Edge and Odds

The enemy of knowledge is not ignorance, it’s the illusion of knowledge (Stephen Hawking)

It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so (Mark Twain)

Edge and Odds

Invest with smart knowledge and objective odds

Month: March 2021

THE DAILY EDGE: 12 MARCH 2021

U.S. Initial Unemployment Insurance Claims Decline Sharply

The job market continues to exhibit signs of healing. Initial claims for unemployment insurance fell sharply to 712,000 during the week ended March 6 from 754,000 during the prior week, revised from 745,000. It was the lowest level of initial claims since the first week of November. The Action Economics Forecast Survey expected 725,000 initial claims for the latest week. The four-week moving average of initial claims declined to 759,000, the lowest level in roughly three months.

Initial claims for the federal Pandemic Unemployment Assistance (PUA) program rose to 478,001 last week from 436,138 one week earlier. These claims have risen from a low of 141,741 in early-January. The PUA program covers individuals such as the self-employed who are not included in regular state unemployment insurance. (…)

Continuing claims for regular state unemployment insurance fell to 4.144 million in the week ended February 27 from 4.337 million in the prior week, revised from 4.295 million. Continuing PUA claims for the week of February 20 rose to 8.387 million from a little-revised 7.329 million in the prior week. The number of Pandemic Emergency Unemployment Compensation (PEUC) claims also increased in that week to a record 5.455 million. The program covers people who were unemployed before COVID but exhausted their state benefits and are now eligible to receive benefits through March 14, 2021.

The total number of all state, federal and PUA and PEUC continuing claims edged higher to 20.116 million in the February 20 week, the highest level since the first week of December, up from a low of 16.106 million in the first week of January. This grand total is not seasonally adjusted.

Bespoke has the key chart:

(Bespoke)

U.S. JOLTS: Job Openings Rate Increases in January but Hiring Rate Declines

The Bureau of Labor Statistics reported that on the last business day of January, the total job openings rate rose to 4.6% from an unrevised 4.5%. It was the highest level in three months. The openings rate is calculated as job openings as a percent of total employment plus jobs that have not yet been filled. The January figure remained below the 4.7% record in January 2019. The hiring rate fell to 3.7%, its lowest level since April of last year. The overall layoff & discharge rate eased to 1.2% and reversed its November increase to 1.5%. The quits rate rose eased to 2.3% and has been moving sideways for six months. These figures date back to December 2000. (…)

Job openings are almost back to their pre-pandemic levels. Hires remain 11.2% lower.

fredgraph - 2021-03-12T061517.732

Yellen Says Americans to Start Seeing Payments This Weekend

Lumber Prices to Extend Surge as North America Shortfall Deepens

(…) Higher lumber prices could stifle the number of planned construction projects across North America and push prices for new homes even higher due to rising costs, echoing issues that hurt homebuyers in the past year. Skyrocketing lumber prices have lifted the average price of a new single-family home in the U.S. by $24,386 in the past 10 months, the National Association of Home Builders said on Feb. 22.

Homebuilding and supply shortfalls are driving wood prices higher

(…) “There’s not going to be enough fiber to supply global demand for saw timber over the next decade,” Jannke said, adding that only the southern U.S. and Russia have significant amounts of excess timber. “We find it hard to see where this fiber’s going to come from.”

U.S. Households’ Net Worth Rose 5.6% to Record $130.2 Trillion in 4th Quarter Soaring prices for stocks, real estate and other assets erased losses inflicted by the coronavirus pandemic

(…) Total debt in the household sector, which consists mostly of mortgages, rose 4% in 2020 to $16.64 trillion, compared with 3.2% growth in 2019. Consumer credit finished the year little changed, as some households used stimulus checks and jobless benefits to pay down debt.

Outstanding business debt, on the other hand, rose 9.1% last year to $17.7 trillion. And the federal government’s debt rose 24% to $23.621 trillion, according to Thursday’s report.

U.S. homeowners cashed out $152.7 billion in home equity last year, a 42% increase from 2019 and the most since 2007, according to mortgage-finance giant Freddie Mac. It was a blockbuster year for mortgage originations in general as well: Lenders churned out more mortgages than ever in 2020, fueled by about $2.8 trillion in refis, according to mortgage-data firm Black Knight Inc. (…)

China Recovery Likely Remains on Track After Soft Start

The Chinese economy appears to have stayed on its recovery track after some softening at the beginning of the year. That’s according to the latest daily indicators from Bloomberg Economics based on alternative data, which saw some softening in January but have stagged a noticeable recovery since the end of China’s Lunar New Year holiday. “Combined with a crater left in early 2020 by the coronavirus shock, this momentum should make for some sizzling year-on-year growth readings”, according to BE Economists Chang Shu and David Qu. Data including industrial production and retail sales for the January-February period will be released by China’s National Bureau of Statistics on Monday.

ECB Watch: Significantly higher

The ECB pledged to fight the higher longer-term bond yields by saying the Governing Council expects purchases under the PEPP over the next quarter to be conducted at a significantly higher pace than during the first months of this year.

On closer inspection, the statement looks like a compromise. There was no commitment to any specific level of purchases and the commitment covers only the next quarter, suggesting there were objections towards a longer-lasting pledge. Further, the chance of not having to use the entire Pandemic Emergency Purchase Programme (PEPP) envelope of EUR 1850bn was repeated, in a nod to the more hawkish members.

In the press conference, Lagarde argued she had no number in mind regarding the weekly pace of the purchases. However, she revealed it takes a Governing Council decision to alter the underlying pace of the purchases, and that a quarterly window was a suitable interval to take such decisions. In other words, the plan is to revisit the PEPP buying pace again in June. It would thus be surprising, if the Governing Council had not agreed on at least a rather tight target range for the weekly purchases. The fact that Lagarde did not reveal the number could suggest the number is not particularly high.

Only the next few weeks will show, what significantly higher means (…). Lagarde did not even manage to provide further clarity on what preserving easy financing conditions means. As a result, the ECB’s current stance is not enough to remove the risks of even faster increases in bond yields. (…)

Most likely, she did not have a mandate for a more dovish message from the Governing Council. (…)

COVID-19

Biden Wants All Adults Eligible for Vaccine by May 1 President Biden pressed states to widen Covid-19 vaccine eligibility to all U.S. adults by May 1, calling for an all-hands effort to defeat the virus to set the stage for small gatherings during Independence Day weekend.

Axios:

The latest analysis from Israel, where a world-leading 44% of the population has received two vaccine doses, suggests that the Pfizer vaccine could significantly reduce asymptomatic transmission — a key driver of infections — in addition to preventing severe illness and death.

The analysis came from real-world data collected between Jan. 17 and March 6 in Israel. Vaccine effectiveness was measured two weeks after the patient received their second dose.

  • The shot was found to be 97% effective at preventing symptomatic cases, hospitalizations and deaths, supporting Pfizer’s clinical trial findings that said it was 95% effective.
  • Unvaccinated people were 44 times more likely to develop symptomatic coronavirus and 29 times more likely to die from the virus.
  • The analysis was also conducted at a time when more than 80% of the tested specimens were the B.1.1.7 coronavirus variant first discovered in the U.K. — providing real-world evidence of the Pfizer vaccine’s effectiveness against one of the more contagious strains.

Novavax’s Vaccine Effective in U.K. Study

As Vaccines Roll Out, Major League Baseball Eyes a Return to Full Ballparks

China Offers Vaccines to Tokyo, Beijing Olympics Participants

It’s Still ‘America First’ on Vaccines as Russia, China Fill Gap

(…) Throughout the developing world, countries like Argentina have been squeezed out by richer nations in the race to secure vaccines produced by Western companies such as Pfizer and Moderna Inc. Across most of Africa and large swaths of Latin America, south Asia and southeast Asia, little or no vaccine has been distributed, according to Bloomberg’s Vaccine Tracker.

As a candidate and then president, Joe Biden repudiated Donald Trump’s “America First” approach to the world. But when it comes to vaccines, Biden is basically following his predecessor’s practice of making sure Americans are fully protected before sharing the doses around the world.

Seeing an opportunity to exert “soft power,” Russia and China have stepped into that breach, doling out doses to countries from Chile to the Philippines as a way to curry favor. While the U.S. makes promises about the future, Russia and China are delivering, albeit modestly, now. (…)

Russia’s president makes discussing access to its Sputnik vaccine — which has been found to be highly effective — a key part of his calls with foreign leaders. Russia has vowed to deliver 700 million doses of the vaccine abroad this year, although production so far hasn’t matched that pace.

Then there’s China. In trips to Myanmar and Brunei in recent months, Chinese Foreign Minister Wang Yi has pledged help with vaccine distribution while calling for greater collaboration on the commercial and infrastructure projects of President Xi Jinping’s Belt and Road Initiative. China’s state-owned media have touted its Sinovac as highly effective, despite concerns over its promised safety and level of protection. Hesitancy about the vaccine’s potential side effects has increased in mainland China and Hong Kong.

The U.S. has grown alarmed at those efforts and is emphasizing its $4 billion in support for Covax, an initiative backed by the World Health Organization, the vaccine alliance Gavi and the Coalition for Epidemic Preparedness Innovations that offers vaccines at low cost to developing countries. (…)

As of last week, 80% of the world’s vaccine supply had gone to just 10 wealthy countries, according to Robbie Silverman, senior corporate advocacy manager for Oxfam America. (…)

The rest of the world doesn’t want to wait any longer. So even though citizens in developing countries are sometimes skeptical about the efficacy of non-Western vaccines — for which clinical trial data is less readily available — their leaders have had little choice but to seek Russian and Chinese shots. (…)

There’s a downside to the global economy from keeping other countries closed, there’s the risk that the virus could mutate in other countries and there’s the diplomatic optics. (…)

Russia Wants to Vaccinate Nearly 1 in 10 on the Planet This Year Russia is ramping up overseas output of its Covid-19 vaccine.

US and Asia allies launch major vaccine drive to counter China The 1bn Covid jabs will be funded by US and Japan, made in India and distributed by Australia

EARNINGS WATCH? Really?

Goldman’s indicator also climbed five times as much as the S&P 500 Technology Index during the period. “These are extraordinary moves that are likely unsustainable at this point,” Jonathan Krinsky, Bay Crest Partners LLC’s chief market technician, wrote in a report Sunday that highlighted the index.

David Wilson

China Lays Plans to Tame Tech Giant Alibaba E-commerce company to face softer treatment than its Ant affiliate, provided it distances itself from founder Jack Ma

(…) Antitrust regulators are considering levying a record fine against Alibaba exceeding the $975 million that Qualcomm Inc. paid in 2015 over anticompetitive practices, so far the largest in China’s corporate history, according to people with knowledge of the matter.

Those people said Alibaba also will be required to end a practice that has been dubbed “er xuan yi”—literally, “choose one out of two”—under which, regulators believe, the tech giant punished certain merchants who sold goods both on Alibaba and its rival platforms, including JD.com. The precise remedies Alibaba will have to take likely will be hammered out only after a decision is announced, according to one of the people.

In addition, regulators are weighing whether to require Alibaba to divest itself of some assets unrelated to its main online-retailing business. (…)

Unlike Ant, which regulators viewed as a disrupter and a threat to the stability of the financial system Alibaba is considered the pride of China, a showcase for technology innovation that also is vital to the nation’s economy. Some 780 million Chinese consumers, or half of the country’s population, made purchases through the company’s platforms last year.

For a company that had net income of nearly $20 billion in its most recent fiscal year, a fine would allow it to throw money at a problem and move on. Some Alibaba executives said even a huge fine would be at least a provisional relief for a company battered by regulatory uncertainty and sinking employee morale. (…)

Bloomberg:

  • Tencent dropped after it was fined by the antitrust watchdog. Regulators see the conglomerate as the next target for increased supervision after a clamp down on Ant, people familiar said. It will probably have to set up a financial holding company.

  • Baidu fell premarket as it and Didi were also censured. Here’s our take on fintech battles.
Money Ninja The Best Way to Rob a Bank The best way to rob a bank is to own a bank.

I think that the collapse over the past week of Greensill Capital has a lot of systemic risk embedded within it, particularly as the fraudulent deals between Greensill and its major sponsors – Softbank and Credit Suisse – come to light. And that’s not even considering Greensill’s second tier of sponsors – entities like General Atlantic and the UK government – all of whom are up to their eyeballs in really dicey arrangements. (…)

Is this a Madoff Moment for the unicorn market? Honestly, if you had asked me a few weeks ago, I would have told you that a Madoff Moment was impossible in our narrative-consumed, speak-no-evil market world of 2021. Now I’m not sure. We’ll see, but I think this has legs. (…)

The weekend should give you time to read Ben Hunt’s full story. Well worth it, especially since The ECB is now asking whether or not the situation is “contained”.

There was a follow up on Ben’s Tuesday piece on Wednesday:

(…) Mr. Gupta is currently negotiating a so-called standstill agreement with Greensill to give his companies breathing space over payments on billions of dollars of debt, some of the people said. He also is trying to tap investors and banks for investment, one of the people added.

The efforts come after Greensill, which is among Mr. Gupta’s biggest lenders, filed for insolvency protection Monday. (…) Mr. Gupta told British union officials on Tuesday that Greensill’s difficulties create “a challenging situation which needs careful management,” according to a transcript of his remarks seen by The Wall Street Journal. (…)

Greensill had $5 billion in loans outstanding to GFG Alliance, according to a person familiar with the relationship. (…)

One challenge for GFG Alliance will be in understanding Greensill’s structure and what if any other parties have claims on the specialty finance company, the person said. (…)

If you know a bit of financial history, you will find this next headline …interesting:

  • JPMorgan Jumps Into Greensill Fray The emergence of other players to fill Greensill’s void lessens fears that the startup’s collapse will ripple through the supply-chain financing business.

Obviously to be continued…

An NFT Sold for $69 Million, Blasting Crypto Art Records

On Thursday, a digital artwork less than a month old hammered for $60.25 million at Christie’s in New York, shattering every previous record set for the medium and pushing the NFT market into the price range of blue-chip masterworks. With buyer’s premium the total comes to $69.3 million. (…)

Everydays: the First 5,000 Days is a mosaic of every image that artist Mike Winkelmann, who goes by the name Beeple, has made since 2013. The artwork is attached to a non-fungible token (NFT), a digital certificate of authenticity that runs on blockchain technology. Unlike some of his other artworks, Everydays doesn’t come with anything physical (a box, a plaque) attached. (…)

Indeed, the $69 million price tag isn’t just an unprecedented price for an NFT, it’s an unprecedented price for a new artist. For contrast, major works by giants of art history such as Vincent Van Gogh and Picasso saw sales of “only” $16 million and $15.6 million recently.

Everydays is now the third-most expensive artwork by a living artist to sell at auction—ever. (…)

On March 3, a group of anonymous art enthusiasts decided to burn an original Banksy screenprint worth roughly £70,000 or around $95,000 USD, and then turned it into a non-fungible token (NFT) asset. The art now exists as an NFT and was auctioned for 228.69 ethereum or $394k using today’s ether exchange rates. However, not everyone was impressed by the NFT transformation, as the cofounder of myartbroker.com says the NFT sale raises the idea that “the only morons in this transaction are the buyers and stunt artists themselves. (…)

THE DAILY EDGE: 11 MARCH 2021

U.S. Consumer Price Inflation Firms in February; Core Prices Tame

The Consumer Price Index rose 0.4% (1.7% y/y) during February following an unrevised 0.3% January increase. The gain matched expectations in the Action Economics Forecast Survey. The CPI excluding food & energy edged 0.1% higher last month (1.3% y/y) after holding steady for two straight months. A 0.2% February gain had been expected.

Strong energy prices provided much of the lift to last month’s increase with a 3.9% jump (2.4% y/y), following January’s 3.5% rise. Gasoline prices surged 6.4% (1.5% y/y), strong for the third straight month. Natural gas prices strengthened 1.6% (6.7% y/y). Fuel oil prices surged 9.9% NSA (-0.5% y/y) following a 5.4% jump while the cost of electricity improved 0.7% (2.3% y/y) after easing 0.2% in January.

Food prices improved 0.2% (3.6% y/y) last month, after rising 0.1% in January. Food-at-home prices rose 0.3% (3.5% y/y). (…)

Goods prices excluding food & energy edged 0.2% lower (+1.3% y/y) in February after rising 0.1% for two straight months. Apparel prices fell 0.7% (-3.6% y/y) following three months of firm increase. (…) New vehicle prices held steady (1.2% y/y). Used car & truck prices fell 0.9% for the third straight month, but they were 9.3% higher y/y. Medical care product costs were off 0.7% (-2.5% y/y), the sixth straight monthly decline. (…)

Services prices rose 0.2% (1.3% y/y) during February after holding steady for two months. Shelter costs rose 0.2% after six straight months of stability. The 1.5% y/y gain was half the 2019 increase. The owners’ equivalent rent of primary residences increased 0.3% and rose a greatly lessened 2.0% y/y. (…) Medical care services prices improved 0.5% (3.0% y/y) for a second straight month. These gains came after three straight months of decline. The cost of public transportation fell 2.3% (-16.2% y/y).

The components of core inflation have converged to a +1.3% YoY increase:

fredgraph - 2021-03-11T061341.267

On a MoM basis, core inflation has been below +0.2% in each of the last 6 months, averaging +0.1% per month. Core Goods prices declined 0.2% last month and are unchanged since September 2020. This is surprising given recent PMI surveys which all pointed to rising input costs being at least partially passed on to clients (other manufacturers, wholesalers, retailers). From Markit’s February U.S. PMI:

As a result, goods producers registered a severe uptick in cost burdens. The rate of input price inflation accelerated to the sharpest since April 2011. Higher raw material prices, notably for steel, and increased transportation costs were widely linked to the rise. The recent strengthening of demand allowed firms to partially pass on higher costs to clients through the fastest rise in charges since July 2008.

From Markit’s February Global PMI:

With rising demand for inputs chasing restricted supply, average input prices increased for the ninth month in a row. Part of the rise in costs was passed onto clients through higher charges. Rates of inflation in both price measures hit near-decade highs, with developed nations seeing (on average) sharper increases than emerging markets.

Since raw materials cost increases are real and well documented and given supply chain problems and surging transportation costs, there seem to be margins problems within the goods sector unless demand is strong enough to offset cost pressures without raising prices.

That could be the case at the retail level where December sales were up 5.9% YoY. However, sales at manufacturers (+0.1%) and wholesalers (+1.7%) seem too weak to provide much of an offset.

fredgraph - 2021-03-11T065317.201

Another potential explanation is that Chinese goods, about 33% of goods sold in the U.S., are deflating. China’s non-food prices are down 0.2% YoY in February.

Another curiosity is that Core CPI is now rising more slowly than Core PCE, unseen since 2010:

fredgraph - 2021-03-11T070317.328

The Atlanta Fed’s Underlying Inflation Dashboard details various inflation measures. Nothing to boost inflationists so far:

unnamed - 2021-03-10T134710.545

ING: US inflation: a long way to the top

(…) headline inflation is set to hit 3% in April as prices in a vibrant, reopened, supply constrained economy contrast starkly with those of 12 months before when the situation looked dire. Add in rising commodity, energy prices and freight costs that are still working their way through into CPI we expect to see inflation rise above 3.5% in May and June, possibly briefly touching 4%.

US annual inflation with ING forecasts Source: Macrobond, ING

(…) we agree that 4% inflation isn’t sustainable. For that we would need to see considerable wage inflation coming through very quickly, which doesn’t seem likely when there are 9.5 million fewer people in work than before the pandemic.

That said, we are a little less relaxed than Jerome Powell who only last week suggested that high inflation readings will be “transitory” and the notion of “deeply ingrained” low inflation will not fade fast. We are of the view that inflation could stay in a 2.5-3.5% range for the next couple of years which, if correct, implies more upward pressure on longer dated Treasury yields.

Our more bearish inflation forecast is likely due to our significantly higher than consensus GDP prediction of 6.5% for 2021 and 4.7% for 2022 and our sense there will be lingering supply issues that improve corporate pricing power. It is also heavily influenced by the one-third weighting of housing-related items within the inflation basket.

A reopening economy that is benefiting from pent-up demand, a much improved household balance sheet, a $1.9tn fiscal stimulus coming after nearly $4tn last year and likely followed up by a $3tn+ Build Back Better infrastructure programme plus ongoing support from monetary policy, to us, suggests vigorous growth. It also likely means that the economy will be able to recover all of the lost jobs due to the pandemic well before the end of 2022.

This strong demand will then crash into initial supply constraints in many industries – think restaurants and bars that have gone out of business, airlines that have laid off pilots, companies needing to rework office space, hotels that need to train staff etc. That supply capacity cannot be rebuilt overnight and this means more corporate pricing power that will keep inflation higher for longer.

A prolonged period of rising energy and commodity prices won’t help either. Note that the NFIB (National Federation of Independent Business) survey suggested that a net 34% of small businesses have plans to hike prices in the next three months, matching figures not seen since briefly in the summer of 2008. You then have to go back to the late 1970s to find a higher proportion of companies looking to raise prices.

Rising house prices will translate into higher CPI housing inflation

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Then there is the heavy weight of housing within the basket of goods and services. Primary housing rents and owners’ equivalent rent account for a third of the inflation basket. As the chart above shows, official house price changes tend to lead these housing components by around 14 months. Consequently, we strongly suspect that these housing components will turn higher soon and contribute positively to inflation for a significant period.

A final point to consider when looking at medium-term US CPI risks is that while there is significant spare capacity on the basis of employment being down 9.5 million on February 2020, employers don’t seem to be experiencing it.

The same NFIB small business survey showed that a record 40% of American small businesses had job openings they couldn’t fill. With Federal unemployment benefits being uprated to $300/week (as part of the $1.9tn stimulus) and extended out to September, on top of state benefits that average $347 per week, this could mean employers increasingly have to raise wages to try and fill positions.

This is a very different labour market to what we saw as we emerged from the Global Financial Crisis over 10 years ago and again suggests inflation moves higher for longer.

While the Federal Reserve remains relaxed, the bond market is understandably less confident that inflation will stick rigidly to 2% over the medium term. The prospect of inflation staying higher for longer argues for upward moves higher in longer-dated Treasury yields – 2% is an obvious next target, particularly if we start to hear some movement on QE tapering.

We also think this backdrop means it will be increasingly difficult for the Fed to argue that they will be leaving rates on hold until 2024. This is likely to remain the implication from next week’s updated Fed dot plot diagram, but we would not be surprised to see a few Fed officials start to move that forward into 2023.

The understatement of housing inflation in the consumer price index has reached a new milestone. As reported, the gap between the actual change in house prices and owners’ rent, as published by the Bureau of Labor Statistics (BLS), exceeds the “bubble” levels.

In February, BLS reported owner’s rent increased 2% over the last 12 months. House price inflation, as reported by the Federal Housing Finance Agency (FHFA), increased 11.4%. That gap over 900 basis points exceeds the 800 basis point gap recorded during the housing bubble peak.

image

The consumer price index was created and designed to measure prices paid for purchases of specific goods and services by consumers. The CPI was often referred to as a buyers’ index since it only measured prices “paid” by consumers.

The CPI has lost that designation. It no longer measures actual prices. For the past two decades, BLS imputes the owners’ rent series, using data from the rental market, no longer using price data from the larger single-family market.

Imputing prices for the cost of housing services make the CPI a hybrid index or a cross between a price index and a cost of living index. A hybrid index is not appropriate as a gauge to ascertain price stability, especially when the hypothetical measure of owner’s rent accounts for 30% of the core CPI.

The CPI missed the price “bubble” of the mid-2000s, and the economic and financial fallout was historic. History sometimes repeats itself in economics and finance. Policymakers forewarned.

Global food prices rose by 2.4% in February, according to the Food and Agriculture Organization’s Food Price Index. That marks the ninth straight month of price rises, causing the index — which is adjusted for inflation — to reach its highest level since July 2014.

Bank of Canada holds fast on rates, bond buying; sees economy gathering steam

The central bank kept its policy interest rate at 0.25 per cent, and reiterated that it does not expect to start raising rates until 2023. It also said that it would continue buying $4-billion worth of government of Canada bonds each week, giving few hints as to when it might begin to “taper” its quantitative easing program. (…)

“The economy is proving to be more resilient than anticipated to the second wave of the virus and the associated containment measures,” the bank said in Wednesday’s one-page statement. It noted that GDP growth in the fourth quarter of 2020 was 9.6 per cent on an annualized basis, twice what the bank had forecast in January, and that GDP is now expected to grow in the first quarter of 2021 rather than contract.

“Consumers and businesses are adapting to containment measures, and housing market activity has been much stronger than expected. Improving foreign demand and higher commodity prices have also brightened the prospects for exports and business investment,” it said.

At the same time, it noted that there is still considerable slack in the economy and uncertainty about the evolution of COVID-19. It said the labour market is “a long way from recovery,” noting that employment is still well below prepandemic levels, and that low-wage workers, young people and women have been hit the hardest.

(…) the bank said the year-over-year rate of inflation will likely tick up in the coming months, as current prices for goods and services – most notably the price of oil – are compared with prices depressed at the outset of the pandemic. Although it reiterated its view that inflation will moderate in the second half of the year, as “excess capacity continues to exert downward pressure.” It noted that measures of core inflation currently range from 1.3 per cent to 2 per cent.

A $60 billion surprise in the Covid relief bill: Tax hikes Democrats tucked in a trio of little-noticed tax hikes on the wealthy and big corporations.

One takes away deductions for publicly traded companies that pay top employees more than $1 million. Another provision cracks down on how multinational corporations do their taxes. A third targets how owners of unincorporated businesses account for their losses.

It’s surprising because Democrats were widely expected to put off their tax-increase plans until later. Many lawmakers are wary of hiking them now, when the economy is still struggling with the coronavirus pandemic. If anything, when it came to their stimulus plan, Democrats were focused on cutting taxes, not increasing them.

But they ran into problems complying with the stringent budget rules surrounding so-called reconciliation measures like the coronavirus legislation — especially after some wanted to add provisions like one waiving taxes on unemployment benefits.

If Democrats exceeded their $1.9 trillion budget cap for the plan, they would lose the procedural protections that were used to shield the entire measure from a Republican filibuster in the Senate.

The tax increases Democrats picked to help keep their plan’s cost in check had the political benefit of being arcane. Unlike things like raising the corporate tax rate or upping the top marginal tax rate on the rich, the ones they chose won’t produce many headlines. (…)

Congress Eyes Antitrust Changes to Counter Big Tech, Consolidation Both Democrats and Republicans have talked about a need to strengthen U.S. antitrust law. This year could test whether they are serious about hammering out legislation to make it happen.

Congress is considering the most significant changes to antitrust law in decades, including some proposals with bipartisan support. Lawmakers are looking at setting a higher bar for acquisitions by companies that dominate their markets; making it easier for the government to challenge anticompetitive conduct; and potentially forcing some giant tech companies to separate different lines of their businesses. (…)

The Senate will begin its discussion in earnest Thursday, when an antitrust subcommittee led by Sen. Amy Klobuchar (D., Minn.) holds its first hearing on possible reforms. (…)

“It’s not just tech, it’s cat food to caskets,” Ms. Klobuchar said. (…)

“There appears to be a broad consensus that the status quo isn’t working,” Sen. Mike Lee (R., Utah), the leading Republican on the Senate antitrust panel, said recently, though he warned against what he called a desire by some Democrats to “seize this moment to radically alter our antitrust enforcement regime.” (…)

Meanwhile, a House antitrust panel led by Rep. David Cicilline (D., R.I.) will conduct a hearing Friday to discuss a bipartisan proposal to allow local news outlets to join to negotiate with dominant platforms such as Alphabet Inc.’s Google and Facebook Inc. (…)

COVID-19