making major changes to policy in the early days of the Covid pandemic.

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The Hindu Morning Digest: December 28, 2023

Government working to make cooperatives strong part of rural life: PM Modi

Prime Minister Narendra Modi on Wednesday said his government is working to make cooperatives a strong part of rural life, asserting that they are being scaled up massively in sectors like agriculture and fisheries after making a mark in fields such as dairy and sugar production. In an interaction with beneficiaries of the ongoing ‘Viksit Bharat Sankalp Yatra‘, he said the change in the lives of crores of beneficiaries of his government’s welfare schemes in the last 10 years has been a story of courage, satisfaction and dreams.

Ayodhya railway junction renamed as Ayodhya Dham

Ayodhya railway junction in Uttar Pradesh has been renamed as Ayodhya Dham junction, local MP Lallu Singh said on Wednesday. The announcement came days before the inauguration of the redevelopment railway station by Prime Minister Narendra Modi. In a post on X, Mr. Singh said, “Ayodhya Junction has become Ayodhya Dham Junction.” Under the guidance of Prime Minister Modi, the renaming has been done respecting public sentiments, he said.

President Vladimir Putin invites PM Modi to visit Russia

President Vladimir Putin on Wednesday invited Prime Minister Narendra Modi to visit Russia next year as External Affairs Minister S. Jaishankar called on the Russian leader at the Kremlin. “We will be glad to see our friend, Mr. Prime Minister Modi in Russia,” Mr. Putin told EAM Jaishankar. Mr. Jaishankar, who is here on a five-day official visit to Russia, earlier met with his Russian counterpart Sergey Lavrov.

After rout in Hindi heartland, Congress reviews readiness of State units for Lok Sabha poll

The Congress leadership on Wednesday held a meeting with leaders of the party’s Andhra Pradesh and Himachal Pradesh units to discuss its strategy for the upcoming Lok Sabha election. Party president Mallikarjun Kharge, former chief Rahul Gandhi, and general secretary (organisation) K.C. Venugopal are among the top leaders from the Congress who have been reviewing the election preparedness of various States. On Tuesday, the party high command had reviewed electoral strategies with the units of Bihar, Punjab, Jammu and Kashmir, and Ladakh.

Amrit Bharat fare for second, sleeper class 15-17% higher than normal express trains

The minimum ticket price to travel on Amrit Bharat Express trains for a destination within one km to 50 km is ₹35, exclusive of the reservation fee and other charges, the Railway Board has informed all zones. It has issued a circular on the fare structure of Amrit Bharat trains and attached a “Fare Table” with the distance slabs and ticket prices for second-class and sleeper-class passengers. As the first Amrit Bharat train, which will be flagged off by Prime Minister Narendra Modi from Ayodhya in Uttar Pradesh on December 30, has only second-class and sleeper-class compartments, the Railway Ministry is yet to work out the fare table for the air-conditioned classes, sources said.

Supreme Court forms panel to prepare SOP for adjournments

The Supreme Court has constituted a committee of judges for preparing a standard operating procedure (SOP) for lawyers seeking adjournment of proceedings. The panel has invited suggestions of the Bar and other stakeholders on the issue. The decision to form a committee came after the Supreme Court Bar Association and the Supreme Court Advocate on Record Association raised concern over circulars issued in December about the discontinuation of the practice of circulation of adjournment slips.

Delhi Police arrests former cricketer for duping several 5-star hotels

Having cheated multiple five-star hotels and resorts of lakhs of rupees as well as cricketer Rishabh Pant of ₹1.63 crore, a conman was arrested from Delhi airport while trying to flee the country, the police said on Wednesday. Additional Deputy Commissioner of Police (New Delhi) Ravikant Kumar said Mrinank Singh was planning to fly to Hong Kong on Monday, but immigration officials detained the 25-year-old as a lookout circular had been issued against the accused and handed him to the police.

Hasina announces Awami League’s poll manifesto, pledges to build ‘Smart Bangladesh’

Bangladesh Prime Minister and ruling Awami League’s president Sheikh Hasina on Wednesday launched her party’s poll manifesto, pledging to build a “Smart Bangladesh” if elected for a fourth consecutive term in the January 7 general elections, being boycotted by the main opposition BNP. “Come; once again allow us to serve you by voting for the ‘boat’, the election symbol of the Awami League,” Ms. Hasina, along with senior party leaders and sympathisers, said while unveiling her party’s poll manifesto in a crowded press conference.

BJP had no role in Ram Janmabhoomi movement, says Uddhav’s Sena faction

A war of words has erupted between the Uddhav Thackeray-led Shiv Sena (UBT) and the ruling BJP over the upcoming Ram Mandir inauguration, after Mr. Thackeray was not invited to the event slated for January 22 next year. Sena (UBT) spokesperson Sanjay Raut on Wednesday questioned the BJP’s “actual” contribution to the Ram Janmabhoomi movement and the demolition of the Babri mosque in Ayodhya in December 1992, while accusing it of having forgotten the Shiv Sena’s and Bal Thackeray’s contribution.

Won’t take any step that hurts Samajwadi Party, says Pawar on Mayawati’s induction into INDIA bloc

Nationalist Congress Party (NCP) chief Sharad Pawar on Wednesday reiterated that it was not necessary for the Opposition INDIA bloc to announce a prime ministerial face as an alternative to Narendra Modi. Speaking in Maharashtra’s Amravati district, Mr. Pawar, replying to a query on the induction of Mayawati’s Bahujan Samaj Party (BSP) into the INDIA bloc, made it clear that the Akhilesh Yadav-led Samajwadi Party (SP) was the alliance’s important ally in the Uttar Pradesh and that it would not take any decision that would hurt it. 

Rajya Sabha MP writes to Railways Minister over avoiding exuberant expenditure on PM’s selfie points

Expressing dismay over the fact that the Central Railway spent nearly ₹1.62 crore on installing selfie photo booths with Prime Minister Narendra Modi’s cut out image, Member of Parliament from Rajya Sabha Dr. V. Sivadasan wrote a letter to Union Railways Minister Ashwini Vaishnaw.  Dr. Sivadasan requested urgent intervention from Ministry of Railways so that wastage of money for partisan political propaganda is avoided. The Hindu reported on December 27 that Central Bureau of Communication under Ministry of Information and Broadcasting had approved L1 contract rates for installing temporary selfie booths at ₹1.25 lakh per installation and ₹6.25 lakh for every permanent installation, to be installed at railway stations. 

Axis Bank moves NCLT to seek insolvency proceedings against Zee Learn

Private sector lender Axis Bank has filed a petition against Zee Learn before the National Company Law Tribunal (NCLT) seeking insolvency proceedings against the the education services provider firm. The company has received a notice from the Mumbai bench of the NCLT in this regard, Zee Learn said in a regulatory filing on Tuesday. “A petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 has been filed by Axis Bank Ltd to initiate Corporate Insolvency Resolution Process (CIRP) of the Company before the National Company Law Tribunal, Mumbai,” it said. The company is compiling information to verify the facts claimed.

Parliament security breach case: Accused Neelam Azad moves Delhi HC, calls police remand illegal

Neelam Azad, an accused arrested in the December 13 Parliament security breach case, on Wednesday approached the Delhi High Court alleging her police remand was illegal as she was not allowed to consult a legal practitioner of her choice to defend her during the trial court proceedings. In her petition, seeking a writ of habeas corpus directing her production before the high court as well as an order to “set her at liberty”, Azad said not allowing her to consult a lawyer of her choice amounted to violation of her fundamental right guaranteed under the Constitution, making the remand order unlawful. The trial court has remanded her in police custody till January 5.

Union Minister Anurag Thakur dismisses Congress’ Bharat Nyay Yatra, evokes 1984 riots

Union Minister Anurag Thakur dismissed the Congress party’s announcement on Wednesday to hold a ‘Bharat Nyay Yatra’, labelling it a spurious attempt to provide justice by “those who could not provide justice to the victims of the anti-Sikh riots of 1984”. The Congress had, at a press conference earlier in the day, announced it would be undertaking the Bharat Nyay Yatra, to be led by Wayanad MP Rahul Gandhi from Manipur to Mumbai, passing through 14 States and 85 districts from the east to the west of India in 67 days, beginning January 14.

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The Hindu Morning Digest, December 26, 2023

Jaishankar lands in Moscow, talks to focus on bilateral issues

Striking a nostalgic note on India-Russia ties, External Affairs Minister S. Jaishankar shared memories of a visit to Moscow during his childhood, at the beginning of his five-day visit to Moscow and St. Petersburg on Monday for bilateral talks with Russian Foreign Minister Sergey Lavrov and Trade Minister Denis Manturov.  Shortly after landing in Moscow, Mr. Jaishankar visited the Kremlin, posting an entry pass in his name from a 1962 commemoration for the first Russian cosmonauts in space at the Red Square, where he visited as a seven-year-old boy,  along with a current picture of himself at the Red Square amidst sub-zero temperatures, entitling it “How it started”, and “How it is going”. 

Three officers in Poonch area attached as Army probes three civilian deaths

Three officers, including the Brigadier in-charge in Jammu and Kashmir’s Poonch district, have been sidestepped and attached with the local unit pending inquiry, over the deaths of three civilians in the district on December 22. The J&K Police have already registered a murder case against unidentified persons over the deaths .Amid the prevailing tension, Army Chief General Manoj Pande visited Poonch sector on Monday, and was given an update on the prevalent security situation. The three officers have been “attached as per procedure” while an Army inquiry is under way into the incident, two sources independently confirmed. All three were attached to the Nagrota-based 16 Corps, another source stated.

Railway officers to be trained in disaster management; NAIR, IRIDM to impart training

Disaster management has now been incorporated as an integral component of the training module for railway officers at the induction/foundation course level and also included in refresher or mid-career training programmes. The National Academy of Indian Railways (NAIR), Vadodara, and the Indian Railway Institute of Disaster Management (IRIDM), Bengaluru, would work together in imparting the comprehensive training programme, railway sources said on Monday. 

France allows aircraft with 303 Indians to fly back to India

An aircraft with 303 passengers, mostly Indian citizens, that was detained by the French authorities on December 21 over alleged concerns of undocumented immigration was allowed to return to India on Monday, the Embassy of India in Paris announced. The aircraft, an Airbus A-340, had landed for a technical halt at the Vatry airport, located approximately 160 km away from the French capital on Thursday when an anonymous tip off had prompted the French government to stop the aircraft from taking off. 

Initial assessment of merchant vessel Chem Pluto indicates a drone attack: Navy

Merchant vessel Chem Pluto that was hit by a projectile reached Mumbai on Monday and the preliminary assessment of the area of attack and th“However, further forensic and technical analysis will be required to establish the vector of attack, including type and amount of explosive used,” the Navy said in a statement. A joint investigation by various agencies has commenced on completion of the analysis by the Navy’s EOD.

Delhi Health Minister, Chief Secy. clash over Burari Hospital case report

In a note to Chief Secretary Naresh Kumar on Sunday, Health Minister Saurabh Bharadwaj sought an action taken report (ATR) within six hours. Sources in Mr. Kumar’s office on Monday alleged that AAP released the note on social media hours before the bureaucrat got it on email and that Mr. Bharadwaj’s office was “politically compromised”. Meanwhile, the Chief Secretary sought the suspension of Mr. Bharadwaj’s private secretary.

Inauguration of Ram Temple befitting reply to those who mocked BJP: Fadnavis

The inauguration of the Ram Temple in Ayodhya on January 22 is a befitting reply to those who used to attack the BJP with the ‘mandir wahi banayenge par tarikh nahi batayenge‘ taunt, said Maharashtra Deputy Chief Minister Devendra Fadnavis on Monday .The opposition Congress and leaders from other parties often mocked the Bharatiya Janata Party claiming it was using the temple issue for political gains despite being unsure of whether it would ever get built.

Gaza refugee camp in ruins after Israeli strike

Residents of Gaza’s Al-Maghazi refugee camp returned to their neighbourhood on Monday only to find blocks of concrete strewn where their homes had stood just a day ago. “These houses are destroyed. Our house was bombed,” said camp resident Abu Rami Abu al-Ais amid the debris. “There’s no safe place in the Gaza Strip. ”Late on Sunday three houses in the camp were hit by Israeli air strikes that killed at least 70 people, according to the health ministry in Hamas-run Gaza. AFP was unable to independently verify the information.

Chhattisgarh CM Sai, Singh Deo join the debate over deforestation in Hasdeo

As protests against the ongoing deforestation in Chhattisgarh’s Hasdeo region continued on Monday, Chief Minister Vishnu Deo Sai blamed the Congress for the exercise, while former Deputy CM T.S. Singh Deo insisted that public opinion should be sought for any mining-related activity. “They should see that the permission for deforestation is from a time when it was their [Congress] government in power…. Whatever has happened, even if it is deforestation, is happening with their permission,” Mr. Sai said, responding to a query from the media on the issue.

India has had its moments in the Rainbow Nation, will look for maiden Test series win

South Africa has produced some of cricket’s finest cricketers and a team that brimmed with extraordinary talent. But that side, led by Ali Bacher and possessing gifted cricketers like Barry Richards, Graeme Pollock and Mike Procter, didn’t get the opportunities it deserved as South Africa was banned by the ICC for the country’s apartheid policy .The Test that the team played in 1970, against Australia at Gqeberha (formerly Port Elizabeth), would be Proteas’ last for more than two decades. And it was in 1992 that the South Africans could play in another Test at home. The opponent was India, which had earlier played host on South Africa’s return to international cricket with an ODI at Kolkata.

Russian forces gain control of Maryinka in east Ukraine, defence minister says

Russian forces have gained full control of Maryinka, a town in eastern Ukraine, Russian defence minister Sergei Shoigu told President Vladimir Putin, one of Russia’s most significant gains since the capture of Bakhmut in May. Most accounts of Maryinka, southwest of the Russian-held regional centre of Donetsk, describe it as a ghost town. Putin said control of the town, which was once home to 10,000 people, will allow the Russian forces to move enemy combat units away from Donetsk.

Army detained a few youth for questioning, three of them died, says FIR

The First Information Report (FIR) filed in the alleged custodial death in the Poonch-Rajouri sector stated that in the aftermath of the terror incident on December 21, Army troops detained a few youth for questioning and three of them succumbed to injuries and “as such a cognizable offence under section 302 of IPC is made out”. The FIR has been filed by the Surankote police station against “unknown” accused persons. Section 302 of the Indian Penal Code (IPC) pertains to murder.

Israel PM Benjamin Netanyahu heckled by hostage families during parliament address

Families of hostages taken by Gaza militants booed Israeli Prime Minister Benjamin Netanyahu on December 25 as he addressed parliament, vowing to bring the captives home but saying “more time” was needed. Mr. Netanyahu’s address came after his Likud party reported that he visited the Gaza Strip on Monday and vowed to step up the army’s assault in the Palestinian territory.

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The Hindu Morning Digest, December 25, 2023

J&K Police file murder case over death of three civilians in Army custody

The Jammu and Kashmir Police on Sunday registered a murder case against unidentified persons after three men picked up by the Army for questioning were found dead with multiple injuries on December 22. Eight men were detained following the ambush on an Army convoy on December 21 in Poonch-Rajouri area where four soldiers were killed and three others were injured. The terrorists involved in the ambush are yet to be identified or arrested. 

Plane carrying 303 passengers, mostly Indians, allowed to leave France

A Nicaragua-bound flight carrying 303 passengers, mostly Indians, was allowed to resume its journey on Monday, three days after they were detained by the French authorities at an airport near Paris over suspected “human trafficking”, according to local media reports on Sunday. After authorising the A340 aircraft, operated by Romanian company Legend Airlines, to leave, the French judges chose to cancel the hearings of the over 300 passengers due to irregularities in the procedure, BFM TV, a French news broadcast television and radio network, reported.

As COVID-19 cases rise, WHO asks countries to strengthen surveillance

The World Health Organization (WHO) has urged countries in Southeast Asia to strengthen surveillance in view of the increasing cases of respiratory diseases, including due to COVID-19 and its new sub-variant JN.1, and influenza. The WHO also urged people to take protective measures. “The COVID-19 virus continues to evolve, change, and circulate in all countries globally. While current evidence suggests the additional public health risk posed by JN.1 is low, we must continue to track the evolution of these viruses to tailor our response.

Virat Kohli rejoins team India ahead of first Test against South Africa

Stalwart batter Virat Kohli has rejoined the Indian red-ball squad in South Africa ahead of the Boxing Day Test at Centurion against the Proteas, according to sources .Earlier this week, a BCCI source revealed that Kohli returned to India due to personal reasons and now is in contention to make his first on-field appearance on December 26, after the World Cup final heartbreak last month. The two-match Test series will be a part of the World Test Championship 2023-25 cycle. As of now, India are at the top of the WTC table, with a win and a draw, giving them a total of 66.67 points percentage.

External Affairs Minister Jaishankar to visit Russia

External Affairs Minister S. Jaishankar will visit Russia from December 25-28. During the year-end visit, he will interact with Russian Deputy Prime Minister and Minister of Industry and Trade Denis Manturov, the Ministry of External Affairs (MEA) said on December 24. During the visit, Dr. Jaishankar is expected meet his counterpart, Sergey Lavrov, who visited Delhi during the G-20 summit, when he led the Russian delegation to the event. 

UK to send naval ship to Guyana amid Venezuela border dispute

Britain will deploy a naval ship off Guyana later this month, its ministry of defence said on Sunday, as the South American nation faces a border dispute with neighbour Venezuela over the oil-rich Essequibo region. The deployment follows a visit by a British junior foreign minister to Guyana earlier this month, intended to offer the UK’s support for the country, an ally and former British colony. Guyana and Venezuela agreed earlier this month to avoid any use of force and not to escalate tensions in the long-running dispute.

Maharashtra government tries to dissuade Jarange-Patil from staging rally in Mumbai

While lauding the Supreme Court’s decision to hear a curative petition on Maratha reservation on January 24, the Maharashtra government on Sunday urged quota activist Manoj Jarange-Patil to cancel his protest rally in Mumbai, scheduled for January 2024. However, the activist refused to yield, warning the government that all doors for discussion would be shut after January 20, when he plans to hold a mega rally of the Maratha community in the State capital. Speaking in Mumbai, Chief Minister Eknath Shinde thanked the Supreme Court for the chance to hear the curative petition on the Maratha reservation issue. 

Prioritising international cricket has helped my game: Starc on turning down multiple IPL fortunes

Senior Australian seamer Mitchell Starc has admitted that he had in the past turned down multiple lucrative offers from the Indian Premier League (IPL) to prioritise his international career, which has “helped” him in improving his game .Starc has been roped in by two-time winners Kolkata Knight Riders for a record Rs 24.75 crore during the auction last week, and it would be his first stint in the tournament since 2015. Starc said that the break during the IPL allowed him to recharge himself and stay fit for the international assignments.

J&K: Retired SSP shot dead by terrorists while offering ‘azaan’

A 72-year-old retired police officer, who was the local “muezzin”, was shot dead by terrorists while he was giving “azaan” – the call for prayer – from a mosque in Jammu and Kashmir’s Baramulla district on Sunday, police said. Recalling the moments before Mohammad Shafi Mir was killed, his cousin Mohammad Mustafa, who was at home, said the call for the pre-dawn prayers was being given by a loudspeaker and suddenly it stopped. Mir’s last words were “reham” (mercy), he said.

After poll debacle, Congress drags its feet on key Rajasthan posts

The Congress was quick to make changes in the State leadership in Chhattisgarh and Madhya Pradesh after the recent poll debacle, but in Rajasthan the party continues to drag its feet.  On Saturday, the party announced its long awaited organisational reshuffle. It promoted Rajasthan’s former Deputy Chief Minister Sachin Pilot to the position of general secretary. Last week, the party had nominated former Chief Minister Ashok Gehlot as a member of the National Alliance Committee. The two appointments indicate that it will be looking for a fresh face for the post of leader of the Congress Legislature Party. The other question looming over is whether the party will retain State chief Govind Singh Dotasra.  

Decision to suspend WFI taken under pressure: Opposition leaders

Opposition leaders on Sunday said the government’s decision to suspend the newly-elected WFI was not enough to give justice to protesting wrestlers and questioned why a loyalist of former WFI president Brij Bhushan Sharan Singh was allowed to contest the election to the sports body in the first place. The Wrestling Federation of India (WFI) elections were held on December 21 with Sanjay Singh and his panel winning the polls by big margins.

Security is stepped up around Christmas celebrations in Germany and Austria over attack concerns

Sightseeing visits were barred at Germany’s landmark cathedral in Cologne and Christmas Eve worshippers faced security checks to get into midnight Mass there Sunday as police responded to indications of a potential attack. However a top security official urged people not to shy away from holiday celebrations out of fear. Churchgoers attended multiple services at the cathedral despite the ban on visits purely for sightseeing, a day after police descended on the cathedral and searched it with sniffer dogs. With several dozen officers on duty outside, Auxiliary Bishop Rolf Steinhaeuser greeted those attending what he said was “probably the most secure church service in all of Germany.”

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The Hindu Morning Digest, December 24, 2023

Jammu and Kashmir government initiates legal action after three civilians picked up by Army found dead

A day after four Army jawans were killed in an ambush by unidentified terrorists in the Poonch-Rajouri area of Jammu and Kashmir, three civilians who were picked up allegedly by the Army for questioning were found dead on December 22 with multiple injuries. Five more persons have been admitted to hospital with serious injuries. A relative of one of the deceased civilian told The Hindu that the three men were tortured to death and the families were asked to collect the bodies from an Army camp on Friday evening.

Priyanka no longer U.P. in-charge; Sachin Pilot to handle Chhattisgarh

Priyanka Gandhi Vadra is now a Congress general secretary “without any assignment portfolio” while Sachin Pilot will be the general secretary in-charge of Chhattisgarh as part of a major organisational reshuffle that Congress president Mallikarjun Kharge carried out on Saturday .Ms. Vadra was in charge of Uttar Pradesh earlier. The much-awaited reshuffle displays a sense of urgency in the run-up to the 2024 Lok Sabha poll and comes just two days after a meeting of the Congress Working Committee (CWC), the party’s highest decision-making body.

Row over Calcutta High Court judge’s husband being quizzed by Bengal CID

At a time when the Trinamool Congress government and its leaders are defending allegations of corruption before the Calcutta High Court, the husband of a sitting High Court judge has alleged torture by the Criminal Investigation Department (CID) of the West Bengal Police. Pratap Chandra Dey, husband of Justice Amrita Sinha, was summoned for questioning by the CID earlier this week and his allegations have triggered a political row. Justice Sinha is hearing a number of cases including those related to the State recruitment scam and allegations against Trinamool leader Abhishek Banerjee.

BJP devises micro-level plans to increase vote share in 2024 Lok Sabha elections

Chaired by BJP president J.P. Nadda, the meeting was attended by national office-bearers, morcha presidents and those in charge of particular States as well State-level generation secretaries of organisation, with the Prime Minister addressing the gathering on Friday and Home Minister Amit Shah on Saturday. Plans by the BJP to reach out to at least 10 crore people by the time the Ram Temple in Ayodhya is inaugurated on January 22 was also discussed.

Dhoni to resume training in the next few weeks: CSK CEO

Chennai Super Kings skipper M.S. Dhoni is set to resume training in the next few weeks as part of his preparation for the 2024 IPL, according to the franchise’s CEO, K.S. Viswanathan .The former India skipper underwent surgery on his left knee after leading the Super Kings to a fifth IPL title earlier this year. The 42-year-old was often seen sporting knee strapping during the 2023 edition and struggled a bit, especially while running between the wickets. Giving an update about Dhoni’s fitness, Viswanathan said, “He is doing well now. He has started his rehab and is working in the gym. And, probably in another 10 days, he will also start working in the nets.”

Air India’s 1st wide-body A350-900 aircraft lands in Delhi

Air India’s first wide-body A350-900 aircraft, sporting new brand livery, arrived in New Delhi from European aviation major Airbus’ Toulouse facility in France. The aircraft, registered as VT-JRA, touched down at the national capital’s Indira Gandhi International Airport at 1346 hrs, making the Tata Group-owned airline the first aircraft operator in India to have this type of aircraft in its fleet, a statement said. The delivery flight is operated using a special call sign AI350, it said.

Sai Sudharsan always looking to learn and improve, says Hemang Badani

Rising star Sai Sudharsan has had a stellar run in the last 12 months. He has won the TNPL, Deodhar Trophy, Irani Cup, and County Championship (playing for Surrey) this year. His batting exploits in the 50-over Vijay Hazare tournament helped Tamil Nadu make the knockouts, which culminated in his India call-up for the ODI series against South Africa .In his debut against South Africa in the first ODI, he looked very comfortable facing a strong Proteas’ bowling unit and scored a match-winning half-century in tough conditions.

Jarange-Patil announces another hunger strike next month in Mumbai; Maharashtra CM says SC to take up hearing on Maratha quota

Granting a nearly month-long reprieve to the Eknath Shinde-led government concerning the Maratha reservation issue, pro-quota activist Manoj Jarange-Patil on Saturday announced an indefinite strike at Azad Maidan in Mumbai from January 20 to intensify his demands for reservation to the community. Mr. Jarange-Patil was addressing a mega rally in Marathwada region’s Beed district. In his address, he said that “crores of people from the Maratha community” will march to Mumbai on January 20.

U.S. Federal Reserve’s rate cuts come into view as inflation retreats

Federal Reserve policymakers are set to start the new year with fresh evidence that their 2022-2023 interest-rate hike campaign put U.S. price pressures firmly in retreat, with data on Friday showing that by some key measures inflation is now at or below their 2% goal. Traders broke out the champagne after a government report showed the personal consumption expenditures (PCE) price index fell 0.1% in November from October, responding to the first decline on that measure since April 2020 by boosting bets not only that the Fed will begin reducing borrowing costs in March but will continue to cut them throughout the year.

Turkey says 12 soldiers killed in clashes with Kurdish militants

Twelve Turkish soldiers have been killed in the past two days in clashes with Kurdistan Workers Party (PKK) militants in northern Iraq, the Defence Ministry said on December 23. The military carried out air strikes on PKK targets, “neutralising” at least 13 PKK militants on Saturday in ongoing clashes, the ministry said in a statement on social messaging platform X. Turkey typically uses the term “neutralised” to mean killed. The ministry also said seven militants had been killed on Friday.

Liquor in GIFT City: Congress, AAP slam Gujarat’s BJP govt. over decision

The ruling Bharatiya Janata Party (BJP) and the Opposition Congress on Saturday clashed over the Gujarat government’s decision a day earlier to allow liquor in GIFT City, which partially overturned the State’s strict prohibition policy. The State government, on Friday, lifted the ban on liquor in the Gujarat International Finance Tec-City (GIFT) to provide a “global ecosystem”. While the Congress and Aam Aadmi Party said it was an unfortunate decision that would ruin the youth, the BJP said it would provide proper environment for the development of business in the region.

U.S. court rules Twitter breached contract over failure to pay bonuses

A U.S. federal court ruled on Friday that social media company Twitter, now branded X, violated contracts by failing to pay annual performance bonuses it orally promised its workers. The breach-of-contract lawsuit was brought by former employer Mark Schobinger in June. The lawsuit said Twitter had promised workers a 2022 performance bonus if they stayed with the company through the final possible payout date, which was the first quarter of this year. The court threw out Twitter’s attempts to have the case dismissed, ruling that Schobinger’s claim of breach of contract under California law was valid.

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Fed holds rates steady, upgrades assessment of economic growth

The Federal Reserve on Wednesday again held benchmark interest rates steady amid a backdrop of a growing economy and labor market and inflation that is still well above the central bank’s target.

In a widely expected move, the Fed’s rate-setting group unanimously agreed to hold the key federal funds rate in a target range between 5.25%-5.5%, where it has been since July. This was the second consecutive meeting that the Federal Open Market Committee chose to hold, following a string of 11 rate hikes, including four in 2023.

The decision included an upgrade to the committee’s general assessment of the economy. Stocks rallied on the news, with the Dow Jones Industrial Average gaining 212 points on the session.

“The process of getting inflation sustainably down to 2% has a long way to go,” Fed Chair Jerome Powell said in remarks at a news conference. He stressed that the central bank hasn’t made any decisions yet for its December meeting, saying that “The committee will always do what it thinks is appropriate at the time.”

Powell added that the FOMC is not considering or even discussing rate reductions at this time.

He also said the risks around the Fed doing too much or too little to fight inflation have become more balanced.

“This signals that while there is a potential risk for the Fed to do more, the bar has become higher for rate hikes, and we are clearly seeing this play out with two consecutive meetings of no policy action from the Fed,” said Charlie Ripley, senior investment strategist at Allianz Investment Management.

Economy has ‘moderated’

The post-meeting statement had indicated that “economic activity expanded at a strong pace in the third quarter,” compared with the September statement that said the economy had expanded at a “solid pace.” The statement also noted that employment gains “have moderated since earlier in the year but remain strong.”

Gross domestic product expanded at a 4.9% annualized rate in the third quarter, stronger than even elevated expectations. Nonfarm payrolls growth totaled 336,000 in September, well ahead of the Wall Street outlook.

There were few other changes to the statement, other than a notation that both financial and credit conditions had tightened. The addition of “financial” to the phrase followed a surge in Treasury yields that has caused concern on Wall Street. The statement continued to note that the committee is still “determining the extent of additional policy firming” that it may need to achieve its goals. “The Committee will continue to assess additional information and its implications for monetary policy,” the statement said.

Wednesday’s decision to stay put comes with inflation slowing from its rapid pace of 2022 and a labor market that has been surprisingly resilient despite all the interest rate hikes. The increases have been targeted at easing economic growth and bringing a supply and demand mismatch in the labor market back into balance. There were 1.5 available jobs for every available worker in September, according to Labor Department data released earlier Wednesday.

Core inflation is currently running at 3.7% on an annual basis, according to the latest personal consumption expenditures price index reading, which the Fed favors as an indicator for prices.

While that has decreased steadily this year, it is well above the Fed’s 2% annual target.

The post-meeting statement indicated that the Fed sees the economy holding strong despite the rate hikes, a position in itself that could prompt policymakers into a prolonged tightening stance.

In recent days, the “higher-for-longer” mantra has become a central theme for where the Fed is headed. While multiple officials have said they think rates can stay where they are as the Fed assesses the impact of the previous increases, virtually none have said they are considering cuts anytime soon. Market pricing indicates the first cut could come around June 2024, according to CME Group data.

Surging bond yields

The restrictive stance has been a factor in the surging bond yields. Treasury yields have risen to levels not seen since 2007, the earliest days of the financial crisis, as markets parse out what is ahead. Yields and prices move in opposite direction, so a rise in the former reflects waning investor appetite for Treasurys, generally considered the largest and most liquid market in the world.

The surge in yields is seen as a byproduct of multiple factors, including stronger-than-expected economic growth, stubbornly high inflation, a hawkish Fed and an elevated “term premium” for bond investors demanding higher yields in return for the risk of holding longer-duration fixed income.

There also are worries over Treasury issuance as the government looks to finance its massive debt load. The department this week said it will be auctioning off $776 billion of debt in the fourth quarter, starting with $112 billion across three auctions next week.

During a recent appearance in New York, Powell said he thinks the economy may have to slow further to bring down inflation. Most forecasters expect economic growth to tail off ahead.

A Treasury Department forecast released earlier this week indicated that the pace of growth likely will tumble to 0.7% in the fourth quarter and just 1% for the full year in 2024. Projections the Fed released in September put expected GDP growth at 1.5% in 2024.

In the wake of the Fed’s comments, the Atlanta Fed’s GDPNow growth tracker slashed expectations for fourth-quarter GDP almost in half to 1.2% from 2.3%. The gauge takes in data on a real-time basis and adjusts its estimates with the latest information.

Whitney Watson, co-CIO of fixed income and liquidity solutions at Goldman Sachs Asset Management, said it’s likely the Fed will keep its policy unchanged into next year.

“There are risks in both directions,” Watson said. “The rise in inflation expectations, owing to higher gas prices, combined with strong economic activity, preserves the prospect of another rate hike. Conversely, a more pronounced economic slowdown caused by the growing impact of higher interest rates might accelerate the timeline for transitioning to rate cuts.”

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Fed Chair Powell calls inflation ‘too high’ and warns that ‘we are prepared to raise rates further’

Federal Reserve Chair Jerome Powell on Friday called for more vigilance in the fight against inflation, warning that additional interest rate increases could be yet to come.

While acknowledging that progress has been made and saying the Fed will be careful in where it goes from here, the central bank leader said inflation is still above where policymakers feel comfortable. He noted that the Fed will remain flexible as it contemplates further moves, but gave little indication that it’s ready to start easing anytime soon.

“Although inflation has moved down from its peak — a welcome development — it remains too high,” Powell said in prepared remarks for his keynote address at the Kansas City Fed’s annual retreat in Jackson Hole, Wyoming. “We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective.”

The speech resembled remarks Powell made last year at Jackson Hole, during which he warned that “some pain” was likely as the Fed continues its efforts to pull runaway inflation back down to its 2% goal.

But inflation was running well ahead of its current pace back then. Regardless, Powell indicated it’s too soon to declare victory, even with data this summer running largely in the Fed’s favor. June and July both saw easing in the pace of price increases, with core inflation up 0.2% for each month, according to the Bureau of Labor Statistics.

“The lower monthly readings for core inflation in June and July were welcome, but two months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal,” he said.

Powell acknowledged that risks are two-sided, with dangers of doing both too much and too little.

Powell's concerns about growth and the labor market being too strong are new, says Point72's Maki

“Doing too little could allow above-target inflation to become entrenched and ultimately require monetary policy to wring more persistent inflation from the economy at a high cost to employment,” he said. “Doing too much could also do unnecessary harm to the economy.”

“As is often the case, we are navigating by the stars under cloudy skies,” he added.

Markets were volatile after the speech, but stocks powered higher later in the day and Treasury yields were mostly up. In 2022, stocks plunged following Powell’s Jackson Hole speech.

“Was he hawkish? Yes. But given the jump in yields lately, he wasn’t as hawkish as some had feared,” said Ryan Detrick, chief market strategist at the Carson Group. “Remember, last year he took out the bazooka and was way more hawkish than anyone expected, which saw heavy selling into October. This time he hit it more down the middle, with no major changes in future hikes a welcome sign.”

A need to ‘proceed carefully’

Powell’s remarks follow a series of 11 interest rate hikes that have pushed the Fed’s key interest rate to a target range of 5.25%-5.5%, the highest level in more than 22 years. In addition, the Fed has reduced its balance sheet to its lowest level in more than two years, a process which was seen about $960 billion worth of bonds roll off since June 2022.

Markets of late have been pricing in little chance of another hike at the September meeting of the Federal Open Market Committee, but are pointing to about a 50-50 chance of a final increase at the November session. Projections released in June showed that almost all FOMC officials saw another hike likely this year.

Powell provided no clear indication of which way he sees the decision going.

“Given how far we have come, at upcoming meetings we are in a position to proceed carefully as we assess the incoming data and the evolving outlook and risks,” he said.

However, he gave no sign that he’s even considering a rate cut.

“At upcoming meetings, we will assess our progress based on the totality of the data and the evolving outlook and risks,” Powell said. “Based on this assessment, we will proceed carefully as we decide whether to tighten further or, instead, to hold the policy rate constant and await further data.”

The chair added that economic growth may have to slow before the Fed can change course.

Gross domestic product has increased steadily since the rate hikes began, and the third quarter of 2023 is tracking at a 5.9% growth pace, according to the Atlanta Fed. Employment also has stayed strong, with the jobless rate hovering around lows last seen in the late 1960s.

“The basic thought that they’re close to done, they think they probably have a little bit more to do … that is the story they’ve been telling for a little while. And that was the heart of what he said today,” said Bill English, a former Fed official and now a Yale finance professor.

“I don’t think this is about sending a signal. I think this is really where they think they are,” he added. “The economy has slowed some but not enough yet to make them confident inflation is going to come down.”

Indeed, Powell noted the risk of strong economic growth in the face of widespread recession expectations and how that could make the Fed hold rates higher for longer.

“It was a balanced but not trend-changing speech, even if the Fed kept the ‘mission accomplished’ banner in the closet,” said Jack McIntyre, portfolio manager at Brandywine Global. “It leaves the Fed with needed optionality to either tighten more or keep rates on hold.”

Getting into details

While last year’s speech was unusually brief, this time around Powell provided a little more detail into the factors that will go into policymaking.

Specifically, he broke inflation into three key metrics and said the Fed is most focused on core inflation, which excludes volatile food and energy prices. He also reiterated that the Fed most closely follows the personal consumption expenditures price index, a Commerce Department measure, rather than the Labor Department’s consumer price index.

The three “broad components” of which he spoke entail goods, housing services such as rental costs and nonhousing services. He noted progress on all three, but said nonhousing is the most difficult to gauge as it is the least sensitive to interest rate adjustments. That category includes such things as health care, food services and transportation.

“Twelve-month inflation in this sector has moved sideways since liftoff. Inflation measured over the past three and six months has declined, however, which is encouraging,” Powell said. “Given the size of this sector, some further progress here will be essential to restoring price stability.”

No change to inflation goal

In addition to the broader policy outlook, Powell honed in some areas that are key both to market and political considerations.

Some legislators, particularly on the Democratic side, have suggested the Fed raise its 2% inflation target, a move that would give it more policy flexibility and might deter further rate hikes. But Powell rejected that idea, as he has done in the past.

“Two percent is and will remain our inflation target,” he said.

That portion of the speech brought some criticism from Harvard economist Jason Furman.

“Jay Powell said all the right things about near-term monetary policy, continuing to hope for the best while planning for the worst. He was appropriately cautious on inflation progress & asymmetric about the policy stance,” Furman, who was chair of the Council of Economic Advisers under former President Barack Obama, posted on X, the social media site formerly known as Twitter. “But wish he had not ruled out shifting the target.”

On another issue, Powell chose largely to stay away from the debate over what is the longer-run, or natural, rate of interest that is neither restrictive nor stimulative – the “r-star” rate of which he spoke at Jackson Hole in 2018.

“We see the current stance of policy as restrictive, putting downward pressure on economic activity, hiring, and inflation,” he said. “But we cannot identify with certainty the neutral rate of interest, and thus there is always uncertainty about the precise level of monetary policy restraint.”

Powell also noted that the previous tightening moves likely haven’t made their way through the system yet, providing further caution for the future of policy.

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Weight loss drugs boost sales at retail pharmacies, but they may not help profits much

A pharmacist displays boxes of Ozempic, a semaglutide injection drug used for treating type 2 diabetes made by Novo Nordisk, at Rock Canyon Pharmacy in Provo, Utah, U.S. March 29, 2023. 

George Frey | Reuters

Drugmakers aren’t the only ones feeling the impact of the weight loss industry gold rush. 

Retailers with pharmacy businesses, such as Walmart, Kroger and Rite Aid, said increased demand for prescription weight loss drugs helped boost sales for the second quarter. 

But analysts note that those blockbuster treatments are minimally profitable for retail pharmacies – and may even come with margin headwinds.

“More recently, you’re starting to hear retailers talk about these drugs. But I wouldn’t say they’re necessarily beneficiaries of the increased popularity,” Arun Sundaram, an analyst at CFRA Research, told CNBC. “They’re really not making much of a profit on the drugs. So it’s really just a traffic driver and not really a profit pool for retailers.” 

Buzzy drugs like Novo Nordisk‘s obesity injection Wegovy and diabetes treatment Ozempic have skyrocketed in popularity over the last year, with high-profile names like billionaire tech mogul Elon Musk among recent users.

Those treatments are known as GLP-1s, a class of drugs that mimic a hormone produced in the gut to suppress a person’s appetite. 

Other drugmakers, such as Eli Lilly and Pfizer, are developing their own GLP-1s in a bid to capitalize on a weight loss drug market that some analysts project could be worth $200 billion by 2030. An estimated 40% of U.S. adults are obese, making successful treatments a massive opportunity for drugmakers. 

But the boom in demand for GLP-1s is also being felt in other parts of the drug supply chain, including the pharmacies that dispense the prescription drugs to patients. 

Are weight loss drugs profitable? 

On an earnings call Thursday, Walmart CEO Doug McMillon said the company expects weight loss drugs to help drive sales for the rest of the year: “We still expect food, consumables, and health and wellness, primarily due to the popularity of some GLP-1 drugs, to grow as a percent total in the back half.” 

In June, likewise, Rite Aid CFO Matthew Schroeder said a jump in pharmacy revenue and the company’s decision to hike its full-year revenue guidance was “due to the increase in sales volume in Ozempic and other high-dollar GLP-1s.” Schroeder was referring to the hefty price tags of GLP-1s, which range from around $900 to $1,300 in the U.S. 

He said those drugs have high sales amounts per prescription, but emphasized that the increased volume of GLP-1s has a “minimal impact” on Rite Aid’s gross profit. 

Kroger CEO Rodney McMullen similarly said during an earnings call in June that GLP-1 drug “sales dollars are a lot bigger than the margin dollars.” 

“We would expect the GLP-1 type drugs to continue but remember, the impact on profitability is pretty narrow,” he said.

That’s because GLP-1s like Wegovy and Ozempic are branded drugs with “very, very low gross margins,” according to CFRA Research’s Sundaram. 

He said retail pharmacies generate high sales for each GLP-1 prescription they dispense but rake in low profits, which is having a slight negative impact on the overall gross margins of retailers like Walmart and Kroger. 

UBS analyst Michael Lasser similarly highlighted in a recent note that gross margins for Walmart’s U.S. business “would have looked even better had it not been for the contribution of the GLP-1 drugs since these carry very low profit rates.”

A selection of injector pens for the Saxenda weight loss drug are shown in this photo illustration in Chicago, Illinois, U.S., March 31, 2023. 

Jim Vondruska | Reuters

Gross margins for branded medications are 3.5% on average for pharmacies, according to a 2017 study from USC’s Schaeffer Center for Health Policy and Economics. That suggests it may take years before a branded drug significantly contributes to a pharmacy’s bottom line.

In contrast, gross margins for generic drugs – the cheaper equivalents of branded medications – are 42.7% on average for pharmacies. 

There are several reasons for the lower margins of branded drugs. For one, branded drugs don’t directly compete with other medications because they have patent protections. That gives drug manufacturers more power when they negotiate drug discounts with wholesalers, which purchase medications and distribute them to pharmacies. 

As a result, there is “little room for wholesalers and pharmacies to capture large margins due to their relative lack of negotiating power,” according to the Association for Accessible Medicines, a trade association representing the manufacturers and distributors of generic prescription drugs. 

What other impacts do retailers face?

But there are also other impacts of GLP-1s to consider beyond a retailer’s pharmacy business.

For companies like Walmart and Kroger, GLP-1 drugs may be indirectly impacting other business categories in a positive way.

That makes some analysts less worried about margin headwinds in pharmacy: “The gross margin headwind is less of a risk overall for Walmart because any footstep in the door often ends up with multiple items in a basket,” KeyBanc analyst Bradley Thomas told CNBC. 

“Walmart is generally not a quick store that you just pop in on the way home,” he said. “They’re going to make multiple purchases, and I think we’re seeing a lot of discretionary categories actually see a lift from some of this incremental traffic they’ve been getting lately.” 

Thomas added that GLP-1 drugs only fall under one part of Walmart’s business: “If you’re listing off the most important things that are driving Walmart’s strong sales performance right now, it’s probably not making the top 10,” he said. 

It’s a slightly different situation for Rite-Aid and similar companies like CVS Health and Walgreens.

Those companies have retail pharmacies but also other business segments that are directly affected in different ways by the boom in GLP-1 drugs.

For example, CVS also operates a health insurer and pharmacy benefit manager, or PBM, which maintains formularies and negotiates drug discounts with manufacturers on behalf of insurers and large employers.

The increased demand for GLP-1 drugs is likely more of a headwind for health insurers since they have to cover the costly drugs for beneficiaries, but CVS says “the risk is manageable” in that business division.

Meanwhile, PBMs may benefit more from the increase in GLP-1 use since they negotiate significant discounts on drugs and drive competition between manufacturers – but they often don’t pass along all of the savings to insurers.

“Each of the businesses kind of has GLP-1 in them and they are impacting them in a variety of different ways,” CVS CEO Karen Lynch said during an earnings call last month.

Correction: The Association for Accessible Medicines is a trade association representing the manufacturers and distributors of generic prescription drugs. An earlier version misstated its name.

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