Aurelia Butler

The Federal Reserve has adopted a “higher-for-longer” policy, maintaining interest rates at peak levels of 5.25%-5.5% in September, with indications of another increase this year. Investors using CME Group’s (NASDAQ:CME) FedWatch tool anticipate steady rates at the November meeting but some predict a December rate hike. These higher interest rates have pushed up the federal funds rate and 30-year mortgage rates, affecting borrowing costs for home equity lines of credit, auto loans, and credit cards.The survey by the Harris Poll also indicates escalating economic anxiety due to these higher borrowing costs exacerbating economic stress. As a result of the Fed’s anti-inflationary measures, US consumers paid a record $130 billion in credit card interest and fees last year, as reported by the Consumer Financial Protection Bureau. If the 4.9% annual growth rate recorded in Q3 continues to fuel inflation, further rate hikes may ensue.Middle-class individuals like Rebecca Acuna from Indianapolis, Tiffany Bond from Maine, and Tom Maley from Ohio have voiced concerns about managing finances and affordability issues amidst these conditions. This apprehension poses a challenge to President Joe Biden’s “Bidenomics” agenda aimed at empowering the middle class. The situation is further complicated by record car payment defaults and generational differences in economic outlooks.Karl Jacob, CEO of LoanSnap, warns that this era of higher interest rates will burden Americans and potentially impact the broader economy. Meanwhile, inflation, as measured by the Consumer Price Index reported by the Labor Department, remains above the Fed’s 2% target.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

This article is an on-site version of our Disrupted Times newsletter. Sign up here to get the newsletter sent straight to your inbox three times a weekToday’s top storiesFor up-to-the-minute news updates, visit our live blogGood evening.A sweeping executive order from US president Joe Biden demanding companies share how they are ensuring the safety of their artificial intelligence tools together with complaints that wider society and industry are being sidelined in favour of Big Tech set the scene for a landmark AI summit in the UK this week.Biden’s decree — the broadest step taken by his government so far to tackle AI threats, from national security to competition and consumer privacy — comes ahead of a keynote speech from vice-president and AI tsar Kamala Harris and her appearance at the summit in Bletchley Park, Buckinghamshire, where British codebreakers in the second world war cracked German Enigma machine ciphers, altering the course of world history.Wider society and industry representatives, however, are being “squeezed out”, according to an international group of campaigners who have written an open letter of complaint to summit host Rishi Sunak, the UK prime minister. “AI is already making life-changing decisions — like how we work, how we’re hired and who gets fired,” said Kate Bell of the Trades Union Congress, one of the groups behind the letter. “It shouldn’t just be tech bros and politicians who get to shape the future of AI.”The debate around regulation has heated up in recent weeks. Gary Gensler, chair of the US Securities and Exchange Commission, told the Financial Times recently that a financial crisis was “nearly unavoidable” within a decade if regulators failed to manage the risks.The EU has moved the fastest, with a law outlining tough measures set to be approved by the end of the year, a move initially opposed by OpenAI co-founder Sam Altman, who said his company could “cease operating” in Europe if the rules were too stringent. In the UK, Sunak said last week he would “not rush to regulate” as he announced a new safety body to assess and test new technologies. Sunak’s government has published a series of papers ahead of the summit on capabilities and risks — including increased unemployment and poverty — focusing notably on “frontier AI”, which are systems that operate in the style of the human brain and include those underpinning products such as OpenAI’s ChatGPT or Google’s Bard chatbots.In the meantime, the gold rush among investors continues. Most AI start-ups, however, are overvalued and will fail to make any money, according to Vinod Khosla, an early OpenAI backer, who told the FT he saw a parallel between the hype around AI and last year’s frenzy around cryptocurrency (where coincidentally the UK today said it would push ahead with regulation).Despite the misgivings, the FT editorial board welcomed the summit as a “worthwhile endeavour whose importance goes beyond any one country”. Above all, it says, the meeting should initiate an international framework for regulation that avoids a further “Balkanisation” of rules and regulatory capture.Between full-on techno-optimism and doom-filled warnings about the end of humanity lies the truth, the FT argues. “It would be a shame to stifle the potential good, just as it would be dangerous to regulate without knowing the biggest risks,” it concludes. “Overseeing AI may be an enigma, but it can be cracked through collaboration.”The FT’s own Future of AI Summit takes place in London and online on November 15 and 16. Register here for your chance to get the big picture and learn how early adopters are using the technology.Need to know: UK and European economyChief economics commentator Martin Wolf highlights the failure of UK regional policy, which he says has led to deep geographical inequality across the country. German inflation fell faster than expected to 3 per cent in September, its lowest annual rate since June 2021. Separate data showed the economy shrank 0.1 per cent in the third quarter as weaker household consumption offset a pick-up in investment. Authorities however also revised up gross domestic product for the previous two quarters, indicating that Europe’s largest economy did not contract as initially thought. The UK and EU will push the world’s richest countries to end subsidies for foreign oil and gas operations and coal mining at an OECD meeting next month. The move builds on a commitment by some member countries to align public finance institutions with Paris Agreement goals to limit global warming. Need to know: global economyThe World Bank warned that oil prices could hit $150 and food prices could also rise if the Israel-Hamas conflict intensified, in a “dual shock” for commodity markets still shaken by the war in Ukraine.The EU and Australia have failed to reach a free trade deal after five years of negotiations. A deal is now unlikely until 2025, according to Australian officials, with EU parliamentary elections in June next year and a federal poll in Australia before or in 2025.The Insurance Development Forum, a World Bank and UN-backed insurer body, is planning an infrastructure fund to help developing countries deal with the effects of climate change. Global climate efforts have faced setbacks recently as some governments have met political opposition over transition plans.Facing elevated debts and growing demands on public spending, governments around the world must work out how they can deliver more with less, says the FT editorial board.Foreign direct investment in China is plunging, according to FT analysis, adding to pressure on its policymakers to address the economic slowdown. Watch our new video for a discussion on whether China’s Belt and Road infrastructure initiative has been a success.Video: Has China’s Belt and Road Initiative been a success?Need to know: businessGeneral Motors agreed a deal with the UAW union to end the carworkers’ strike, following similar deals struck by Ford and Chrysler owner Stellantis.US chipmaker Broadcom and cloud software company VMware delayed the completion of their $69bn merger as they await approval from China. Chinese regulators have been holding up the deal after Washington toughened rules to block Chinese access to high-end semiconductors.Norsk Hydro, a leading European aluminium producer, warned that the increasing number of electric cars imported from China could have a big impact on regional demand for the metal. It says regional orders would drop if European carmakers could not compete. In the US, EV growth is slowing.BlackRock, the world’s biggest asset manager, warned that investor disdain towards mining risked starving the sector of capital and hindering the energy transition by creating shortages of metals vital for green technologies.China tech IPOs are drying up as regulators turn tough on start-ups. About 126 companies have cancelled or suspended applications for initial public offerings on Shanghai’s tech-focused Star Market so far in 2023, more than in the previous four years combined.Killing Kittens, a sex party planner part-owned by the UK government (through a pandemic-era start-up fund) vowed to turn a profit for the taxpayer as it pivots to a new dating app. The Future Fund was launched in April 2020 but has faced criticism for ill-fated investments. The world of workWomen account for more than 60 per cent of solicitors in England and Wales but only about one-third of partners in law firms. A concerted push is under way to redress the balance. Critics attacking Gen Z workers for moaning about work burdens are taken to task by columnist Jemima Kelly. Why shouldn’t they take their happiness and quality of life seriously and why do we need to keep glorifying the daily grind as if it were an inherently worthy or virtuous way to live, she asks.Some good newsMusic has long been known as a balm for the soul, but new research suggests a favourite song, especially of the moving/bittersweet variety, can temporarily reduce the perception of physical pain.Recommended newslettersWorking it — Discover the big ideas shaping today’s workplaces with a weekly newsletter from Work & Careers editor Isabel Berwick. Sign up hereThe Climate Graphic: Explained — Understanding the most important climate data of the week. Sign up hereThanks for reading Disrupted Times. If this newsletter has been forwarded to you, please sign up here to receive future issues. And please share your feedback with us at [email protected]. Thank you More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Crude prices could rise to more than $150 a barrel if the conflict in the Middle East escalates, the World Bank warned on Monday, risking a repeat of the 1970s oil price shock if key producers cut supplies.In its quarterly Commodity Markets Outlook, the multilateral lender said a prolonged Israel-Hamas conflict could drive big rises in energy and food prices in a “dual shock” for commodity markets still reeling from Russia’s full-scale invasion of Ukraine.“The latest conflict in the Middle East comes on the heels of the biggest shock to commodity markets since the 1970s — Russia’s war with Ukraine,” said Indermit Gill, the World Bank’s chief economist and senior vice-president for development economics.Under the bank’s baseline forecasts, overall commodity prices are predicted to fall 4.1 per cent in the next year, with oil prices declining to an average of $81 a barrel, down from a projected $90 a barrel in the current quarter, as economic growth slows.However, the report said this outlook could quickly reverse if the conflict in the Middle East intensifies. In a worst-case scenario, global oil supply could shrink by 6mn to 8mn barrels a day, sending prices to between $140 and $157 a barrel, if leading Arab producers such as Saudi Arabia moved to cut exports. Under small and medium disruption scenarios, prices could hit $102 to $121 a barrel, the report added. Current global oil demand is about 102mn b/d.Israel-Hamas warThe war began when Hamas launched cross-border attacks from Gaza on October 7, killing more than 1,400 people and taking more than 230 hostages, according to Israeli officials. The Israeli bombardment has killed more than 8,000 people in Gaza and injured more than 20,000, according to Palestinian officials. The conflict threatens to spread beyond Israel and the occupied Palestinian territories, with energy analysts warning that global exports could be hit if leading crude producers such as Iran became actively involved.European gas prices this month jumped to their highest levels since March as traders feared that pipeline disruptions would hit global supplies, but oil markets have mostly shrugged off the impact of conflict. Benchmark Brent prices fell more than 3 per cent to about $87 a barrel on Monday, having exceeded $89 after the outbreak of the latest conflict. Crude prices hit a record $147 a barrel in 2008 on the eve of the global financial crisis. The World Bank said the global economy was in a better position to withstand a supply shock than in October 1973, when Arab members of Opec cut exports to the US and other countries that supported Israel in the Yom Kippur war, quadrupling crude prices.The Middle East is less important for global oil exports than it was 50 years ago, accounting for about 30 per cent of supply, down from 37 per cent in the 1970s. But 30 per cent is still a big share, warned Ayhan Kose, the World Bank’s deputy chief economist. “When you think about oil prices, what happens in the Middle East does not stay in the Middle East. It has huge global repercussions.”But the report warned that there had not yet been a full recovery from Russia’s invasion of Ukraine in February 2022, which Kose described as “traumatic for commodity markets”.He told the Financial Times that a “really negative outcome” will come if an escalation in the conflict drives a persistent increase in commodity prices, which would unleash “another wave of inflation” and force central bankers to act. Gil added: “Policymakers will need to be vigilant.”This would have severe consequences for food security in poorer countries already facing rising levels of hunger, according to the bank. Increases in oil and gas prices would also drive up shipping and fertiliser costs, making agricultural commodities more expensive.“Higher oil prices, if sustained, inevitably mean higher food prices,” said Kose, adding that at the end of 2022 nearly a tenth of the world’s population was undernourished.“An escalation of the latest conflict would intensify food insecurity, not only within the region but also across the world.” More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The writer is a professor of management practice in business administration at Harvard Business SchoolThe Covid-19 pandemic called attention to the fragility of the supply chains for many medical products, with shortages in everything from generic pharmaceuticals and essential medicines to basic supplies like blood sample collection containers and personal protective equipment. Since then there have been numerous calls in the US to rethink supply chain designs, build national stockpiles and revamp domestic manufacturing. But three of the last five high-volume disposable syringe factories in the US have closed in the past six months because it was cheaper to source products from China.A recent visit to a Becton, Dickinson and Co (BD) factory in Canaan, Connecticut, one of the last two large-scale syringe factories left in America, raised some important questions about the scale of that challenge.In the US, we use about 10mn syringes a day — two out of every three medical procedures involve one. Hospitals, pharmacies and doctors’ offices use them for everything from intravenous injection of drugs, to intensive care unit infusion of critical drugs, to the maintenance of catheters. Their quality and precision are critical to patient safety, yet they are amazingly inexpensive, typically selling for about 15 cents each. In 1954, BD supplied disposable glass syringes for Jonas Salk’s first polio vaccine trial and supported the subsequent vaccination campaign.The Canaan factory, which started operations in 1961, was a big supplier for H1N1 flu shots and, of course, for Covid vaccine shots. It has about 400 employees who produce more than 2bn medical devices a year, which means over 5mn units per employee per year. Each syringe is individually packaged, sterilised and then boxed in quantities of 100 or more.I was told that the output of the factory fills between four and seven 53-foot semi-trailers a day, depending on size mix (with 1mn units in each trailer). Eighty per cent are shipped all over the US and the rest exported. The factory is highly automated, and it runs around the clock, so there are not that many people on the floor.I draw two conclusions from these observations. First, that labour costs are not an issue because worker productivity is so high. And second, that capital costs are low because most of the equipment is fully depreciated, except for a relatively new electron beam sterilisation system. So why do these domestically produced syringes cost slightly more than the ones made in China? Material costs, mainly the polypropylene plastic for the syringe body or the polyisoprene (a synthetic rubber) stopper that is part of the plunger, represent more than half the manufacturing cost. These are made from resins derived from oil, and right now oil is cheaper for Chinese manufacturers because they can buy it from Russia.The BD factory had its Food and Drug Administration inspection in mid-September. A quick search of the FDA website for a few Chinese manufacturers importing into the US indicated no inspections since 2018, well before the pandemic.Among the reasons one would want to inspect the factories is to ensure consistent product quality and avoid safety issues from over- or under-infusion of drugs due to size variations (this is especially critical in paediatric and neonatal patient populations). One would also want inspections to check drug stability and potency shifts if pre-filled and unqualified materials were used in manufacture.The other challenge with syringes is that because they and similar items are sold to medical product distributors and may pass through several layers before reaching the medical professional who ultimately uses them, most of these end users in hospitals and medical facilities don’t know where the product came from. And they have too many other immediate things to worry about instead of where it was made or whether they will be able to get it in the next crisis.But, for a matter of just pennies per syringe, the US seems to be going down a path towards losing its last large-scale domestic syringe manufacturing capacity. I recently received my Covid booster and flu shots, and I would have happily paid a nickel or a dime more for domestically produced syringes to make sure I could get them in the next pandemic. More

ZURICH (Reuters) -The Swiss National Bank is set to reduce the amount of money it pays commercial banks after it announced on Monday a cut in interest it pays lenders who park cash with it overnight.The SNB announced the change after costs soared with the switch from negative interest rates – aimed at stemming the rise of the safe-haven franc – to positive rates as its focus shifted to battling inflation.It paid out 3.3 billion Swiss francs ($3.66 billion) in interest on sight deposits in the first six months of 2023, after reversing a near eight-year run of negative rates during which commercial banks paid the central bank to park cash overnight. European Central Bank policymakers are also considering ways to reduce interest payments to the euro zone’s commercial lenders early next year, Reuters reported earlier this month.In Switzerland, sight deposits held to meet minimum reserve requirements will no longer be remunerated from Dec. 1, under the changes announced on Monday.From the same date, banks will be paid the SNB’s policy rate, currently 1.75%, on deposits equivalent to 25 times their minimum reserve requirements, down from 28 times. It also set interest on deposits held above a bank’s individual threshold at 0.5 percentage points below the SNB’s policy rate.”These adjustments will ensure that monetary policy implementation remains effective and will reduce interest costs for the SNB,” the SNB said.”The changes have no impact on the current monetary policy stance,” it added. The SNB received 11.3 billion Swiss francs from the banks during the era of negative rates, but flows reversed when its rates entered positive territory in September.”Now that the interest rates are positive, the central banks still pay interest and this is costly,” said Yvan Lengwiler, professor of economics at the University of Basel.This has been a big issue for the SNB because of the high level of cash held in sight deposits for banks – 472 billion francs according to the latest data on Monday.The SNB declined to comment on the level of savings it expected to achieve.UBS economist Maxime Botteron estimated the SNB could be saving around 700 million francs per year at its current policy rate.With excess deposits earning 50 basis points below the policy rate, banks will have an incentive to lend in the money market, contributing to higher activity and supporting the transmission of monetary policy, he added. The central bank made a loss of 1 billion francs on its Swiss franc positions last year after the payments that followed the September shift to positive interest exceeded the income from negative overnight rates earlier in the year. It made a total 2022 full-year loss of 132.5 billion francs, mainly due to losses on its foreign currency investments. “It is politically difficult for a central bank to keep paying interest to commercial banks when it is making a loss and not transferring profits to the government, especially after a period in which the interest paid to savers has been negligible,” said Stefan Gerlach, Chief Economist at EFG Bank.The SNB had used sight deposits to conduct foreign currency transactions aimed at keeping the strength of the safe-haven Swiss franc in check – crediting the local currency accounts of commercial banks with newly created francs in exchange for foreign currencies.($1 = 0.9022 Swiss francs) More