Tag: Bank of England

Pound briefly tops $1.40 as Bank of England officials see pickup in U.K. wages
Unemployment

Pound briefly tops $1.40 as Bank of England officials see pickup in U.K. wages

The pound GBPUSD, -0.3644% briefly rose above $1.40 Wednesday afternoon in London as Bank of England policy makers said salaries for Britons appear to be strengthening, a view they outlined in this month’s quarterly inflation report. “A pick up in wages is starting to take root,” Andrew Haldane, the central bank’s chief economist, told a Treasury committee meeting.
Wage pressures were weak early in 2017, he said, and “arithmetically, given what we’ve seen over the past few months, it’s very likely average weekly earnings growth will nudge up to have a ‘3’ in front of it, which is our forecast for Q1.”
Bank of England Governor Mark Carney said there’s been steady firming in private-sector earnings excluding bonuses. “As we get towards full unemployment … we are seeing a variety of indicators that are consistent with the firming of wage pressures,” said Carney.
The pound hit $1.4010 as the policy makers spoke, but has since fallen back to $1.3975.
Data released Wednesday showed wage growth grew 2.5% in the three months to December.
Earlier Wednesday, sterling was the worst performer among major U.S. dollar rivals, driving to a low of $1.3905 after an unexpected rise in the U.K. unemployment rate, to 4.4%.
British Pound

UK growth downgrade possible after run of weak figures
Unemployment

UK growth downgrade possible after run of weak figures

Official figures showed a 1.3 percent monthly decline in industrial production in December and a 4.9 billion-pound ($6.9 billion) trade deficit for goods and services, its worst since September 2016.
Though construction output was stronger than anticipated, expanding by 1.6 percent during the month, some economists say that the figures could lead to economic growth being revised down. “Today’s data reinforces the message that the U.K. continues to underperform other developed market economies, growing at around half the rate of the U.S. and the eurozone,” said James Knightley, chief international economist at ING. “As such, while the Bank of England is clearly hinting at the potential for a May rate hike, we remain cautious on the longer term path for rates, particularly given the Brexit-related uncertainty.”
Last month, the Office for National Statistics estimated that the economy grew 0.5 percent in the fourth quarter from the previous three-month period, a better-than-expected outturn that partly allowed the Bank of England on Thursday to talk up the chance of more rate increases.
The Bank of England is tasked with setting rates to keep inflation near 2 percent.
In December, it stood at 3 percent.
Even if fourth-quarter growth is not downgraded when the next estimate is published later this month, the trade figures are likely to provide rate-setters on the Bank’s Monetary Policy Committee with pause for thought.
Governor Mark Carney had said exporters were in a “sweet spot” at the moment — still in the European Union ahead of Brexit but also benefiting from the fall in the pound after Britain voted to leave the EU. “The latest trade figures should temper the MPC’s optimism that the economy is rebalancing and enjoying a trade boost,” said Samuel Tombs, chief U.K. economist at Pantheon Macroeconomics.

U.K. hikes interest rates for first time in 10 years
Unemployment

U.K. hikes interest rates for first time in 10 years

The Bank of England hiked its key rate on Thursday from a record low of 0.25% to 0.5%, a shift that economists widely expected.
Britain’s economy has struggled to move out of first gear following the Brexit referendum in June 2016.
Unemployment has continued to fall, but a sharp drop in the value of the pound has hurt consumers by making imported goods more expensive.
But it will also make borrowing and mortgages more expensive for consumers who are already facing tighter household budgets.
The worry is that hiking rates and putting consumers under more pressure could cause economic growth to slow further.
At 3%, inflation is firmly above the central bank’s official 2% target, and a rate hike would help cool things down.
The Bank of England said in a statement that it expects inflation to peak above 3% in November before diminishing over the next year.
The central bank also noted that effective monetary policy won’t be enough to counteract the negative effects of Brexit. “Monetary policy cannot prevent either the necessary real adjustment as the U.K. moves towards its new international trading arrangements or the weaker real income growth that is likely to accompany that adjustment over the next few years,” it said.
U.K. interest rates remain at very low levels despite the hike.

Grant me tighter policy…but not yetThe Bank of England should wait before raising rates
Unemployment

Grant me tighter policy…but not yetThe Bank of England should wait before raising rates

During the financial crisis in 2008-09 Britain’s base rate of interest was cut to 0.5%.
After the Brexit referendum of 2016 the bank cut by a further 0.25 percentage points, in anticipation of the slowdown that most economists believed was to follow.
At various points in recent years members of the bank’s monetary-policy committee (MPC) have hinted that rate rises were on the cards.
A rise to 0.5% would mark the beginning of Britain’s first tightening cycle since 2003.
Even if the bank did nothing, inflation would be down again before long, as exchange-rate effects faded.
Inflation hawks point out that the rate of GDP growth is above the economy’s potential and that, at 4.3%, unemployment is low by historical standards even as the employment rate is near a historical high.
And the British economy is highly sensitive to increases in interest rates (see article).
Many households’ finances may be able to afford higher rates.
Even if the MPC tried to reassure Britons that monetary policy would remain loose, many might behave as if rates were likely to rise further.
Waiting a bit too long before tightening will do little damage; tightening too early could do a lot.

LONDON MARKETS: FTSE 100 Rises As Eyes Turn To Wages Data
Unemployment

LONDON MARKETS: FTSE 100 Rises As Eyes Turn To Wages Data

The London benchmark on Tuesday shed 0.1% (http://www.marketwatch.com/story/ftse-100-tilts-lower-as-traders-brace-for-inflation-report-2017-10-17).
Labor report: Data on the U.K. jobs market in August will be a focus, given a persistent lack of growth in real wages that has been a concern for BOE policy makers, among others.
Analysts polled by FactSet expect the unemployment rate to remain at 4.3%.
Those figures for August would likely represent a fall in real wages, given data released Tuesday showed consumer price inflation climbed to 3% in September. That level of inflation is a full percentage point above the BOE’s target, and the figures will add to policy makers’ deliberations on whether to raise the bank’s key interest rate from 0.25% at their Nov. 2 meeting.
What strategists are saying: “Once again though, the unemployment data is expected to paint one picture with the rate remaining at 4.3%, while average earnings paints an entirely different one, as wages rise by only 2.1%.
Such earnings index figures as we are expecting to get this morning, then, are a blow to sterling’s rate hike hopes.”
While the pound’s drop has fueled growth in price inflation, it has also helped boost shares of multinational companies that make most of their earnings in overseas markets.
Among these, shares of high-end apparel and accessories maker Burberry Group (BRBY.LN) rose 0.9%, security services company G4S PLC (GFS.LN) added 1%, and equipment rental company Ashtead Group PLC (AHT.LN) was p 0.7%.

FTSE 100 rises as eyes turn to wages data
Unemployment

FTSE 100 rises as eyes turn to wages data

A continued pullback in the pound helped push U.K. stocks modestly higher Wednesday, as investors waited for an update on jobs and wage growth that should help shape the Bank of England’s thinking on an interest-rate hike.
Labor report: Data on the U.K. jobs market in August will be a focus, given a persistent lack of growth in real wages that has been a concern for BOE policy makers, among others.
Those figures for August would likely represent a fall in real wages, given data released Tuesday showed consumer price inflation climbed to 3% in September.
The jobs market report is due at 9:30 a.m. London time, or 4:30 a.m. Eastern Time, from the Office for National Statistics.
What strategists are saying: “Once again though, the unemployment data is expected to paint one picture with the rate remaining at 4.3%, while average earnings paints an entirely different one, as wages rise by only 2.1%.
“The Bank of England has proven reticent to raise rates with wage growth so stagnant, fearing what a further squeeze on household income would do to the U.K.’s consumer spending-reliant economy.
It extended losses logged in its slide to $1.3190 late Tuesday in New York, its lowest since Oct. 9, according to the WSJ Market Data Group.
While the pound’s drop has fueled growth in price inflation, it has also helped boost shares of multinational companies that make most of their earnings in overseas markets.
Among these, shares of high-end apparel and accessories maker Burberry Group BRBY, +1.01% rose 0.9%, security services company G4S PLC GFS, +1.41% added 1%, and equipment rental company Ashtead Group PLC AHT, +0.54% was p 0.7%.

Gap between rising prices and pay widens as wage growth figures disappoint; unemployment drops to 4.3pc
Unemployment

Gap between rising prices and pay widens as wage growth figures disappoint; unemployment drops to 4.3pc

Gap between rising prices and pay widens as wage growth figures disappoint; unemployment drops to 4.3pc.
Unemployment is at a new 42-year low.
Wage growth reaction: today’s disappointing figures pull down early interest rate hike hopes Has today’s disappointing wage growth wounded hopes of an early interest rate hike?
He said: “With the UK jobs report on the way the FTSE continued to suffer in the shadow of sterling’s September rise.
What to expect Wage growth is expected to nudge up to 2.2pc in the three months to July, a 0.1 percentage point rise on last month’s figures and lagging far behind inflation.
Agenda: Pound pushes past $1.33 against dollar ahead of wage growth data Lagging wage growth is the focal point for the markets this morning with the ONS’ figures expected to show the gap between pay and rising prices continuing to widen.
Unemployment is at a new 42-year low.
Wage growth reaction: today’s disappointing figures pull down early interest rate hike hopes Has today’s disappointing wage growth wounded hopes of an early interest rate hike?
He said: “With the UK jobs report on the way the FTSE continued to suffer in the shadow of sterling’s September rise.
Agenda: Pound pushes past $1.33 against dollar ahead of wage growth data Lagging wage growth is the focal point for the markets this morning with the ONS’ figures expected to show the gap between pay and rising prices continuing to widen.

Tesla truck; Brexit crunch; Trump blocks China deal
Unemployment

Tesla truck; Brexit crunch; Trump blocks China deal

Tesla truck; Brexit crunch; Trump blocks China deal.
Brexit crunch: The Bank of England held interest rates at record lows on Thursday.
But it warned of continued risks from the “exceptional circumstances” that have resulted from the Brexit vote. “There remain considerable risks to the outlook, which include the response of households, businesses and financial markets to developments related to the process of EU withdrawal,” the bank said in a statement.
The pound gained 0.8% against the dollar after the announcement.
Inflation is racing ahead and unemployment levels are at record lows.
But prices are rising much faster than wages, and the economy is slowing, hurt by anxiety among businesses and consumers over the impact of Brexit.
John Lewis, one of the country’s leading department store chains, said Thursday its first half profits halved because of weaker consumer demand and the fall in the value of the pound.
Tesla’s new truck: Tesla is set to unveil its new semi-truck next month, CEO Elon Musk said.
The Trump administration launched an investigation last month into whether China is unfairly getting hold of American technology and intellectual property.

UK inflation lower than expected, easing rate hike prospects
Unemployment

UK inflation lower than expected, easing rate hike prospects

UK inflation lower than expected, easing rate hike prospects.
LONDON – Consumer price inflation in Britain unexpectedly held steady in July at an annual rate of 2.6 percent, official figures showed Tuesday, in a development that may ease pressure on the Bank of England to raise interest rates at a time when the economy has slowed amid uncertainty over the country’s exit from the European Union.
By midday in London, it was down 0.6 percent at $1.2883, while the euro rose 0.3 percent to 0.9114 pound.
A minority of rate-setters at the bank have in the past few months voted in favor of raising the benchmark interest rate from the record low of 0.25 percent to keep a lid on price increases.
Inflation, which hit 2.9 percent in May, was barely positive when Britons cast their votes in the June 2016 referendum.
The rise in inflation has hurt living standards as price increases outstrip annual wage rises, which are running at below 2 percent.
The worry is that consumers will either respond by further reining in spending or opt instead to pile up on credit, leaving them more vulnerable in the event interest rates rise or if unemployment increases due to Brexit. “While inflation has plateaued in recent months, current levels are nonetheless placing significant pressure on consumers,” said Jack Coy, economist at the Centre for Economics and Business Research.
The fact that inflation is not rising further could prompt some cheer both among policymakers at the central bank and consumers.
One bit of bad news for consumers was the confirmation that regulated rail fares, such as annual season tickets, will rise by up to 3.6 percent next year.

Bank of England set to stay on hold as Brexit risks loom
Unemployment

Bank of England set to stay on hold as Brexit risks loom

Bank of England set to stay on hold as Brexit risks loom.
When they last met in June, Governor Mark Carney and his fellow rate-setters voted by a narrow 5-3 margin to keep Bank Rate at 0.25 percent.
The surprisingly close decision pushed up sterling and British government bond yields as investors pulled forward their expectations of a rate hike.
Chief Economist Andy Haldane said soon after that he was close to voting for a hike too, adding to speculation that the BoE might soon be ready to follow the lead of the U.S. Federal Reserve and raise borrowing costs.
With unemployment at a four-decade low and inflation above the Bank’s target, the case had seemed to be growing for the BoE to at least reverse the emergency rate cut it made after last year’s shock decision by voters to leave the European Union.
But since June, data has shown the economy had its slowest growth since 2012 in the first half of this year, that inflation has dipped and that growth in wages remains weak. “Given it looks like the economy might be slowing now, it seems like an odd time” to raise interest rates, former BoE deputy governor Charlie Bean said, speaking at a monetary policy conference held by Fathom Consulting on Wednesday. “At the current juncture it is not plausible to think that investment is going to, given the uncertainty about trade relationships in the future,” Bean said.
Any meaningful rise in exports was likely to be more than two years away, he added. “The risk that the Bank will start tightening too late has changed.”