High prices are driving an increase in attempts to bring eggs into the US from Mexico, according to border officials.
Officers at the San Diego Customs and Border Protection Office have seen an increase in the number of attempts to move eggs across the US-Mexico border, according to a tweet from director of field operations Jennifer De La O.
“The San Diego Field Office has recently noticed an increase in the number of eggs intercepted at our ports of entry,” wrote De La O in the Tuesday tweet. “As a reminder, uncooked eggs are prohibited entry from Mexico into the U.S. Failure to declare agriculture items can result in penalties of up to $10,000.”
Bringing uncooked eggs from Mexico into the US is illegal because of the risk of bird flu and Newcastle disease, a contagious virus that affects birds, according to Customs and Border Protection.
In a statement emailed to CNN, Customs and Border Protection public affairs specialist Gerrelaine Alcordo attributed the rise in attempted egg smuggling to the spiking cost of eggs in the US. A massive outbreak of deadly avian flu among American chicken flocks has caused egg prices to skyrocket, climbing 11.1% from November to December and 59.9% annually, according to the Bureau of Labor Statistics.
The increase has been reported at the Tijuana-San Diego crossing as well as “other southwest border locations,” Alcordo said.
For the most part, travelers bringing eggs have declared the eggs while crossing the border. “When that happens the person can abandon the product without consequence,” said Alcordo. “CBP agriculture specialists will collect and then then destroy the eggs (and other prohibited food/ag products) as is the routine course of action.”
In a few incidents, travelers did not declare their eggs and the products were discovered during inspection. In those cases, the eggs were seized and the travelers received a $300 penalties, Alcordo explained.
“Penalties can be higher for repeat offenders or commercial size imports,” he added.
Alcordo emphasized the importance of declaring all food and agricultural products when traveling.
“While many items may be permissible, it’s best to declare them to avoid possible fines and penalties if they are deemed prohibited,” he said. “If they are declared and deemed prohibited, they can be abandoned without consequence. If they are undeclared and then discovered during an exam the traveler will be subject to penalties.”
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In the fervor-filled days leading up to the November 16 launch of the long-awaited Artemis I mission, an uncrewed trip around the moon, some industry insiders admitted to having conflicting emotions about the event.
On one hand, there was the thrill of watching NASA take its first steps toward eventually getting humans back to the lunar surface; on the other, a shadow cast by the long and costly process it took to get there.
“I have mixed feelings, though I hope that we have a successful mission,” former NASA astronaut Leroy Chiao said in an opinion roundtable interview with The New York Times. “It is always exciting to see a new vehicle fly. For perspective, we went from creating NASA to landing humans on the moon in just under 11 years. This program has, in one version or another, been ongoing since 2004.”
There have been numerous delays with the development of the rocket at the center of the Artemis I mission: NASA’s Space Launch System (SLS), the most powerful rocket ever flown — and one of the most controversial. The towering launch vehicle was originally expected to take flight in 2016. And the decade-plus that the rocket was in development sparked years of blistering criticism targeted toward the space agency and Boeing, which holds the primary contract for the SLS rocket’s core.
NASA’s Office of Inspector General (OIG) repeatedly called out what it referred to as Boeing’s “poor performance,” as a contributing factor in the billions of dollars in cost overruns and schedule delays that plagued SLS.
“Cost increases and schedule delays of Core Stage development can be traced largely to management, technical, and infrastructure issues driven by Boeing’s poor performance,” one 2018 report from NASA’s OIG, the first in a series of audits the OIG completed surrounding NASA’s management of the SLS program, read. And a report in 2020 laid out similar grievances.
For its part, Boeing has pushed back on the criticism, pointing to rigorous testing requirements and the overall success of the program. The OIG report also included correspondence from NASA, which noted in 2018 that it “had already recognized the opportunity to improve contract performance management” and agreed with the report’s recommendations.
In various op-eds, the rocket has also been deemed “the result of unfortunate compromises and unholy politics,” a “colossal waste of money” and an “irredeemable mistake.”
Despite all the heated debate that has followed SLS, by all accounts, the rocket is here to stay. And officials at NASA and Boeing said its first launch two months ago was practically flawless.
“I worked over 50 Space Shuttle launches,” Boeing SLS program manager John Shannon told CNN by phone. “And I don’t ever remember a launch that was as clean as that one was, which for a first-time rocket — especially one that had been through as much as this one through all the testing — really put an exclamation point on how reliable and robust this vehicle really is.”
The Artemis program manager at NASA, Mike Sarafin, also said during a post-launch news conference that the rocket “performed spot-on.”
But with its complicated history and its hefty price tag, SLS could still face detractors in the years to come.
Many have questioned why SLS needs to exist at all. With the estimated cost per launch standing at more than $4 billion for the first four Artemis missions, it’s possible commercial rockets, like the massive Mars rocket SpaceX is building, could get the job done more efficiently, as the chief of space policy at the nonprofit exploration advocacy group Planetary Society, Casey Dreier, recently observed in an article laying out both sides of the SLS argument.
(NASA Administrator Bill Nelson noted that the $4 billion per-launch cost estimate includes development costs that the space agency hopes will be amortized over the course of 10 or more missions.)
Boeing was selected in 2012 to build SLS’s “core stage,” which is the hulking orange fuselage that houses most of the massive engines that give the rocket its first burst of power at liftoff.
Though more than 1,000 companies were involved with designing and building SLS, Boeing’s work involved the largest and most expensive portion of the rocket.
That process began over a decade ago, and when the Artemis program was established in 2019, it gave the rocket its purpose: return humans to the moon, establish a permanent lunar outpost, and, eventually, pave the path toward getting humans to Mars.
But the SLS is no longer the only rocket involved in the program. NASA gave SpaceX a significant role in 2021, giving the company a fixed-price contract for use of its Mars rocket as the vehicle that will ferry astronauts to the lunar surface after they leave Earth and travel to the moon’s orbit on SLS. SpaceX’s forthcoming rocket, called Starship, is also intended to be capable of completing a crewed mission to the moon or Mars on its own. (Starship, it should be noted, is still in the development phases and has not yet been tested in orbit.)
Boeing has repeatedly argued that SLS is essential and capable of performing tasks that other rockets cannot.
“The bottom line is there’s nothing else like the SLS because it was built from the ground up to be human rated,” Shannon said. “It is the only vehicle that can take the Orion spacecraft and the service module to the moon. And that’s the purpose-built design — to take large hardware and humans to cislunar space, and nothing else exists that can do that.”
Starship, meanwhile, is not tailored solely to NASA’s specific lunar goals. SpaceX CEO Elon Musk has talked for more than a decade about his desire to get humans to Mars. More recently, he has said Starship could also be used to house giant space telescopes.
Yet, another reason critics remain skeptical of SLS is because of its origins. The rocket’s conception can be traced back to NASA’s Constellation program, which was a plan to return to the moon mapped out under former President George W. Bush that was later canceled.
But the SLS has survived. Many observers have suggested a big reason was the desire to maintain space industry jobs in certain Congressional districts and to beef up aerospace supply chains.
Much of the criticism levied against SLS, however, has focused on the actual process of getting the rocket built.
At one point in 2019, former NASA administrator Jim Bridenstine considered sidelining the SLS rocket entirely, citing frustrations with the delays.
“At the end of the day, the contractors had an obligation to deliver what NASA had contracted for them to deliver,” Bridenstine told CNN by phone last month. “And I was frustrated like most of America.”
Still, Bridenstine said, when his office reviewed the matter, it found “there were no options that were going to cost less money or take less time than just finishing the SLS” — and the rocket was never ultimately sidelined. (Bridenstine noted he was also publicly critical of delayed projects led by SpaceX and others.)
NASA continued to stand by Boeing and the SLS rocket even as it became a political hot potato, with some in Congress both criticizing its costs and refusing to abandon the program.
The SLS rocket ended up flying its first launch more than six years later than originally intended. NASA had allocated $6.2 billion to the SLS program as of 2018, but that price tag more than tripled to $23 billion as of 2022, according to an analysis by the Planetary Society.
Those escalating costs can be traced back to the type of contracts that NASA signed with Boeing and its other major suppliers for SLS. It’s called cost-plus, which puts the financial burden on NASA when projects face cost overruns while still offering contractors extra payments, or award fees.
In testimony before the Senate Appropriations Subcommittee on Science last year, current NASA Administrator Bill Nelson criticized the cost-plus contracting method, calling it a “plague.”
More in vogue are “fixed-price” contracts, which have a firm price cap, like the kind NASA gave to Boeing and SpaceX for its Commercial Crew Program.
In an interview with CNN in December, however, Nelson stood by cost-plus contracting for SLS and Orion, the vehicle that is designed to carry astronauts and rides atop the rocket to space. He said that without that type of contract, in his view, NASA’s private-sector contractors simply wouldn’t be willing to take on a rocket designed for such a specific purpose and exploring deep space. Building a rocket as specific and technically complex as SLS isn’t a risk many private-sector companies are anxious to take on, he noted.
“You really have difficulty in the development of a new and very exquisite spacecraft … on a fixed-price contract,” he said.
“That industry is just not willing to accept that kind of thing, with the exception of the landers,” he added, referring to two other branches of the Artemis program: robotic landers that will deliver cargo to the moon’s surface and SpaceX’s $2.9 billion lunar lander contract. Both of those will use fixed-price — often referred to as “commercial” — contracts.
“And even there, they’re getting a considerable investment by the federal government,” Nelson said.
Still, government watchdogs have not pulled punches when assessing these cost-plus contracts and Boeing’s role.
“We did notice very poor contractor performance on Boeing’s part. There’s poor planning and poor execution,” NASA Inspector General Paul Martin said during testimony before the House’s Subcommittee on Space and Aeronautics last year. “We saw that the cost-plus contracts that NASA had been using…worked to the contractor’s — rather than NASA’s — advantage.”
Shannon, the Boeing executive, acknowledged in an interview that Boeing and SLS have faced loud detractors, but he said that the value of the drawn out development and testing program would become evident as SLS flies.
“I am extremely proud that NASA — even though there were significant schedule pressures — they could set up a test program that was incredibly comprehensive,” he said. “The Boeing team worked through that test process and hit every mark on it. And you see the results. You see a vehicle that is not just visually spectacular, but its performance was spectacular. And it really put us on the road to be able to do lunar exploration again, which is something that’s very important in this country.”
But the rocket is still facing criticism. During a Congressional hearing with the House’s Science, Space, and Technology Committee in March 2022, NASA’s Inspector General said that current cost estimates for SLS were “unsustainable,” gauging that the space agency will have spent $93 billion on the Artemis program from 2012 through September 2025.
Martin, the NASA inspector general, specifically pointed to Boeing as one of the contractors that would need to find “efficiencies” to bring down those costs as the Artemis program moves forward.
In a December 7 statement to CNN, Boeing once again defended SLS and its price point.
“Boeing is and has been committed to improving our processes — both while the program was in its developmental stage and now as it transitions to an operational phase,” the statement read, noting the company already implemented “lessons learned” from building the first rocket to “drive efficiencies from a cost and schedule perspective” for future SLS rockets.
“When adjusted for inflation, NASA has developed SLS for a quarter of the cost of the Saturn V and half the cost of the Space Shuttle,” the statement noted. “These programs have also been essential to investing in the NASA centers, workforce and test facilities that are used by a broad range of civil and commercial partners across NASA and industry.”
The successful launch of SLS was a welcome winning moment for Boeing. Over the past few years, the company has been mired in controversy, including ongoing delays and myriad issues with Starliner, a spacecraft built for NASA’s Commercial Crew Program, and scandal after scandal plaguing its airplane division.
Now that the Artemis I mission has returned safely home, NASA and Boeing can turn to preparing more of the gargantuan SLS rockets to launch even loftier missions.
SLS is slated to launch the Artemis II mission, which will take four astronauts on a journey around the moon, in 2024. From there, SLS will be the backbone of the Artemis III mission that will return humans to the lunar surface for the first time in five decades and a series of increasingly complex missions as NASA works to create its permanent lunar outpost.
Shannon, the Boeing SLS program manager, told CNN that construction of the next two SLS rocket cores is well underway, with the booster for Artemis II on track to be finished in April — more than a year before the mission is scheduled to take off. All of the “major components” for a third SLS rocket are also completed, Shannon added.
For the third SLS core and beyond, Boeing is also moving final assembly to new facilities Florida, freeing up space at its manufacturing facilities to increase production, which may help drive down costs.
Shannon declined to share a specific price point for the new rockets or share any internal pricing goals, though NASA is expected to sign new contracts for the rockets that will launch the Artemis V mission and beyond, which could significantly change the price per launch.
Nelson also told CNN in December that NASA “will be making improvements, and we will find cost savings where we can,” such as with the decision to use commercial contracts for other vehicles under the Artemis program umbrella.
How and whether those contracts bear out remain to be seen: SpaceX needs to get its Starship rocket flying, a massive space station called Gateway needs to come to fruition, and at least some of the robotic lunar landers designed to carry cargo to the moon will need to prove their effectiveness. It’s also not yet clear whether those contracts will result in enough cost savings for the critics of SLS, including NASA’s OIG, to consider the Artemis program sustainable.
As for SLS, Nelson also told reporters December 11, just after the conclusion of the Artemis I mission, that he had every reason to expect that lawmakers would continue to fund the rocket and NASA’s broader moon program.
“I’m not worried about the support from the Congress,” Nelson said.
And Bridenstine, Nelson’s predecessor who has been publicly critical SLS, said that he ultimately stands by SLS and points out that, controversies aside, it does have rare bipartisan support from its bankrollers.
“We are in a spot now where this is going to be successful,” Bridenstine said last month, recalling when he first realized the Artemis program had support from the right and left. “All of America is going to be proud of this program. And yes, there are going to be differences. People are gonna say well, you should go all commercial and drop SLS…but at the end of the day, what we have to do is we have to bring together all of the things that are the best programs that we can get for America and use them to go to the moon.”
The latest monthly jobs report, set to be released at 8:30 a.m. ET, is expected to show that the US economy added 200,000 jobs in December, with the unemployment rate holding steady for the third-straight month at 3.7%.
The Labor Department’s final monthly employment tally for 2022 likely brings with it some familiar story lines.
— Job growth is expected to remain robust, although slower than the breakneck pace of historically high job gains during the early stages of economic recovery from the pandemic.
— Workers are still not returning to hard-hit sectors such as leisure and hospitality, public service and child care.
— The strong labor market, while it keeps the economy churning, is a little too consistently vigorous for the Federal Reserve’s needs to reduce inflation by tempering demand.
— The tight labor market needs more workers, and wage growth still hasn’t returned to pre-pandemic levels, which would help quell fears of a wage-price spiral, when higher wages cause price increases that in turn cause higher wages.
Lather, rinse and repeat.
“The preponderance of evidence suggests that the labor market is still nowhere near back to normal,” said Julia Pollak, senior economist with ZipRecruiter online employment marketplace.
The US labor market remains atypically tight — something that was reinforced Wednesday when the Bureau of Labor Statistics released its Job Openings and Labor Turnover Survey (JOLTS) report for November. It showed there were still north of 10.5 million job openings, or about 1.7 available positions for every unemployed person looking for work.
The survey also showed that what has been deemed the “Great Resignation” is still chugging along, Pollak said. During the Covid-19 pandemic, a record number of workers voluntarily quit their jobs in search of greener pastures — be it better working conditions, higher pay, or increased flexibility.
The number of people per month quitting their jobs has now landed above 4 million for 18 months straight. In the two decades leading up to the pandemic, the monthly average was 2.6 million.
“Companies are still battling huge retention difficulties,” Pollak said.
The latest JOLTS didn’t show that the market was loosening up as maybe some had hoped or expected. Butit did provide a window into some of the divergence that’s occurring at a time when some businesses are hiring more to meet consumer demand while others scale down their operations because of bloat, the rippling effects of high interest rates, or preparation for less fruitful economic times ahead.
Industries such as accommodation and food services reported about 50% fewer layoffs in November than what was seen on average between 2000 and February 2020, Pollak said.
“I think it’s mostly just pre-pandemic recovery,” she said. “Leisure and hospitality is still short hundreds of thousands of workers and just still ramping up, because spending recovered more quickly than staffing.”
As of October 2022, the leisure and hospitality sector was still below pre-pandemic employment levels by more than 1 million jobs, or 6.3%, according to a CNN Business analysis of BLS employment data.
Technology companies have accounted for the lion’s share of job cuts announced in recent months. During the pandemic, when people were relegated to working and spending their money from home, tech and e-commerce firms bulked up to meet the demand.
During 2022, technology was the leading job-cutting industry, with 97,171 reductions announced, according to Challenger, Gray & Christmas’ latest job cut announcement report released Thursday.
Overall, job cuts trended upward in 2022 at 363,824 as compared to 321,970 the year before. There were 43,651 job cuts announced in December, a 129% jump from December 2021, according to the report.
But the job cuts announced in 2022 were the second-lowest on record, going back to 1993, Challenger, Gray & Christmas data showed. In 2019, there were 592,556 job cuts announced.
“The overall economy is still creating jobs, though employers appear to be actively planning for a downturn,” Andrew Challenger, senior vice president of Challenger, Gray & Christmas, said in the report.
If the monthly job gains come in as expected on Friday, that would mean the economy added more than 4.5 million jobs in 2022.
That would be the second-highest annual total on record, behind the massive 6.7 million gains in 2021, which of itself was a pendulum swing from a record 9.2 million job losses in 2020, BLS data shows.
“The Federal Reserve would like to see a [monthly job growth] number closer to 100,000 or below that,” said Nick Bunker, economic research director for North America at the Indeed Hiring Lab. “That’s more in line with a clearly cooling labor market.”
Economists are also expecting average hourly earnings growth to slow on a monthly and year-over-year basis, to 0.4% and 5%, respectively, according to Refinitiv.
Wage gains, although outpaced by inflation, remain well above pre-pandemic averages and beyond what the Fed wants to see in its price-busting campaign. Chair Jerome Powell, while acknowledging that the wage increases did not cause inflation to spike to the highest levels in 40 years, has repeatedly noted that persistent wage growth in such a tight labor market could keep inflation levels elevated.
“This is a set of labor market data that for workers and job seekers, [continued, strong nominal wage growth] it’s very much positive news,” Bunker said. “But for central bankers, they see this as a problem.”
Inflation has started to come down in recent months, with key gauges showing declines. But for the Fed to reach its desired target of 2% inflation, the labor market will have to take a hit, with unemployment rising to about 4.6% this year, according to the central bank’s projections released in December.
“The fact that inflation appears to be cooling down without the labor market taking a significant hit is a sign that a lot of this very high inflation was not driven by the labor market and that it is possible for inflation to be coming down from these levels without the labor market taking a hit,” Bunker said.
“But it’s unclear how far inflation can fall without the labor market deteriorating, or rather, it’s not clear what the underlying pace of inflation is with the labor market this tight.”
When we were teenagers, my brother and I received kidney transplants six days apart. It wasn’t supposed to be that way. He, two years older, was scheduled to receive my dad’s kidney in April of 1998. Twenty-four hours before the surgery, the transplant team performed its final blood panel and discovered a tissue incompatibility that all the previous testing had somehow missed. My brother was pushed onto “the list,” where he’d wait, who knows how long, for the kidney of somebody who had died and possessed the generous foresight to be a donor after death. I was next in line for my dad’s kidney. We matched, and the date was set for August 28. Then my parents got a call early in the morning on August 22. There had been a car crash. A kidney was available. As with many things in life, my brother went first and I followed.
His operation went smoothly. Six days later, it was my turn. I remember visiting the doctor shortly before the transplant, feeling the pinprick and stinging flush of local anesthetic, then a blunted tugging, the nauseating and strange sensation of a dialysis catheter withdrawn from below my collarbone. I remember, later, the tranquil fog of midazolam as I was rolled to the OR.
I remember waking from great depths after surgery under bright lights and shivering violently, then falling back asleep. I remember lying naked under blankets in the ICU, mildly delirious from morphine while watching a movie about a plane crash in the Alaskan wilderness, with Anthony Hopkins and Alec Baldwin fleeing a giant grizzly bear. I remember friends visiting me on the recovery floor, and how it hurt to laugh.
But now that 24 years have passed, all in relatively good health, I can recognize how much I’ve forgotten. I forget the short leash of dialysis from the months before my transplant: those oversize recliners deep inside the taupe core of a hospital building where, three times a week, machines drained and recycled my blood. I forget the plainness of a low-potassium, low-phosphorus, low-salt diet. I forget how bizarre it is that a few pills in the morning and a few at night keep the foreign organ in my lower abdomen alive—keep me alive. I, regrettably, lose sight of the supreme gift I’ve been given, this indefinite allowance of extra time, while 90,000 other Americans wait for this same gift, often on dialysis for years. Roughly 4 percent will die every year still waiting, and another 4 percent will become too sick to undergo major surgery. But here I am, forgetting this grace.
Five years ago, my brother’s kidney began to fail, and all of these buried memories resurfaced. His blood tests returned erratic levels, and nephrologists fretted. He was in and out of the hospital with recurring viral infections. A biopsy revealed necrotic tissue perforating half his kidney, webbed throughout like the tunnels of an ant colony. Finally, in May of 2018, he sent an email to family and friends, distilling the two borrowed decades during which he had attended concerts, hiked the Pacific Northwest, fallen in love, gotten married, started a family. All of these details were offered with a kind of chummy lightheartedness, but, as every reader knew, they barreled toward the inevitable and awkward conclusion. He was 37 years old and back in the hunt for a kidney. Would you be so kind as to consider … ?
The first successful kidney transplant took place in Boston in 1954 between a deliriously ill Richard Herrick and his identical twin brother, Ronald. Eight years later, his new kidney still doing its job, Richard died of a heart attack. Scattered attempts had come before then. In Ukraine, in 1933, the kidney of a 60-year-old man with type B blood who’d been dead for six hours was transplanted into a 26-year-old woman with type O blood who’d lost kidney function after poisoning herself. The recipient survived for two more days, which is miraculous considering the technology, circumstances, and general knowledge at the time. A transplant recipient in Chicago, in 1950, had some additional kidney function for a few months. Paris became a hotbed of experimentation in the early ’50s. Then came the Herricks.
Their story was technically dazzling but left unsolved the central biological puzzle of transplantation: how to tame the immune system. In most cases, our bodies recognize foreign tissue and send a battery of B and T cells to kill it. As identical twins with identical-enough tissue types, the Herricks sidestepped this problem. But doctors would need a solution to our innate immune response if kidney transplants were ever to become a mainstream procedure. Early efforts subjected patients to full-body preoperative blasts of X-ray radiation at borderline-lethal doses. The intent was to crush the immune system, then let it rebuild with the new kidney in place. This was sometimes accompanied by an injection of bone marrow. Most patients died from organ rejection, graft-versus-host disease, or both. The field of transplant surgery grew insular and desperate. Citing the fundamental precept of avoiding unnecessary harm, the more conservative medical practitioners of the day vilified the practice. Around this time, one detractor wondered, “When will our colleagues give up this game of experimenting on human beings? And when will they realize that dying, too, can be a mercy?”
Former Federal Reserve Chairman Alan Greenspan believes a US recession is the “most likely outcome” of the Fed’s aggressive rate hike regime meant to curb inflation. He joins a growing chorus of economists predicting imminent economic downturn.
His views are particularly important. Not only did Greenspan serve five terms as Fed chair under four different presidents between 1987 and 2006, but he was the last chair to successfully navigate a soft landing, in 1994. In the 12 months that followed February 1994 Greenspan nearly doubled interest rates to 6% and managed to keep the economy steady, avoiding recession.
Greenspan, now 96, said in a note this week that he doubts this current bout of hikes will result in a repeat performance.
The last two months of data showed that prices are beginning to decelerate – good news but not good enough, he said. “I don’t think it will warrant a Fed reversal that is substantial enough to avoid at least a mild recession,” said Greenspan, now a senior economic adviser to Advisors Capital Management, in commentary released on the company’s website Tuesday.
The Fed hiked interest rates seven times last year, increasing the rate that banks charge each other for overnight borrowing to a range of 4.25%-4.5%, the highest since 2007. Fed officials still expect to raise rates by another percentage point, according to projections released during their December monetary policy meeting.
Wage increases and, by extension, employment, “still need to soften further for a pullback in inflation to be anything more than transitory,” said Greenspan. “So we may have a brief period of calm on the inflation front, but I think it will be too little too late.” Unemployment rates remain near historic lows, holding at 3.7% in November. New employment data is set to be released Friday morning.
Greenspan doubts the Fed will loosen interest rates soon because “inflation could flare up again and we would be back at square one,” he said. “Furthermore, this could potentially damage the Federal Reserve’s credibility as a purveyor of stable prices, especially if the action were seen to be taken merely to protect the stock market rather than in response to truly unstable financial conditions.”
He does see some good news for investors on the horizon. Markets won’t be nearly as chaotic in 2023 as they were last year, he said. “I believe 2022 would be a tough year to top with respect to market volatility,” he remarked.
Parts made by more than a dozen US and Western companies were found inside a single Iranian drone downed in Ukraine last fall, according to a Ukrainian intelligence assessment obtained exclusively by CNN.
The assessment, which was shared with US government officials late last year, illustrates the extent of the problem facing the Biden administration, which has vowed to shut down Iran’s production of drones that Russia is launching by the hundreds into Ukraine.
CNN reported last month that the White House has created an administration-wide task force to investigate how US and Western-made technology – ranging from smaller equipment like semiconductors and GPS modules to larger parts like engines – has ended up in Iranian drones.
Of the 52 components Ukrainians removed from the Iranian Shahed-136 drone, 40 appear to have been manufactured by 13 different American companies, according to the assessment.
The remaining 12 components were manufactured by companies in Canada, Switzerland, Japan, Taiwan, and China, according to the assessment.
The options for combating the issue are limited. The US has for years imposed tough export control restrictions and sanctions to prevent Iran from obtaining high-end materials. Now US officials are looking at enhanced enforcement of those sanctions, encouraging companies to better monitor their own supply chains and, perhaps most importantly, trying to identify the third-party distributors taking these products and re-selling them to bad actors.
NSC spokesperson Adrienne Watson told CNN in a statement that “We are looking at ways to target Iranian UAV production through sanctions, export controls, and talking to private companies whose parts have been used in the production. We are assessing further steps we can take in terms of export controls to restrict Iran’s access to technologies used in drones.”
There is no evidence suggesting that any of those companies are running afoul of US sanctions laws and knowingly exporting their technology to be used in the drones. Even with many companies promising increased monitoring, controlling where these highly ubiquitous parts end up in the global market is often very difficult for manufacturers, experts told CNN. Companies may also not know what they are looking for if the US government has not caught up with and sanctioned the actors buying and selling the products for illicit purposes.
And the Ukrainian intelligence assessment is further proof that despite sanctions, Iran is still finding an abundance of commercially available technology. For example, the company that built the downed drone, Iran Aircraft Manufacturing Industries Corporation (HESA), has been under US sanctions since 2008.
One major issue is that it is far easier for Russian and Iranian officials to set up shell companies to use to purchase the equipment and evade sanctions than it is for Western governments to uncover those front companies, which can sometimes take years, experts said.
“This is a game of Whack-a-Mole. And the United States government needs to get incredibly good at Whack-a- Mole, period,” said former Pentagon official Gregory Allen, who now serves as Director of the Artificial Intelligence Governance Project at the Center for Strategic and International Studies. “This is a core competency of the US national security establishment – or it had better become one.”
Allen, who recently co-authored an investigation into the efficacy of US export controls, said ultimately, “there is no substitute for robust, in-house capabilities in the US government.”
He cautioned that it is not an easy job. The microelectronics industry relies heavily on third party distributors and resellers that are difficult to track, and the microchips and other small devices ending up in so many of the Iranian and Russian drones are not only inexpensive and widely available, they are also easily hidden.
“Why do smugglers like diamonds?” Allen said. “Because they’re small, lightweight, and worth a ton of money. And unfortunately, computer chips have similar properties.” Success won’t necessarily be measured in stopping 100% of transactions, he added, but rather in making it more difficult and expensive for bad actors to get what they need.
The rush to stop Iran from manufacturing the drones is growing more urgent as Russia continues to deploy them across Ukraine with relentless ferocity, targeting both civilian areas and key infrastructure. Russia is also preparing to establish its own factory to produce them with Iran’s help, according to US officials. On Monday, Ukrainian President Volodymyr Zelensky said that Ukrainian forces had shot down more than 80 Iranian drones in just two days.
Zelensky also said that Ukraine had intelligence that Russia “is planning a prolonged attack with Shaheds,” betting that it will lead to the “exhaustion of our people, our air defense, our energy sector.”
A separate probe of Iranian drones downed in Ukraine, conducted by the UK-based investigative firm Conflict Armament Research, found that 82% of the components had been manufactured by companies based in the US.
Damien Spleeters, the Deputy Director of Operations at Conflict Armament Research, told CNN that sanctions will only be effective if governments continue to monitor what parts are being used and how they got there.
“Iran and Russia are going to try to go around those sanctions and will try to change their acquisition channels,” Spleeters said. “And that’s precisely what we want to focus on: getting in the field and opening up those systems, tracing the components, and monitoring for changes.”
Experts also told CNN that if the US government wants to beef up enforcement of the sanctions, it will need to devote more resources and hire more employees who can be on the ground to track the vendors and resellers of these products.
“Nobody has really thought about investing more in agencies like the Bureau of Industry Security, which were really sleepy parts of the DC national security establishment for a few decades,” Allen, of CSIS, said, referring to a branch of the Commerce Department that deals primarily with export controls enforcement. “And now, suddenly, they’re at the forefront of national security technology competition, and they’re not being resourced remotely in that vein.”
According to the Ukrainian assessment, among the US-made components found in the drone were nearly two dozen parts built by Texas Instruments, including microcontrollers, voltage regulators, and digital signal controllers; a GPS module by Hemisphere GNSS; a microprocessor by NXP USA Inc.; and circuit board components by Analog Devices and Onsemi. Also discovered were components built by International Rectifier – now owned by the German company Infineon – and the Swiss company U-Blox.
CNN sent emailed requests for comment last month to all the companies identified by the Ukrainians. The six that responded emphasized that they condemn any unauthorized use of their products, while noting that combating the diversion and misuse of their semiconductors and other microelectronics is an industry-wide challenge that they are working to confront.
“TI is not selling any products into Russia, Belarus or Iran,” Texas Instruments said in a statement. ” TI complies with applicable laws and regulations in the countries where we operate, and partners with law enforcement organizations as necessary and appropriate. Additionally, we do not support or condone the use of our products in applications they weren’t designed for.”
Gregor Rodehuser, a spokesperson for the German semiconductor manufacturer Infineon, told CNN that “our position is very clear: Infineon condemns the Russian aggression against Ukraine. It is a blatant violation of international law and an attack on the values of humanity.” He added that “apart from the direct business it proves difficult to control consecutive sales throughout the entire lifetime of a product. Nevertheless, we instruct our customers including distributors to only conduct consecutive sales in line with applicable rules.”
Analog Devices, a semiconductor company headquartered in Massachusetts, said in a statement that they are intensifying efforts “to identify and counter this activity, including implementing enhanced monitoring and audit processes, and taking enforcement action where appropriate…to help to reduce unauthorized resale, diversion, and unintended misuse of our products.”
Jacey Zuniga, director of corporate communications for the Austin, Texas-based semiconductor company NXP USA, said that the company “complies with all applicable export control restrictions and sanctions imposed by the countries in which we operate. Military applications are not a focus area for NXP. As a company, we are vehemently opposed to our products being used for human rights violations.”
Phoenix, Arizona-based semiconductor manufacturing company Onsemi also said it complies with “applicable export control and economic sanctions laws and regulations and does not sell directly or indirectly to Russia, Belarus or Iran nor to any foreign military organizations. We cooperate with law enforcement and government agencies as necessary and appropriate to demonstrate how Onsemi conducts business in accordance with all legal requirements and that we hold ourselves to the highest standards of ethical conduct.”
Swiss semiconductor manufacturer U-Blox also said in a statement that its products are for commercial use only, and that the use of its products for Russian military equipment “is in clear breach of u-blox’s conditions of sale applicable to customers and distributors alike.”
The trend is clear: Inflation is cooling off in America.
The Federal Reserve’s preferred measurement of inflation showed price increases continued to moderate in November, providing yet another welcome indication that the period of painfully high prices has peaked.
The Personal Consumption Expenditures price index, or PCE, rose 5.5% in November from a year earlier, the Commerce Department reported Friday. That’s lower than in October, when prices rose 6.1% annually.
In November alone, prices rose just 0.1% from October.
Core PCE, which excludes the volatile food and energy categories, was up 4.7% annually and 0.2% on a monthly basis, matching expectations of economists polled by Refinitiv.
The annual increases for both PCE inflation indexes hit their lowest levels since October 2021 and follows continued declines in other inflation gauges, such as the Consumer Price Index and Producer Price Index.
PCE, specifically the core measurement, is the Fed’s favored inflation gauge, since it provides a more complete picture of costs for consumers.
Friday’s report also showed that spending continued to rise in November, but at a much slower pace than in previous months. Spending was up 0.1% in November as compared to 0.8% the month before. Personal income increased by 0.4% in November, down from 0.7% in October.
The November PCE report, the last major inflation gauge released in 2022, provided a snapshot of an economy in transition. Tasked with reining in the highest inflation since the early 1980s, the Fed has undertaken a series of blockbuster interest rate hikes to squelch demand.
In its seven meetings starting in March, the central bank’s policymaking arm raised its benchmark interest rate by a cumulative 4.25 percentage points. The sharp hike in rates has started to filter through the economy, its effects showing up first in areas such as real estate, where mortgage rates were 6.27% this week, more than double the rate seen last year at this time, according to Freddie Mac data.
“The economy is moving in the right direction from the Federal Reserve’s perspective at the end of 2022, but not quickly enough,” Gus Faucher, chief economist for PNC Financial Services, said in a statement. “Higher interest rates are weighing on consumer spending, particularly for durable goods, and inflation is slowing.”
Inflation has moderated in recent months, especially on items like goods as supply chain bottlenecks have eased and consumers focused more spending in areas like leisure and hospitality.
However, inflation within the services sector has been a little “sticky,” and not abating as quickly. Friday’s PCE report showed the services index posted a monthly increase of 0.4% – unchanged from October’s rate – and a year-over-year increase of more than 11%, Faucher noted.
While much of the services inflation is due to housing costs, which are rapidly reversing, the Fed is concerned that strong wage growth could fuel persistent increases in services prices and overall inflation, he added.
“The Federal Open Market Committee will continue to increase the fed funds rate in early 2023 until it becomes more apparent that the job market is cooling, and wage growth and services inflation are slowing to more sustainable paces,” he added.
The Fed’s latest economic projections that were released last week showed that board members were expecting inflation to remain slightly higher for longer than previously forecast. Fed board members now expect PCE inflation to end 2023 at 3.1% and core PCE to finish next year at 3.5%, above the central bank’s target rate of 2%.
A separate Commerce Department report released Friday showed that new orders for manufactured goods tumbled 2.1% in November, the biggest monthly drop since the onset of the pandemic.
Transportation equipment, specifically new orders for non-defense aircraft and parts, drove the decline, according to the report. Excluding transportation, new orders increase 0.2%.
Shipments increased 0.2% in November, which followed a 0.4% increase in October.
“Core durable goods orders slowed but did not contract, reflecting growing unease about the economy,” Diane Swonk, chief economist for KPMG, tweeted Friday after the report’s release. “Manufacturing activity has begun to contract and prelim reading for December suggests it will contract further at year end. A cold winter expected for the manufacturing sector.
Inflation’s slow march downward has been welcome news to consumers as well, helping to perk up their economic sentiments during December, according to new data released Friday by the University of Michigan.
The final December reading for the index of consumer sentiment came in at 59.7 in December, up slightly from a preliminary measurement of 59.1 and November’s final reading of 56.8, according to data from the university’s Surveys of Consumers.
“Consumers clearly welcomed the recent easing of inflation,” Joanne Hsu, director of the Surveys of Consumers, said in a statement. “While sentiment appears to have turned a corner from its all-time low from June, consumers have reserved judgment about whether the trends will continue.”
She added: “Their outlook for the economy may have improved, but it remains relatively weak. The sustainability of robust consumer spending is contingent on continued strength in incomes and labor markets in the quarters ahead.”
The report showed the biggest improvement in sentiment about business conditions, while inflation expectations also improved by falling to 4.4% in December, the lowest reading in 18 months, according to the university. This is a key data point for the Federal Reserve. If consumers believe prices will remain high, that could factor into increased wage demands, which could cause businesses to raise prices.
Earlier this week, the Conference Board’s consumer confidence index – another measure of how consumers are feeling about the economy – landed at its highest measurement since April 2022.
The Biden administration has launched an expansive task force to investigate how US and western components, including American-made microelectronics, are ending up in Iranian-made drones Russia is launching by the hundreds into Ukraine, multiple officials familiar with the effort tell CNN.
The US has imposed tough export control restrictions and sanctions to prevent Iran from obtaining high-end materials, but evidence has emerged that suggests Iran is finding an abundance of commercially-available technology.
Last month, the UK-based investigative organization Conflict Armament Research examined several drones that had been downed in Ukraine and found that 82% of their components were manufactured by companies based in the US.
Among the components found in some of the drones are processors built by the Dallas-based technology company Texas Instruments, according to an investigation by the Ukrainian Armed Forces and a source familiar with the US inquiry, as well as an engine made by an Austrian firm owned by Canada’s Bombardier Recreational Products. Both companies have condemned any use of their technology for illicit purposes.
Their apparently unintentional ensnarement in Iran’s drone manufacturing industry underscores how inexpensive products intended for civilian use can be easily retrofitted for military purposes, and often fall just outside the bounds of sanctions and export control regimes.
Texas Instruments said in a statement to CNN that “TI is not selling any products into Russia, Belarus or Iran. TI complies with applicable laws and regulations in the countries where we operate, and partners with law enforcement organizations as necessary and appropriate. Additionally, we do not support or condone the use of our products in applications they weren’t designed for. ”
Bombardier Recreational Products said in a statement that it was launching an investigation into how the engines ended up in the drones.
The investigation has intensified in recent weeks amid intelligence obtained by the US that the Kremlin is preparing to open its own factory for drone production inside Russia as part of a deal with Iran, the officials said.
Iran has already begun transferring blueprints and components for the drones to Russia to help with production there, CNN has reported, in a dramatic expansion of the countries’ military partnership.
Agencies across Washington are involved in the task force, including the departments of Defense, State, Justice, Commerce and Treasury, with one official describing the inquiry as an “all hands on deck” initiative. The effort is being overseen by the White House National Security Council as part of an even bigger, “holistic approach” to dealing with Iran, a senior administration official said, from its crackdown on protesters and its nuclear program to its deepening role in the war in Ukraine.
But the drone issue is particularly urgent given the sheer volume of US-made components, many of them manufactured in the last couple years, that have been found in the Iranian drones Russia has been deploying across Ukraine against civilians and critical infrastructure.
Conflict Armament Research found that the Iranian drones they examined in Ukraine in November had “higher-end technological capabilities,” including tactical-grade sensors and semiconductors sourced outside of Iran, demonstrating that Tehran “has been able to circumvent current sanction regimes and has added more capabilities and resiliency to its weapons.”
National Security Council official John Kirby told reporters earlier this month that the US would be sanctioning three Russian companies involved in acquiring and using the Iranian drones, and is “assessing further steps we can take in terms of export controls to restrict Iran’s access to sensitive technologies.”
Much of that work has fallen to the task force, officials said, and among its first tasks has been to notify all of the American companies whose components have been found in the drones. Congressional staffers briefed on the effort told CNN that they hope the task force provides lawmakers with a list of US companies whose equipment is being found in the drones in an effort to force greater accountability by urging the companies to monitor their supply chains more closely.
The task force is also having to coordinate with foreign allies, since the components being used in the drones are not limited to those produced by American companies. Conflict Armament Research also found that “more than 70 manufacturers based in 13 different countries and territories” produced the components in the Iranian drones they examined.
In October, CNN obtained access to a drone that was downed in the Black Sea near Odesa and captured by Ukrainian forces. It was found to contain Japanese batteries, an Austrian engine and American processors.
Iran may also be acquiring near-exact replicas of western components from China, according to a study published last month by the Washington-based Institute for Science and International Security. “China plays a larger role than previously assessed in enabling Iran to manufacture and supply drones to Russian forces,” the report found. “It appears that Chinese companies are supplying Iran with copies of Western commodities to produce UAV combat drones.”
The White House believes it is successfully driving home the scale of the issue with allies. The senior administration official told CNN that there was “growing broad and deep international consensus on Iran, from the EU to Canada to Australia and New Zealand, which is being led by US diplomacy.”
There is no evidence that any of the western companies are knowingly exporting their technology to be used in the drones, and that is partly why the task force’s job has been so difficult, officials said.
The task force has its work cut out for it in tracing supply chains for the microelectronics industry, which relies heavily on third party distributors and resellers. The microchips and other small devices ending up in so many of the Iranian and Russian drones are not only inexpensive and widely available, they are also easily hidden.
Iran also uses front companies to buy equipment from the US and EU that may have a dual use, like the Austrian engines, that Tehran can then use to build drones, according to the Treasury Department, which sanctioned several of those companies in September.
That makes supply chain monitoring a challenge, though experts say US and European companies could be doing a lot more to track where their products are going.
“American companies should be doing a lot more to track their supply chains,” said Dmitri Alperovitch, the former chief technology officer at the cybersecurity firm CrowdStrike.
Keeping better track of resellers is a first step, he said, but the task is admittedly difficult because so many of these companies’ products are so commoditized and available off-the-shelf and online for civil purposes. Ultimately, neutering some Iranian front companies with sanctions and cutting off their supply from some western companies will be akin to “a game of whack a mole,” Alperovitch said, noting that they “can easily find another supplier.”
He added that the real “weak underbelly” of US policy when it comes to export controls is enforcement—and prosecuting the specific individuals involved in the illicit transactions.
“We have to beef up the resources for enforcement of our sanctions to achieve the desired effect,” Alperovitch said.
“You can put companies on the [sanctioned] entities list,” he added, “but if you don’t actually go after the people involved, it doesn’t mean a whole lot.”
Editor’s Note: This is an updated version of a story that originally ran on November 2, 2022.
In its last policymaking meeting of the year,the Federal Reserve on Wednesday raised its benchmark interest rate for the seventh timein a row, to a range of 4.25% to 4.5%. That is the highest it’s been in 15 years.
In a continued bid to tame decades-high inflation, the central bank may keep pushing rates higher next year, too, albeit at a more modest pace.
That, of course, means higher borrowing costs for consumers. But it also means your savings may actually start earning a little money after years of barely-there interest.
“Credit card rates are at a record high and still increasing. Auto loan rates are at an 11-year high. Home equity lines of credit are at a 15-year high. And online savings account and CD yields haven’t been this high since 2008,” said Greg McBride, chief financial analyst at Bankrate.
The good news: There are ways to situate your money so that you can benefit from rising rates and protect yourself from their costs.
If you’ve been stashing cash at big banks that have been paying next to nothing in interest for savings accounts and certificates of deposit, don’t expect that to change much, McBride said.
Thanks to the big players’ paltry rates, the national average savings rate is still just0.19%, up from 0.06% in January, according to Bankrate’sDecember 7 weekly survey of large institutions.
But all those Fed rates hikes are starting to have a much more significant impact at online banks and credit unions, McBride said. They’re offering far higher rates — with some topping 3.75% currently — and have been increasing them as benchmark rates go higher.
As for certificates of deposit, there’s been a noticeable increase in return. The average rate on a one-year CD is 1.20% as of November 22, up from 0.14% at the start of the year. But top-yielding one-year CDs now offer as much as 4.5%.
So shop around. If you make a switch to an online bank or credit union, however, be sure to only choose those that are federally insured.
Given today’s high rates of inflation, Series I savings bonds may be attractive because they’re designed to preserve the buying power of your money. They’re currently paying 6.89%.
But that rate will only be in effect for six months and only if you buy an I Bond by the end of April 2023, after which the rate is scheduled to adjust. If inflation falls, the rate on the I Bond will fall, too.
There are some limitations: You can only invest $10,000 a year. You can’t redeem it in the first year. And if you cash out between years two and five, you will forfeit the previous three months of interest.
“In other words, I Bonds are not a replacement for your savings account,” McBride said.
Nevertheless, they preserve the buying power of your $10,000 if you don’t need to touch it for at least five years, and that’s not nothing. They also may be of particular benefit to people planning to retire in the next 5 to 10 years since they will serve as a safe annual investment they can tap if needed in their first few years of retirement.
When the overnight bank lending rate — also known as the fed funds rate — goes up, various lending rates that banks offer their customers tend to follow.
So you can expect to see a hike in your credit card rates within a few statements.
The average credit card rate hit a record high of 19.40% as of December 7, up from 16.3% at the start of the year, according to Bankrate. Some retail store credit cards are now carrying whopping rates of more than 30%.
“[Interest rate hikes] will most acutely impact those consumers who do not pay off their credit card balances in full through higher minimum monthly payments,” said Michele Raneri, vice president of US research and consulting at TransUnion.
Best advice: If you’re carrying balances on your credit cards — which typically have high variable interest rates — consider transferring them to a zero-rate balance transfer card that locks in a zero rate for between 12 and 21 months.
“That insulates you from [future] rate hikes, and it gives you a clear runway to pay off your debt once and for all,” McBride said. “Less debt and more savings will enable you to better weather rising interest rates, and is especially valuable if the economy sours.”
Just be sure to find out what, if any, fees you will have to pay (e.g., a balance transfer fee or annual fee), and what the penalties will be if you make a late payment or miss a payment during the zero-rate period. The best strategy is always to pay off as much of your existing balance as possible — on time every month — before the zero-rate period ends. Otherwise, any remaining balance will be subject to a new interest rate that could be higher than you had before if rates continue to rise.
If you don’t transfer to a zero-rate balance card, another option might be to get a relatively low fixed-rate personal loan. Average personal loan rates range from 10.3% to 12.5% for those with excellent credit scores, according to Bankrate. The best rate you can get would depend on your income, credit score and debt-to-income ratio. Bankrate’s advice: To get the best deal, ask a few lenders for quotes before filling out a loan application.
Mortgage rates have been rising over the past year, jumping more than three percentage points.
The 30-year fixed-rate mortgage averaged 6.33% in the week ending December 9, according to Freddie Mac. That is more than double where it stood a year ago.
“After cresting above 7%, mortgage rates have pulled back a bit but not enough to impact buyer affordability. The year-to-date rise in mortgage rates has still stripped would-be homebuyers of one-third of their buying power,” McBride said.
What’s more, mortgage rates may climb further.
So if you’re close to buying a home or refinancing one, lock in the lowest fixed rate available to you as soon as possible.
That said, “don’t jump into a large purchase that isn’t right for you just because interest rates might goup.Rushing into the purchase of a big-ticket item like a house or car that doesn’t fit in your budget is a recipe for trouble, regardless of what interest rates do in the future,” said Texas-based certified financial planner Lacy Rogers.
If you’re already a homeowner with a variable-rate home equity line of credit, and you used part of it to do a home improvement project, McBride recommends asking your lender if it’s possible to fix the rate on your outstanding balance, effectively creating a fixed-rate home equity loan.
If that’s not possible, consider paying off that balance by taking out a HELOC with another lender at a lower promotional rate, McBride suggested.
Given that inflation may have peaked, market returns may be better next year, said Yung-Yu Ma, chief investment strategist at BMO Wealth Management. “The outlook for equity and fixed income returns has improved, and a balanced approach [in your portfolio] makes sense.”
That’s not to say markets won’t remain choppy in the near term. But, Ma noted, “A soft landing for the economy looks not only possible but likely.”
Any cash you have sitting on the sidelines might be put into the equity and fixed income markets in regular intervals over the next six to 12 months, he suggested.
Ma remains bullish on value stocks, especially small cap ones, which have outperformed this year. “We expect that outperformance to persist going forward on a multi-year basis,” he said.
Regarding real estate, Ma noted, “the sharply higher interest and mortgage rates are challenging…and that headwind could persist for a few more quarters or even longer.”
Commodities, meanwhile, have come down in price. “But they still are a good hedge given the uncertainty in energy markets,” he said.
Broadly speaking, however, Ma suggests making sure your overall portfolio is diversified across equities. The idea is to hedge your bets, since some of those areas will come out ahead, but not all of them will.
That said, if you’re planning to investin a specific stock, consider the company’s pricing power and how consistent the demand is likely to be for their product, said certified financial planner Doug Flynn, co-founder of Flynn Zito Capital Management.
To the extent you already own bonds, the prices on your bonds will fall in a rising rate environment. But if you’re in the market to buy bonds youcan benefit from that trend, especially if you purchase short-term bonds, meaning one to three years. That’s becausetheir prices have fallen more, relative to long-term bonds, and their yields have risen more. Ordinarily, short- and long-term bonds move in tandem.
“There’s a pretty good opportunity inshort-term bonds, which are severely dislocated,” Flynn said.
“For those in higher-income tax brackets, a similar opportunity exists in tax-free municipal bonds.”
Muni prices have dropped significantly and, while they have started to improve, yields have risen overall and many states are in better financial shape than they were pre-pandemic, Flynn noted.
Ma also recommends short-term corporate bonds or short-term Agency or Treasury securities.
Other assets that may do well are so-called floating rate instruments from companies that need to raise cash, Flynn said. The floating rate is tied to a short-term benchmark rate, such as the fed funds rate, so it will go up whenever the Fed hikes rates.
But if you’re not a bond expert, you’d be better off investing in a fund that specializes in making the most of a rising rate environment through floating rate instruments and other bond income strategies. Flynn recommends looking for a strategic income or flexible income mutual fund or ETF, which will hold an array of different types of bonds.
“I don’t see a lot of these choices in 401(k)s,” he said. But you can always ask your 401(k) provider to include the option in your employer’s plan.
Treasury Secretary Janet Yellen is striking a cautiously optimistic tone about 2023, predicting a major inflation cooldown and stressing that a recession isn’t required to get prices back under control.
“I believe by the end of next year you will see much lower inflation, if there’s not an unanticipated shock,” Yellen told CBS’s “60 Minutes” in an interview that aired on Sunday.
Yellen cited plunging gas prices — AAA said Monday the national average is down by 52 cents per gallon in the past month — tumbling shipping costs and shortening delivery lags.
“I hope that it will be short-lived,” Yellen said of the current period of high inflation. “We learned a lot of lessons from the high inflation we experienced in the 1970s. And we’re all aware that it’s critically important that inflation be brought under control and not become endemic to our economy. And we’re making sure that won’t happen.”
Yellen, like many economists and even the Federal Reserve, has previously been overly optimistic about inflation. She admitted earlier this year that she was “wrong” about the path of inflation, telling CNN’s Wolf Blitzer in June that she “didn’t — at the time — fully understand” the “large shocks to the economy” that would come from Russia’s war in Ukraine.
The comments come after Friday’s hotter-than-expected wholesale inflation report, which showed producer prices increased in November at the slowest annual pace in 18 months.
The more closely watched consumer inflation report due out on Tuesday this week is expected to show a similar cooldown of consumer prices.
The Federal Reserve is widely expected to deliver a seventh-straight interest rate hike on Wednesday, though investors are betting the US central bank will slow the pace of rate increases from three-quarters of a point to half a point. The Fed’s aggressive rate hikes have driven up borrowing costs — credit card rates are at record highs — and raised fears of a recession.
Yellen conceded a recession is possible in the months ahead — though the former Fed chair emphasized that one isn’t required to tame inflation.
“There’s a risk of a recession,” Yellen said. “But it certainly isn’t, in my view, something that is necessary to bring inflation down.”
Like other Biden administration officials, Yellen argued the economy is in the midst of a healthy transition from blockbuster growth to something more sustainable.
“We had a very rapid recovery from the pandemic. Economic growth was very high,” Yellen said. “To bring inflation down and because almost anyone who wants a job has a job, growth has to slow.”
Yellen said the US economy is at or near full employment, meaning it’s “not necessary” for rapid growth to get people back to work.
The Treasury secretary said she tries to instill a sense of compassion and urgency into policymaking by stressing to her staff that real people are suffering.
Yellen recalled how in 2009 when millions of people were out of work in the middle of the Great Recession, she reminded her staff at the San Francisco Federal Reserve, where she was president from 2004-2010, that there are real people behind labor market statistics and economists need to worry about their wellbeing.
“I think I said, ‘They’re f***people,’” Yellen said. “I wanted people that worked for me to take seriously the harm and misery that was being experienced by all too many Americans.”