Money market rates may limit Fed's balance sheet shrinkage: BAML

NEW YORK (Reuters) – The Federal Reserve’s plan to start reducing the size of its balance sheet later this year may be limited by the resulting upward pressure on money market rates, according to a Bank of America Merrill Lynch (NYSE:BAC) strategist.

The U.S. central bank has signaled its intention to reduce the size of its $4.5 trillion balance sheet later this year as it remains on track on a gradual path of interest rate increases amid an improving economy.

© Reuters. A police officer keeps watch in front of the U.S. Federal Reserve in Washington

“Given our expectation that most of the Fed balance sheet decline will be concentrated from foreign bank reserve holdings and lower Fed repo activity, the Fed may only be able to reduce their balance sheet by $1 (trillion) before funding markets materially tighten,” Bank of America Merrill Lynch’s head of U.S. short rates strategy Mark Cabana wrote in a research note on Thursday.

As the Fed pares its balance sheet, it will to reduce the amount of excess reserves in the banking system, which would likely put upward pressure on borrowing costs in money markets.

The Fed has yet to offer details on the amount it plans to taper its reinvestments in U.S. Treasuries and mortgage-backed securities and a desired size for its balance sheet.

The Federal Open Market Committee, the central bank’s policy-setting group, will hold a two-day policy meeting which will begin next Tuesday. [FED/DIARY]

New CERN Particle Accelerator May Help Both Doctors and Art Sleuths

A new particle accelerator unveiled at CERN, the European physics research centre, is expected to spawn portable accelerators that could help doctors treat cancer patients and experts analyse artwork.

CERN is gradually upgrading its hardware to get more data from the Large Hadron Collider (LHC), its 27-km (17-mile) circular accelerator that smashes protons together at almost the speed of light to probe basic questions about the universe.

Its latest upgrade, resembling a 90-metre oil pipeline hooked up to a life support machine, replaces the 39-year-old injector that produces the flow of particles for the LHC.

Standing by the new Linac 4 machine, which cost CHF 93 million ($93 million or roughly Rs. 597 crores) and took 10 years to build, project leader Maurizio Vretenar said CERN had miniaturised the technology and saw many potential uses.

New CERN Particle Accelerator May Help Both Doctors and Art Sleuths

“It’s a brave new world of applications,” he told Reuters in Linac 4’s tunnel 12 metres under Geneva.

CERN has already built a version to treat tumours with particle beams and licensed the patent to ADAM, a CERN spin-off owned by Advanced Oncotherapy.

Another medical use is to create isotopes for diagnosing cancers. Since they decay rapidly, they normally have to be rushed to patients just in time to be used.

“With our portable technology they could be made inside the hospital already,” Vretenar said.

 

His next goal is a one-metre prototype weighing about 100kgs, with which museums could analyse paintings and jewellery. The bulk of funding for the project came in a few weeks ago.

“We are building something portable,” he said. “We already have a collaboration with the Louvre, and with the Italians at Florence at the Italian institute for conservation of artworks.”

The Louvre in Paris is the only museum in the world that already has an accelerator, and when it is closed on Tuesdays, artefacts are taken down to the basement for analysis, he said.

Other museums don’t have the same luxury, and may not want to send their artworks away for analysis.

The results take a few hours and can show which mine a piece of jewellery came from, or detect heavy elements that date and identify the paint used, revealing restorations or fakes.

There’s no risk of damage, Vretenar said.

“We are very careful. The intensity of particles is very low,” he said. “It’s not like here, there’s only a few protons.”

 

Tim Cook May Have Taken a Subtle Dig at Facebook in His MIT Commencement Speech

HIGHLIGHTS

  • Tim Cook appeared to make a veiled swipe at Facebook in his MIT speech
  • “Sometimes the very technology that is meant to connect us divides us”
  • Cook seemed to imply that some technologies draw us in the wrong way

Apple chief executive Tim Cook appeared to make a veiled swipe at Facebook on Friday as he spoke to new graduates at the Massachusetts Institute of Technology.

Tim Cook May Have Taken a Subtle Dig at Facebook in His MIT Commencement Speech

Addressing the Class of 2017, Cook emphasised the importance of baking humanity into every decision and project, particularly when it came to technology. While tech has made the world better, he said, sometimes it has revealed new problems for societies to solve.

“The potential adverse consequences [of technology] are spreading faster and cutting deeper,” said Cook. “The threats to security, threats to privacy, fake news, and social media that becomes antisocial. Sometimes the very technology that is meant to connect us divides us.”

Of course, Facebook’s whole mission as a company is to connect people, according to its own chief executive, Mark Zuckerberg. And many Americans likely would never have heard about fake news had it not been for its prominence on Facebook during the 2016 election. Since then, Facebook has taken steps to minimise fake news’s impact by working with third-party fact-checkers and highlighting when a particular article may be disputed, among other things.

Cook blamed some of these societal issues on the way we think about technology. Urging Americans not to reduce the world to algorithms but to find the essence of humanity and inject it into our technology, Cook seemed to imply that some technologies draw us in the wrong direction.

“Measure your impact in humanity not in the likes, but the lives you touch,” he said. “Not in popularity, but in the people you serve.”

Facebook didn’t immediately respond to a request for comment. Apple declined to comment.