Category: ΝΕΑ ΕΞΩΤΕΡΙΚΟΥ

27
Feb

U.S., EU Cut Some Russian Banks From SWIFT, Target Central Bank

By Saleha Mohsin, Annmarie Hordern and Alberto Nardelli

(Bloomberg) — Western nations agreed to unleash new sanctions to further isolate Russia’s economy and financial system after initial penalties failed to persuade President Vladimir Putin to pull out of Ukraine.

A decision by Western nations to exclude some Russian banks from the SWIFT messaging system, used for trillions of dollars worth of transactions between banks around the world, was announced in a joint statement Saturday.

The move is aimed at Russian banks that have already been sanctioned by the international community, but can be expanded to other Russian banks if necessary, according to a spokesman for the German government.

In addition, the nations said they would act together to impose “restrictive measures that will prevent the Russian Central Bank from deploying its international reserves in ways that undermine the impact of our sanctions.”

More penalties against the bank could come this weekend, according to a U.S. official. Russia has about $640 billion in reserves.

As the conflict in Ukraine grinds on, a consensus has emerged to prevent Russia from using the plumbing of the modern financial system and isolate it as a pariah similar to Iran, Venezuela and North Korea.

“The speed and unity to take this unprecedented financial action will give Putin pause,” said Josh Lipsky of the Atlantic Council. “The SWIFT move was largely expected but striking at the Central Bank will reverberate in Moscow and beyond.”

The Western move “won’t send the entire Russian economy into immediate shock. But it removed all the potential to backstop the large commercial banks,” he added.

Authorities haven’t determined the full list of banks that will be hit by the SWIFT sanctions. But a U.S. official briefing reporters on condition of anonymity said that they will be carefully chosen to maximize the impact on Russia and minimize the impact on EU nations.

It’s not clear how severe an impact the moves will have on Russia, or whether they really will do much to help Ukraine in the coming days. President Joe Biden said it would take weeks or longer for the pain for sanctions to be felt, but Saturday’s move suggested Western nations wanted to accelerate that process.

“Sanctioning Russia’s central bank is likely to have a dramatic effect on the Russian economy and its banking system, similar to what we saw in 1991,” said Elina Ribakova, deputy chief economist for the Institute of International Finance, said before the latest round of penalties was announced. “This would likely lead to massive bank runs and dollarization, with a sharp sell-off, drain on reserves — and, possibly, a full-on collapse of Russia’s financial system.”

All Russian banks that have already been sanctioned by the international community are going to be restricted from SWIFT. That list can be expanded if needed, officials said.

“Sanctioning the central bank of Russia is the kind of draconian sanctions we’ve employed on Iran,” Representative French Hill, an Arkansas Republican, said on Twitter ahead of the joint action. “I don’t see why waiting bears any strategy. Putin’s taken this catastrophic action. He needs to pay the maximum price now.”

The Biden administration has already sanctioned five Russian banks, including Sberbank and VTB Group, which collectively account for about half of the country’s banking assets. Russia had over 360 licensed banks at the start of the year.
Bill Ackman

@BillAckman

I wouldn’t want to keep money in a bank that can’t access the SWIFT system. Once a bank can’t transfer or receive funds from other banks, its solvency can be at risk. If I were Russian, I would take my money out now. Bank runs could begin in Russia on Monday. #StandWithUkraine

While Russia has been steadily reducing its reliance on foreign currency, the central bank still had 16.4% of its holdings in dollars at the end of June 2021, according to the latest official data, down from 22.2% a year earlier. The euro’s share was up at 32.2%.

By targeting the central bank, the West could complicate the enactment of monetary policy while removing a potential source of cash for the government.

Losing access to funds abroad would handcuff Russia’s central bank as it tries to shore up the ruble in the foreign-exchange market by selling hard currency. The direct interventions, announced this week after Putin ordered his military to attack Ukraine, mark the first time the Bank of Russia waded into the market since 2014.

Iran, Venezuela
Although the decision would be without precedent for an economy the size of Russia’s, the U.S. has previously sanctioned the central banks of adversaries. In 2019, the Treasury Department blacklisted the monetary authorities of Iran and Venezuela for funneling money that supported destabilizing activities in the respective regions. North Korea’s central bank is also blacklisted.

The Bank of Russia kept 22% of its hoard in gold, most of which is held domestically and would be out of reach of Western sanctions, while about 13% of the central bank’s holdings were in yuan.

Russia still has about $300 billion of foreign currency held offshore — enough to disrupt money markets if it’s frozen by sanctions or moved suddenly to avoid them, according to Credit Suisse Group AG strategist Zoltan Pozsar.

In a report this week that parsed data from the central bank and financial markets, Pozsar calculated that a much larger share is held in dollars than official numbers suggest. The Bank of Russia’s dollar exposure is about 50%, Credit Suisse estimates.

Any unreported reserves would be far harder to track and target with sanctions, though it does raise the potential for the U.S. and others to target more accounts — if they can identify where that money is. Pozsar said in his note that the offshore currency holdings he outlined could be vulnerable to sanctions, or to being moved out of their potential reach, potentially fueling further de-dollarization.

Sanctioning the central bank could also affect the country’s ability to facilitate trade and hinder its ability to promote international investments.
In the case of Iran, by the time the Trump administration targeted the country’s central bank in 2019, there was little left of the Islamic Republic’s economy that hadn’t been penalized, with the U.S. already enacting substantial sanctions on its banking industry.

It increased the chilling affect of sanctions on doing business with Iran even further, prevented the the central bank from accessing its special drawing rights under the International Monetary Fund, and also harmed its ability to carry out humanitarian trade including foods and medicines.

Russia may also not necessarily be able to count on Chinese financial institutions to help cushion the blow from the Western sanctions. At least two of China’s largest state-owned banks are restricting financing for purchases of Russian commodities, Bloomberg reported on Friday.

Other financial sanctions that could still be on the table include a ban for western public pension funds to invest in Russian assets and excluding the country from JPMorgan Chase & Co.’s Emerging Market Bond Index or the equivalent MSCI Inc. benchmarks, according to Bluebay’s Ash.

Full blocking sanctions against some Russian banks should already choke off their ability to conduct dollar payments with U.S. counterparts even if they retain access to the global messaging service.

Banks can also resort to alternative systems and even communicate via email to send payment instructions, Julia Friedlander, senior fellow at the Atlantic Council, said before the announcement.

Still, “it’s like a kick in the shins,” she said. “Transactions with Russia would be slower and more expensive. A sudden cut-off will also hold a lot of current assets in limbo, for corporations and banks.”

10
Feb

More ECB Officials Distrust Inflation Forecast Amid Hawkish Turn

  • Unexpectedly high data outcomes are unsettling policy makers
  • Chief economist defends staff modeling, projection process
By Jana Randow, Carolynn Look and Alexander Weber

(Bloomberg) — A growing number of European Central Bank policy makers are losing faith in the institution’s current inflation forecasting, emboldening their shift toward hiking interest rates later this year, according to officials with knowledge of the matter. 

While Chief Economist Philip Lane robustly defends the ECB’s projections and insists his staff’s modeling is reliable and state-of-the-art, several governors are cautioning against depending too much on them in a quickly changing, uncertain environment where the recent run of price increases has persistently confounded expectations. 

Such doubts on the forecasting process emerged in multiple conversations with officials on the discussions behind last week’s surprisingly hawkish shift unveiled by President Christine Lagarde. They spoke on condition of anonymity because ECB deliberations are private. 

The euro extended gains, trading up 0.3% at around $1.1445. Bund futures trimmed an advance in thin trading after the European session.

Lagarde’s pivot, taken against the backdrop of intensifying global tightening, has set the scene for a more hawkish decision in March, when policy makers may consider how quickly to stop bond purchases. 

New forecasts will take prominence at that meeting, with the ECB’s last set of projections from Dec. 16 obsolete after another surge in energy and two record inflation readings since then, including a 5.1% reading in January. The last outlook was for an overall average of 3.2% of this year. 

Lagarde said Monday those forecasts will help the Governing Council to “better appraise the implications” of current inflation readings on the medium-term outlook.

A foretaste of the size of the likely upgrade for the path of consumer prices may emerge on Thursday as the European Commission issues new projections. Draft forecasts seen by Bloomberg show consumer prices will advance by an average 1.7% in 2023 after surging 3.5% in 2022.

As chief economist, Lane is the Executive Board member responsible for the preparation and presentation of the ECB’s forecasts. His role also entails proposing any course of action at Governing Council decisions. 

Doubts on the ECB’s modeling capabilities form one line of attack on his relatively dovish view that policy makers shouldn’t flinch on inflation that isn’t about to spiral out of control, officials say, observing that his position is gaining less and less traction among colleagues. 

Instead, officials cite growing concern among Governing Council members, well beyond the typical hawks such as the Germans and the Dutch, that prices won’t undershoot the 2% target next year predicted in existing staff forecasts, and that such projections might prove an unreliable tool in a rapidly changing environment. 

What Bloomberg Economics Says…

“Our base case is that the ECB signals a hike will come at year end, perhaps reinforced by plans to taper asset purchases a little faster. There’s a danger, albeit a small one, that doves on the Council cave into pressure from the hawks after taking stock of the inflation numbers and how financial markets have priced in aggressive hiking cycles in the U.S. and the U.K.”

–Jamie Rush and Maeva Cousin. For the full report, click here

Lane has insisted that it takes a model to beat a model, a hint that any critics aren’t offering constructive alternatives. He does also acknowledge an evolving economic landscape where unemployment is falling faster than anticipated and inflation expectations are stabilizing. 

The Harvard-educated chief economist, seen by many observers as a torch-bearer of continuity for the stimulus-focused policy of former ECB President Mario Draghi, still reckons the ECB needs more time to form a policy judgment, with a potential conflict in Ukraine and its impact on energy among factors to watch. 

His own policy prescription, rather than the aggressive interest-rate increases now predicted for later this year by economists at banks including Goldman Sachs Group Inc. and also anticipated by investors, would favor more gradual “normalization.” 

That’s a view that Bank of Spain Governor Pablo Hernandez de Cos shared on Wednesday, while Bank of France Governor Francois Villeroy de Galhau on Tuesday said financial markets may have overreacted to Lagarde’s pivot, a suggestion that they have priced in too much tightening. 

Others appear more sanguine about investor views. Bundesbank President Joachim Nagel told Zeit that a rate increase is possible this year, while Dutch central bank chief Klaas Knot sees a 25 basis-point move as soon as the fourth quarter.  

Lagarde herself talked of a “gradual” adjustment on Monday. Regarding the forecasts, she insisted last week that she has “full confidence” in staff making “sensible, reasonable, rational assumptions.” At the same time, she stressed that policy makers aren’t tied to projections and that “there is an element of discretionary judgment” in their decisions.

ECB Executive Board member Isabel Schnabel echoed Lagarde’s view in a post during a Twitter discussion on Wednesday. 

In a reaction to the concerns of Governing Council members about the forecasting process reported in this story, the ECB provided a statement via a spokesperson. 

“The ECB’s/Eurosystem’s macroeconomic projections are conducted and owned by the ECB and by the Eurosystem staff. These provide a key input into Governing Council meetings, where decision-makers assess the outlook for the economy and inflation and formulate their own views on the risks to outcomes for inflation and growth. As any forecast, they are both model-dependent and sensitive to the incoming data. The Governing Council will receive fresh staff projections at the 10th March meeting, which will include all information which will have become available after the December meeting.”

–With assistance from James Hirai, Greg Ritchie and Jorge Valero.

 

1
Feb

Traders Dare BOE, ECB With Rate-Hike Bets Ahead of Key Decisions

  • Money markets see 125bps of hikes by BOE, 25bps by ECB in 2022
  • Leads to renewed bond selloff, puts pressure on policy makers
By Libby Cherry and James Hirai

(Bloomberg) — European markets are awash with hawkish enthusiasm, as traders bet on the fastest pace of policy tightening in more than a decade from the Bank of England and the European Central Bank ahead of their rate decisions on Thursday. 

Money markets are wagering on the BOE raising rates five times by 25 basis points and a move of that magnitude from the ECB by December. That spurred a renewed selloff in bonds across the continent, and challenges ECB policy makers including President Christine Lagarde who have pushed back against the idea of raising borrowing costs this year. 

Markets are assuming sentiment at the BOE and the ECB could have evolved following the Federal Reserve’s hawkish shift. Policy makers will have a tricky time to balance the need to cool inflation running at the hottest in decades, while not hurting economies recovering from the pandemic or provoking market volatility.

“The ECB had a narrative that the peak inflation print was December and inflation would cool over the course of the year,” said Rohan Khanna, a rates strategist at UBS Group AG. “While this may still prove true, today’s upside surprise to German inflation and hence upside surprise to tomorrow’s euro-zone HICP print imply that the ECB would also have to revise their forecasts upwards.”

Two-year and five-year German yields — the most sensitive to interest-rate rises — saw their biggest jumps since March 2020 on Monday, while the benchmark 10-year yield broke into positive territory for the second time this month. That presages an end to an era of negative rates, with the ECB having last hiked in 2011.

For the BOE, which kicked off its hiking cycle in December, traders are focusing on the pace of rate rises going forward. Money markets have priced in as many as five full hikes to take the key interest rate to 1.5% by year-end.

Traders haven’t priced in such an aggressive timeline of hikes since at least 2008. There’s also a widening split between the market and economists, who see the BOE’s key rate only reaching 0.75% in December. 

While inflation is at the highest in 30 years, a fast rise in borrowing costs would hurt U.K. households facing an increase to taxes and energy bills from April. The cost of living is adding to pressure on Prime Minister Boris Johnson, already fighting for his survival after a report into rule-breaking parties by his officials during lockdown.

Bond investors aren’t hanging around, dumping gilts to send the U.K.’s two-year yields above 1% for the first time since 2011. A Bank rate at that level would be especially significant for markets, as the point at which policy makers said they would consider the active sale of gilts — an unprecedented step for the central bank.

“We don’t expect the BOE to tighten as quickly as the Fed,” said Peder Beck-Friis, a portfolio manager at Pacific Investment Management Co., seeing greater inflationary risks in the U.S. “That said, if the Fed speeds up its hiking pace we would expect the BOE to up its pace too.”

 

14
Jan

France’s Power Price Cap Will Cost EDF up to $9.6 Billion 

(Bloomberg) — The French government will ask Electricite de France SA to sell more power at a deep discount to protect households from surging wholesale electricity prices, a measure that will cost the state-controlled utility as much as 8.4 billion euros ($9.6 billion).

The unprecedented move, announced by Finance Minister Bruno Le Maire in an interview with Le Parisien published Thursday, is the latest decision by President Emmanuel Macron to tackle inflation and gain support of voters ahead of April’s presidential election as an energy crisis threatens to create havoc across Europe.

In a separate development, EDF said late Thursday that several of its nuclear power plants in France would be down longer than expected for repairs, prompting the company to slash its output forecast from reactors by 8%. The move threatens to drive up power prices as Europe is already facing a historic energy crisis.  

Also See: EDF Trims Nuclear Power-Output Forecast 8%, Citing Repairs   

The increase in electricity bills for households and very small businesses will be capped at 4% this year, when including 8 billion euros of tax cuts on electricity consumption, the minister said. Without the moves, prices would rise by 35% from Feb. 1.

Rivals of Paris-based EDF, which are already entitled by law to buy 100 terawatt-hours of the energy giant’s annual power output at a steep discount to current market prices, will be given the opportunity to buy another 20 terawatt-hours on the cheap, Le Maire told the newspaper. That will cost EDF between 7.7 billion euros and 8.4 billion euros, depending on market prices, the minister said.

The financial consequences for EDF Group can’t be precisely determined at this stage, and will depend on the market prices over the implementation period, the energy giant said in a Thursday statement.

‘Appropriate Measures’

EDF said it “will consider appropriate measures to strengthen its balance sheet structure and any measure to protect its interests.” The company withdrew its guidance for 2022 indebtedness, and said it will communicate again by Feb. 18 at the latest when it releases annual results.

The government decision means EDF, which tends to sell its power in advance, will have to buy back power at high prices to sell it back at discount to rivals. It’s even more costly, because an unusually high number of its nuclear reactors are halted for long maintenance or repairs. In its statement Thursday, EDF said it was cutting its 2022 forecast for French nuclear output by 30 terawatt-hours to between 300 and 330 terawatt-hours.

EDF will sell 20 terawatt-hours of electricity at 46.2 euros per megawatt-hour to rivals this year, on top of the 100 terawatt-hours it’s selling at 42 euros, according to details disclosed by the government after Le Maire’s interview.

That compares with a day-ahead price of French baseload power that closed at 228 euros per megawatt-hour in Paris Thursday.

France’s plan needs to be approved by the European Commission, since it may impact competition within the European Union. Le Maire told the newspaper he has an agreement on the measure with Margrethe Vestager, the EU’s competition commissioner.

To achieve the 4% cap — a pledge made three months ago when market prices much were lower — the government will also postpone a portion of the 2022 tariff increase over a 12-month period starting February next year, EDF said.

2
Jan

Europe Seeks Green Label for Certain Gas and Nuclear Projects

  • European Commission is designing sustainable investment rules
  • Draft EU taxonomy proposal sparks criticism from the Greens 

By Ewa Krukowska

(Bloomberg) — The European Union is planning to allow some natural-gas and nuclear energy projects to be classified as sustainable investments in a proposal that sparked immediate criticism from the Greens. 

The European Commission wants to give a temporary green label to gas projects that replace coal and emit no more than 270 grams of carbon dioxide equivalent per kilowatt-hour, according to a draft regulation seen by Bloomberg News. Such plants would have to obtain construction permits before the end of 2030, and have plans to switch to renewable or low-carbon gases by the end of 2035.

Nuclear energy could be classified as sustainable as long as new plants that are granted construction permits by 2045 meet a set of criteria to avoid significant harm to the environment and water resources, according to the draft, sent on Friday to EU national governments for review. 

“The Commission considers there is a role for natural gas and nuclear as a means to facilitate the transition towards a predominantly renewable-based future,” the EU executive arm said in a statement on Saturday.

The design of the EU investment classification system, known as taxonomy, is closely watched by investors worldwide and could potentially attract billions of euros in private finance to help the green transition. The challenge is to ensure the decision on nuclear and gas gets political support, while avoiding the risk of greenwashing, or overstating the significance of emissions cuts.

Europe wants to reach carbon neutrality by the middle of the century under the Green Deal, a sweeping overhaul that aims to accelerate pollution cuts in all areas, from energy production to transport.

Yet for some lawmakers, investors and activists, classifying gas or nuclear projects as green would harm the entire sustainable investment rulebook.  

“Including nuclear power and gas in the EU taxonomy is like labeling a caged egg as organic,” said Michael Bloss, a German member of the Green group in the European Parliament. “Instead of channeling money into investments in the solar and wind industries, old and extremely expensive business models can now be continued under false guise.”

The taxonomy aims to guide investors to clean projects. The decision on whether it should include gas and nuclear power was delayed in April following criticism that such an addition could undermine the credibility of the system.

Giving a temporary green label to certain gas projects gas projects could facilitate investments in cleaning up coal-based heating systems in countries such as Poland. That’s an argument often raised by East European politicians.  

The inclusion of some nuclear energy projects would help attract private finance in nations from France to the Czech Republic, which plan to rely on atomic power in their transition to net-zero emissions.

The Commission is also planning to ensure a high degree of transparency to investors concerning gas and nuclear energy, introducing specific disclosure requirements for non-financial and financial undertakings. 

Member states and the Platform on Sustainable Finance have until Jan. 12 to provide feedback. The Commissions will then adopt the delegated act later this month. In the next step, it will be sent to EU nations and the European Parliament for scrutiny.

9
Nov

H Tesla σημειώνει τη μεγαλύτερη πτώση από τον περασμένο Μάρτιο μετά τα σχόλια του Michael Burry

(Bloomberg) — Οι μετοχές της Tesla υποχωρούν έως και 11% την Τρίτη μετά τα σχόλια στο Twitter του πασίγνωστου Μάικλ Μπέρι από την ταινία “The Big Short” , ότι ο Elon Musk μπορεί να θέλει να πουλήσει κάποια μετοχές της Tesla για να καλύψει τα προσωπικά του χρέη.

 

  • Η TΕSLA έκλεισε -4,8% τη Δευτέρα, αφότου ο Musk διεξήγαγε μια δημοσκόπηση στο Twitter το Σαββατοκύριακο σχετικά με το αν έπρεπε να πουλήσει το 10% της εταιρείας

 

  • Ο Burry έκανε επίσης μια σύγκριση μεταξύ του τρέχοντος χρηματιστηρίου και της ολλανδικής φούσκας της τουλίπας

 

  • Νωρίτερα, Ο αδελφός του Μασκ, Κίμπαλ πούλησε 88.500 μετοχές στις 5 Νοεμβρίου, πριν από τη δημοσκόπηση στο Twitter
1
Nov

Ex-Barclays Trader Banned for Life After Euribor Conviction

(Bloomberg) — A former Barclays Plc trader convicted of helping rig a key benchmark rate was banned from working in the finance industry for life.

Colin Bermingham, who was sentenced to five years in prison in 2019, was not “fit and proper” to take on any regulated role, the Financial Conduct Authoritysaid. The ruling comes after the former trader lost an attempt to overturn his guilty finding last year.

“His conviction demonstrates clear and serious dishonesty and a lack of integrity,” the FCA said in a statement Monday.

Bermingham agreed to resolve the matter with the lifetime ban, the FCA said. A  lawyer who previously represented Bermingham at trial didn’t immediately return a message seeking comment.

The 2019 convictions of Bermingham and another trader Carlo Palombo were part of the U.K. Serious Fraud Office’s probe into efforts to manipulate the Euro interbank offered rate, which is related to trillions of dollars worth of loans and derivatives.

31
Oct

G-20 Leaders Strike Climate Deal With Little Progress on Warming

(Bloomberg) — Negotiators reached agreement on the climate section of the Group of 20 summit’s final conclusions, giving leaders something to take onto the COP26 summit in Glasgow this week.

The language largely mirrors prior pledges made in the 2015 Paris climate accord, however.

Leaders said they “remain committed to the Paris Agreement goal to hold the global average temperature increase well below 2 degrees Celsius and to pursue efforts to limit it to 1.5 degrees Celsius above pre-industrial levels.”

As expected, the communique agrees to phasing out investment in new offshore coal power plants, something China already said it would do. “We will put an end to the provision of international public finance for new unabated coal power generation abroad by the end of 2021.”

In terms of domestic coal, the statement only contains a general pledge to supporting those countries that commit to “phasing out investment in new unabated coal power generation capacity to do so as soon as possible.”

29
Oct

Euro-Area Inflation Breaches 4% as Lagarde Fails to Sway Markets

(Bloomberg) — Euro-area inflation accelerated more than expected to breach 4% for only the second time ever, adding to the European Central Bank’s challenge in battling increasingly aggressive market bets for interest-rate hikes.

Consumer prices rose 4.1% in October, compared with the median of economist estimates at 3.7%, according to figures released by Eurostat on Friday. A measure stripping out volatile components such as food and energy climbed to 2.1%, a rate not seen in nearly two decades. 

On the eve of the data, ECB President Christine Lagarde attempted to pushed back on investor bets that her institution will have to raise interest rates next year, declaring such pricing at odds with its own analysis and policy guidance. 

That left investors unimpressed. On Friday, they started to price in 20-basis points of rate hikes by October 2022, even sooner than before Lagarde tried to convince them that their expectations are off the mark. 

“Without a doubt, investors have a different take on inflation to the ECB,” said Rishi Mishra, an analyst at Futures First.
Lagarde acknowledged that faster price increases will stick around for longer than the ECB previously anticipated, but also stuck to the view that it will ease through 2022. 

Her attempt to counter investor speculation stopped short of saying markets are wrong to bet on rate hikes next year. That reflected an agreement among Governing Council members that such a move could backfire, officials familiar with the matter said.

Based on market pricing, investors are expecting the ECB to raise borrowing costs for the first time in more than a decade to bring the deposit rate to minus 0.3% within a year.

Global Shift

The shift in markets comes amid a global inflation surge that’s seen some central banks — including the Bank of England and the Bank of Canada — shift tack already. 

Businesses are struggling to deal with the fraying of global supply chains, which has caused the costs of parts, raw materials and shipping to soar. Energy prices in the euro area, meanwhile, rose 23.5% in October, up from 17.6% a month earlier, amid a natural-gas crunch. 
Anticipation of higher borrowing costs is also being felt in European bond markets. The 10-year yields on Italian and Greek debt — often regarded as the riskiest in the region — jumped 22 basis points and 11 basis points, respectively, to 1.29% and 1.17%. That’s pushed Italy’s benchmark borrowing costs to the highest since July last year.
Professional forecasters polled by the ECB also ramped up their inflation outlook for the period through 2023, though they continue to see a sharp slowdown in 2022 from the current level, according to report on Friday. The respondents expect price growth of 1.9% in 2022 and 1.7% in 2023, below the ECB’s 2% target.

21
Aug

The Vaccinated Are Worried and Scientists Don’t Have Answers

By Kristen V. Brown and Rebecca Torrence

(Bloomberg) — Anecdotes tell us what the data can’t: Vaccinated people appear to be getting the coronavirus at a surprisingly high rate. But exactly how often isn’t clear, nor is it certain how likely they are to spread the virus to others. And now, there’s growing concern that vaccinated people may be more vulnerable to serious illness than previously thought.

There’s a dearth of scientific studies with concrete answers, leaving public policy makers and corporate executives to formulate plans based on fragmented information. While some are renewing mask mandates or delayingoffice reopenings, others cite the lack of clarity to justify staying the course. It can all feel like a mess.

“We have to be humble about what we do know and what we don’t know,” said Tom Frieden, a former director of the Centers for Disease Control and Prevention and the head of the nonprofit Resolve to Save Lives. “There are a few things we can say definitively. One is that this is a hard question to address.”

Absent clear public health messaging, vaccinated people are left confused about how to protect themselves. Just how vulnerable they are is a key variable not just for public health officials trying to figure out, say, when booster shots might be needed, but also to inform decisions about whether to roll back reopenings amid a new wave of the virus. On a smaller scale, the unknowns have left music lovers unsure if it’s OK to see a concert and prompted a fresh round of hang-wringing among parents pondering what school is going to look like.

In lieu of answers, what has emerged is a host of case studies providing somewhat different pictures of breakthrough infections. Variables including when the surveys were conducted, whether the delta variant was present, how much of the population was vaccinated and even what the weather was like at the time make it hard to compare results and suss out patterns. It’s difficult to know which data might ultimately carry more heft.

“It’s quite clear that we have more breakthroughs now,” said Monica Gandhi, an infectious disease expert at the University of California, San Francisco. “We all know someone who has had one. But we don’t have great clinical data.”

One of the best known outbreaks among vaccinated people occurred in the small beach town of Provincetown, Massachusetts, as thousands of vaccinated and unvaccinated alike gathered on dance floors and at house parties over the Fourth of July weekend to celebrate the holiday — and what seemed like a turning point in the pandemic. About three-fourths of the 469 infections were among vaccinated people.

Authors of a CDC case study said this might mean that they were just as likely to transmit Covid-19 as the unvaccinated. Even so, they cautioned, as more people are vaccinated, it’s natural that they would also account for a larger share of Covid-19 infections and this one study was not sufficient to draw any conclusions. The incident prompted the CDC to reverse a recommendation it had issued just a few weeks earlier and once again urge the vaccinated to mask up in certain settings.

Still, the particular details of that cluster of cases may have made that outbreak especially bad, according to Gandhi.

“The rate of mild symptomatic outbreaks in this population was higher because of a lot of indoor activity (including intimacy), rain that weekend, not much outside time and mixture of people with different vaccination status,” she said in an email.

A newly released, far larger CDC case study of infections in New York state, meanwhile, found that the number of breakthrough infections has steadily ticked up since May, accounting for almost 4% of cases by mid-July. Those researchers cautioned that factors such as easing public health restrictions and the rise of the highly contagious delta variant might impact the results.

Yet another CDC case study, in Colorado, found that the breakthrough infection rate in one county, Mesa, was significantly higher than the rest of the state, at 7% versus about 5%. The report suggested it was perhaps because the delta variant was circulating more widely there, but also noted the ages of patients in Mesa and the lower vaccination rate may have played a role.

Research out of Israel seems to back the idea that protection from severe disease wanes in the months after inoculation, and more recently, that breakthrough cases may eventually lead to an uptick in hospitalizations. The information is preliminary and severe breakthrough cases are still rare, but it bolsters the case that some people will need booster shots in coming months.

Case studies and data from some states in the U.S. have similarly shown an increase in breakthrough cases over time. But with the delta variant also on the rise, it’s difficult to tell whether waning immunity to any type of coronavirus infection is to blame, or if the vaccinations are particularly ineffective against the delta variant. It could be both, of course. Changing behavior among vaccinated people could be a factor, too, as they return to social gatherings and travel and dining indoors.

All that said, some facts are well established at this point. Vaccinated people infected with the virus are much less likely to need to go to the hospital, much less likely to need intubation and much less likely to die from the illness. There’s no doubt that vaccines provide significant protection. But a large proportion of the nation — almost 30% of U.S. adults — have not been vaccinated, a fact that has conspired with the highly contagious delta variant to push the country into a new wave of outbreaks.

“The big picture here is that the vaccines are working and the reason for the spike in the U.S. is we have too little vaccine uptake,” Frieden said.

To a certain extent, breakthrough cases of any virus are expected. In clinical trials, no Covid vaccine was 100% effective — even the best vaccines never are. The more the virus is in circulation, the greater the risk of breakthrough cases. It’s also common for some aspects of viral immunity to naturally wane over time.

For the time being, there are simply more questions than answers. Are breakthrough infections ticking up because of the delta variant, waning immunity or a return to normal life? Are vaccinated people more vulnerable to severe illness than previously thought? Just how common are breakthrough infections? It’s anyone’s guess.

“It is generally the case that we have to make public health decisions based on imperfect data,” Frieden said. “But there is just a lot we don’t know.”

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