The Federal Reserve raised its benchmark interest rate by 25 basis points this week. The central bank also signaled that it’s likely to keep raising rates at every meeting well into the second half of the year, and made it clear that it will start paring its balance sheet soon.

If all this sounds quite hawkish, it should—at least stacked up against the Fed’s previous forecasts in December. Since then, inflation has intensified and become more deeply entrenched, and the market had already adjusted its expectations ahead of the Fed meeting. So, while the March information was a bit more hawkish than anticipated, it wasn’t a paradigm change.

The US Economy Should Withstand Rate Hikes

The Ukraine war is foremost among today’s uncertainties, and it’s simply too early for the Fed—or anyone else—to have a clear picture of the longer-term impacts. The Fed’s statement, and Chair Powell’s comments about the war, were largely factual—not predictive.

Powell simply noted that the war would likely push inflation up and economic growth down, which we agree is the likely outcome. The Fed will wait to see the balance between those two outcomes before deciding if the war necessitates a change to its economic outlook—and thus its policy outlook.

Inflation: More Severe and Embedded than Initially Thought

Even without the war’s impact, the Fed’s expectations on inflation and growth have shifted since the last forecast round. Inflation is more intense and deeply embedded in the US economy than the central bank had thought, and the central bank was compelled to boost its inflation forecasts. Meanwhile, persistent inflation is eroding purchasing power, resulting in a downgrade to economic growth forecasts.

The Fed upped its 2022 forecast for core personal consumption expenditures, its go-to inflation measure, to 4.1% from 2.7%, and increased the 2023 and 2024 forecasts—it now doesn’t expect inflation to fall back to 2.0% until at least 2025. The forecast for 2022 economic growth was cut from 4.0% to 2.8%, reflecting deteriorating real purchasing power made worse by surging commodities costs. If energy prices move meaningfully from here, inflation and growth forecasts will need to be revised.

The Fed made clear how it expects to respond to higher prices and lower growth: with tighter monetary policy. Based on the central bank’s new “dot plot,” most members of the Federal Open Market Committee (FOMC) expect rate hikes at each of the six remaining 2022 meetings. Several FOMC members expect at least one rate hike of 50 basis points or more at a single meeting.

A Rapid Evolution in the Fed’s Rate Path

The Fed has come a long way on its rate trajectory in a short amount of time. The most dovish of this week’s dots—each FOMC member’s estimate of year-end rates—calls for four more rate hikes from the central bank this year. That estimate would have been the most hawkish only three months ago.

Based on the new dot plot, potential outcomes for 2022 fed funds target rates ranges from 1.375%, meaning 100 more basis points of rate hikes, to 3.125% (evidently, one FOMC member believes that 275 basis points of additional rate hikes over the next six meetings is appropriate). A substantial minority of dots (seven of 16) call for more than 2% in rate hikes during 2022, meaning that seven of the 16 FOMC members expect to raise rates by 50 basis points at least one time this year.

Our Forecasts Reflect More Rate Hikes to Come

In large part because of the war, economic uncertainty is exceptionally high right now, making forecasts beyond the immediate future more challenging than usual. Our forecast, and any other, depends a lot on developments in Ukraine and associated moves in commodity prices.

Based on the information available today, we expect the Fed to raise rates by another 25 basis points in May, and to announce at that meeting that balance-sheet reduction will start. After that, we think another 125 basis points of hikes are likely this year, with at least one hike (probably June’s) of 50 basis points. Tightening should slow, but not stop, economic growth, allowing the Fed to slow the pace of rate hikes in the fourth quarter and into 2023–2024 and bring inflation gradually back to target.

We find it interesting that the Fed is explicitly considering balance-sheet runoff as part of its policy tightening tool kit. This suggests that the pace of the runoff itself could be flexible; if the Fed thinks balance-sheet reduction is a substitute for rate hikes, it might become desirable to use that tool more dynamically. Such an approach would be a big change from the last cycle, when balance-sheet reduction was meant to happen in the background.

The greatest modern commodity is no longer gold or oil, it is data. Today’s technology has enabled companies to collect and store massive amounts of consumer data. While there are many benefits and rewards to collecting and monetizing data, there are just as many risks and responsibilities when it comes to handling consumers’ personal information. Data can be a powerful tool to improve a product or service; however, to truly reap the benefits of data, businesses need to collect, store, and use it responsibly. Otherwise, corporations will lose customers’ trust and, ultimately, their business. Read More

As a small business, you may have qualified to receive a piece of the Paycheck Protection Program (PPP) funds that were allocated by the Small Business Administration (SBA) in response to the economic disruption caused by the coronavirus (COVID-19) outbreak. In addition to bolstering cash flow, SBA’s PPP will also forgive loans if all employees are kept on payroll for eight weeks and the funding is utilized specifically for payroll, rent, mortgage interest or utilities.

This past Monday, SBA reported that it had successfully processed more than 100,000 loans from more than 4,000 lenders. Assuming your small business was able to quickly turn around the application, it’s likely you received your funding (or it may be on the way as the SBA preps to process PPP round two – as an additional $310 billion in funding was granted by the SBA this week).

As organizations begin to put this funding to use, it’s imperative that the requirements for where, when and how you use these funds are top of mind as the fear of non-compliance looms. Taking necessary actions now can assist your small business down the road to reach forgiveness – you don’t want a loan (and neither does the bank at these low interest rates), you want forgiveness.

• FORGIVENESS SURROUNDING EMPLOYEES

  • As referenced prior, one stipulation regarding the PPP loan forgiveness states that “SBA will forgive all loans if all employees are kept on payroll for eight weeks and the money is used for payroll, rent, mortgage interest or utilities.”
  • It’s important to note that the eight-week period that is referenced commences on the exact date that the PPP funds are received.

• PAID OR INCURRED – BE CONSISTENT IN THE APPROACH

  • The law states that costs must be paid or incurred, which could be two different things depending on timing. For ease of reporting, and to best match up cash flow, it’s likely best to track things on a cash basis.

• ENSURE RENT, UTILITIES, MORTGAGE INTEREST ARE PAID AND UP TO DATE

  • No more than 25% of the forgivable amount of the loan can be attributable to these non-payroll costs.
  • If your facilities costs include common area maintenance, do your best to get billed by lessor or estimate and pay.

• CONSIDER PRE-FUNDING BONUSES TO EMPLOYEES THAT WOULD OTHERWISE BE ENTITLED

  • If possible, consider matching contributions to retirement plans, such as 401(k) even if on a discretionary basis. You could also provide additional Health Savings Account (HSA) funding.

• COMPENSATION IS LIMITED

  • Keep in mind, as a small business you are limited to no more than $100,000 (annualized) for one employee. This works out to $15,384 of compensation during the eight-week period.

• KEEP TRACK OF HEADCOUNT

  • If you have had a recent reduction in employee headcount, consider bringing those employees back by June 30, 2020. They will count as Full-time equivalent (FTE) for the entire eight-week covered period.

• SETUP A SEPARATE BANK ACCOUNT

  • While this is not required, it makes this significantly easier for inflow/outflow tracking purposes as you begin to use funding
  • Support for expenditures will need to be shown, but one dedicated account will make this process more painless.

• NO DOUBLE DIPPING

  • If there are employees on your payroll that receive their salaries in the form of a government grant, they need to be excluded from your total employee count.

• SOCIAL SECURITY TAX DEFERRAL

  • The Internal Revenue Service (IRS) has clarified that employers receiving PPP loans (that have not have been forgiven), may be able to take advantage of the Social Security tax deferral, without incurring penalties, until the date on which the lender issues a decision to forgive the PPP loan.
  • The tax that is deferred prior to the loan forgiveness date is due under the applicable dates provided in the statute (50% by December 31, 2021 and 50% by December 31, 2022).

Read more on: Assurance & Advisory | Income Tax Services

Life science and health care is the industry which is a late adopter of digital innovation but never left untouched by this. For life sciences companies who are looking to transform digital technology, here are the latest tech trends they should focus on.

Artificial Intelligence/Machine Learning

One of the biggest challenges for life sciences companies is the time it takes to develop a product or drug, it varies from 7-10 years.  A lot of this time is spent in reviewing and analyzing data, which can be reduced by using AI and ML. Researchers are focusing on writing AI scripts that can analyze the structures and unstructured data and present the meaningful value to the research community so that they can make faster decisions. AI can be used to select the right patient and sites for clinical trials to accelerate the trial process. Using AI and machine Learning, you can train the system to analyze people, drugs, trial results and regulations to expedite the drug delivery process. 

Automated Data Extraction

Data extraction is a critical step for life science companies and regulatory agencies. Companies can use automated scripts to read relevant research data, historical trends to make better business decisions. Regulatory agencies can use it to read the submitted data and analyze it and make decisions like who to send the data for review. Regulatory agencies can use this to inform the drug manufacturer or public as well about the safety concern of a drug or ingredient. 

Natural Language Processing

Reading unstructured data and understanding it in context of language and research has always been a challenge for life science companies. Additionally, companies that are submitting drugs in multiple markets have to face the challenge of translating content and labels in different languages. NLP can help this, It can be used to read unstructured data like texts, comments and data collected from kiosk in context of the scenario. NLP can be combined with machine learning to train the system and extract the right meaning. 

Blockchain

Managing and securing data is big for life science companies. Blockchain seems to be the right solution for clinical trial, drug delivery and supply chain management. It can be used to secure patient health records, trial outcomes, historical data, communication among stakeholders, and other related data. Some blockchain platforms are being launched to cater to the life sciences, there is more need to understand the use cases and come up with the right solutions.

Mobile Apps /Wearables for Data Collection

Last 10 years have seen an explosion in mobile apps and wearable for health and fitness. Life science companies were initially slow to adopt to these technologies, however, they are focusing more on this now. It really makes the clinical trial process faster and accurate. You can give apps and wearables to patients to gather the data in real time and make the right decision. Overall, these technologies make the process faster and less costly. 

Piyush Jain is CEO and Founder of Simpalm, a custom software development company based in Bethesda, MD.