Wanderlust

Category: ECONOMY

  • Bank of England leaves rates on hold amid Brexit uncertainty

    Bank of England Image copyright Getty Images

    The Bank of England has left interest rates on hold at 0.75% as expected but flagged “greater uncertainty” around the Brexit negotiations.

    The Bank’s Monetary Policy Committee (MPC) voted 9-0 to leave rates unchanged.

    A quarter of a percentage point rise last month took rates to the highest level since March 2009.

    The European Central Bank also kept eurozone interest rates unchanged at 0% on Thursday.

    The MPC said in the minutes of its September meeting there were mounting fears about the UK leaving with the EU without a deal agreed.

    Image copyright PA Image caption England basked in record temperatures this summer, which boosted consumer spending

    The minutes showed recent rises in economic and wages growth had not affected the MPC’s commitment to “gradual” and “limited” rate rises in the coming years, said Samuel Tombs at Pantheon Macroeconomics.

    Ruth Gregory at Capital Economics said expected two rate rises next year and another two in 2020, bringing rates to 1.75%, assuming a Brexit deal was struck and the economy held up well.

    “That would be above the market expectation for just two hikes over the next three years – but still consistent with the MPC’s guidance,” she said.

    Ben Brettell at Hargreaves Lansdown said: “Policymakers are firmly in ‘wait-and-see’ mode having raised rates last month, and will be reluctant to even consider another move until they have a clear idea of what Brexit will look like.

    “Realistically May next year looks the first available opportunity to raise rates to 1%.”

    Last month the Bank signalled that rates would need to rise by about 0.25 percentage points over the next two or three years to bring inflation, which stands at 2.5%, back to target.

    September’s MPC minutes also revealed that the recent energy price cap announced by Ofgem would reduce inflation by more than expected over the course of 2019.

  • Gordon Brown in dire warning about the next financial crisis

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    Media captionGordon Brown says we are sleepwalking into another financial crisis

    The world is not ready to deal with another financial crisis, former Prime Minister Gordon Brown has told the BBC.

    A breakdown in international co-operation means nations would be unable to act in a concerted way to tackle future threats – which are many.

    “I feel we’re sleepwalking into the next crisis”, said Mr Brown, speaking on the 10th anniversary of the start of the previous crisis.

    He added that some of the bankers involved should have gone to jail.

    Mr Brown, speaking from his living room, said: “This is a leaderless world and I think when the next crisis comes, and there will be a future crisis, we’ll find that we neither have the fiscal or monetary room for manoeuvre or the willingness to take that action.

    “But perhaps most worrying of all, we will not have the international co-operation necessary to get us out of a worldwide crisis.”

    In the immediate aftermath of the collapse of Wall Street banking giant Lehman Brothers, the UK government was one of the first to press the case for using public money to recapitalise failing banks and did exactly that – pumping taxpayer funds into Lloyds, HBOS and RBS.

    Mr Brown, UK prime minister as the crisis unfolded, said that it was possible to counteract the evaporation of trust in the markets by co-ordinated action between governments and regulators that trusted eachother.

    “But now with the trade wars, the disagreements over climate change, the nuclear deals that have fallen apart there is no spirit of co-operation – there is division and protectionism and I fear a new crisis would see nations trying to shift the blame to each other.”

    Bob Diamond defends risk-taking banks Hammond: Financial crisis ‘shock’ continues Carney warns against complacency

    He acknowledged that the use of public money to bail out high earning bankers was a difficult pill for the public to swallow and although he insists it was necessary, he says that he is frustrated that harsher penalties weren’t dished out to some of the bankers involved.

    “I’ll be honest with you. Some of these bankers should have gone to jail and until we have proper laws that can find the guilty and show there are clear penalties, then people will think the bankers have got away with it and will go back to doing the same thing again.”

    What blame does he bear himself? Former governor of the Bank of England, Mervyn (Lord) King has been critical of the way his government designed the regulatory regime – moving bank supervision away from the central bank to the Financial Services Authority.

    Mr Brown acknowledges that it didn’t work perfectly, but argues that the system was designed to look at isolated outbreaks of bank distress – not a contagion which consumed the entire global financial system.

    No national warning system, he says, was equipped to see the full picture and no individual country could have tackled the meltdown.

    A global problem needs global co-operation. Without that – and with most of the tools available already used (rock bottom interest rates, trillions pumped into the system through quantitative easing) – Mr Brown paints a grim picture of our ability to face the next crisis.

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  • Oil prices rise to hit four-year high of $70 a barrel

    Petrol pump Image copyright Getty Images

    The price of oil has hit $70 a barrel for the first time since December 2014.

    Brent crude climbed after members of Opec, the cartel of 14 oil-producing nations that accounts for 40% of the world’s output, said it would continue to limit supplies.

    The RAC, the motoring group, has warned that rising oil prices could lead to higher forecourt costs for motorists.

    However, the AA said that drivers would benefit if supermarkets resumed their petrol price war.

    Suhail al-Mazrouei, the UAE oil minister and Opec president, said it was committed to limiting output until the end of the year.

    The US Energy Information Administration on said crude inventories fell by almost five million barrels to 419.5 million barrels in the week to 5 January. US production also fell by 290,000 barrels per day to 9.5 million.

    US oil also rose 1.5% to $64.51 a barrel.

    The RAC said that rising oil prices were likely to have “a knock-on effect in the forecourt due to the increase causing the wholesale price of fuel to rise”.

    The price of unleaded petrol has already risen by nearly 5p since November to 121.27p per litre, while diesel prices have jumped 3p to 123.97p over the same period.

    It said that cost of filling an average 55-litre family car was now £66.69 for petrol and £68.18 for diesel.

    An RAC spokesman said: “If oil stays at this level, pump price hikes will be almost inevitable.

    “With households across the country still feeling the cost of Christmas this is not the start to 2018 anyone would have wanted. It could also negatively affect business and further fuel inflation.”

    But the AA said: “Oil at $70 a barrel has yet to threaten a pump price surge on UK forecourts.”

    An AA spokesman said petrol prices had risen in recent weeks after supermarkets put their fuel price war on hold.

    According to data from the AA, supermarkets lowered petrol prices several times last year to a low of 111.8p a litre in July.

    While the AA conceded that wholesale prices have risen, it added: “The current higher prices are more a reflection of reduced fuel price competition at supermarkets.”

    By December, petrol was an average of 117.6p a litre at supermarkets and 121.9p ea litre at other outlets.

  • Oil pushes past $80 as Iran fears mount

    Oil well in South Texas Image copyright Reuters

    Oil has risen above $80 a barrel to its highest level this year amid concerns about supplies from Iran and a fall in US stockpiles.

    Brent crude rose more than 1% to $80.13 – the first time it has breached $80 since late May.

    The rise reflects concern about the impact of US sanctions against Iran that will target oil exports.

    “Iran is increasingly becoming the preoccupation of the crude market,” said consultants JBC Energy.

    “The last couple of weeks have seen the expected squeeze on Iranian crude flows taking shape, with overall outflows down markedly.”

    Gordon Gray, HSBC’s global head of oil and gas equity research, said there were “real risks” that Brent could hit $100 a barrel.

    “The fact that much higher supply is already needed from the likes of Saudi Arabia – and the low levels of spare capacity remaining – leave the global system highly vulnerable to any further significant outage,” he said.

    ‘Huge uncertainty’

    Russian energy minister Alexander Novak said global oil markets were fragile due to geopolitical risks and supply disruptions.

    He also warned of the impact of US sanctions against Iran: “This is a huge uncertainty on the market – how countries, which buy almost 2 million barrels per day of Iranian oil, will act. The situation should be closely watched, the right decisions should be taken.”

    Opec, the Organization of the Petroleum Exporting Countries that accounts for 40% of global production, cut its forecast for oil demand growth next year in its monthly report.

    Oil traders were also watching the progress of category 4 Hurricane Florence, which is expected to make landfall in the US by Friday.

    US crude rose 91 cents to $70.16 a barrel.

    In January Brent crude hit $70 a barrel for the first time since December 2014.

  • Lehman gamble paid out for brave investors

    Lehman UK staff Image copyright Reuters Image caption This Reuters picture of Lehman Brothers staff being told the bank would survive at a meeting on 11 September 2008 is one of the images that defines the financial crisis

    Investors who took a gamble on the wreck of Lehman Brothers’ UK operations after the investment bank collapsed made up to seven times their money.

    The assets of Lehman’s UK arm greatly exceeded its liabilities.

    Tony Lomas, the partner at the accountancy firm PwC who was appointed lead administrator, told the BBC there was a surplus of about £8bn.

    Lehman’s collapse into administration a decade ago marked the height of the financial crisis.

    Creditors able to wait while the administrators unwound millions of trading positions received back more than they were originally owed, said Mr Lomas, who has recently left PwC.

    Image copyright PA

    Lehman UK was far from flush when he first took over. The US parent company had grabbed all the cash available – a normal practice for large multinational companies with central treasury units – and the British operation was unable to meet its bills. “There was £3bn that had to go out on the Monday morning and it didn’t have it,” Mr Lomas said.

    As a result, Lehman UK was put into administration, and the search for assets began. “The first thing is you are looking for assets – and for liabilities – and first of all for liquid assets, things that you might be able to sell quickly,” Mr Lomas said.

    “We had a September payroll due and the quarterly rent was due. We needed about £100m quickly. We couldn’t find liquid assets quickly enough, so we had to borrow £100m from a hedge fund.”

    Lehman collapse: ‘These were very dangerous times’ How did the financial crisis affect your finances? Who’s to blame for the financial crisis?

    That search for ready funds was itself fraught. “You had to be sure you were borrowing from the right legal entity – from the right bit of Lehmans that you were sure assets would fall into,” he explained. “Most of the counterparties to Lehman trades just identified them as trades with Lehman – not the actual legal entity, so you had to be sure.”

    “We have been able to pay everybody everything they were owned – and we had £8bn left over, which was mainly the bank’s own capital.”

    Separately, the senior Bank of England official who dealt with the fallout from the Lehman collapse has revealed the Bank arranged to bring $86bn from the US to help keep London markets running in the wake of the collapse.

    Sarah Breeden, now executive director for international banks supervision at the Prudential Regulation Authority, said the Lehman administration meant London markets were running short of US dollars, leading the Bank of England to agree a “swap” deal with its US counterparts. “Eventually that totalled $86bn,” she said.

    The Bank of England lost no money from its interventions after Lehman, Ms Breeden added.

  • Carney warns against complacency on 10th anniversary of financial crisis

    Image copyright AFP Image caption The Chinese economy is a success story, but levels of debt are worryingly high, according to Mark Carney.

    The governor said that regulators around the world needed to remain vigilant and that any fragmentation of global standards to try and gain competitive advantage would be dangerous.

    He said no one should engage in a “race to the bottom”.

    “We have to think about not why things are going to go right, but what could go wrong,” he said.

    “What could happen [for example] when we think about the changing relationship with the EU?

    “Part of our job at the Bank of England is to think about what could go wrong in that circumstance and how do we prepare our banks, our financial system, so that it’s there regardless of the outcomes of the negotiations.

    “There are risks around Brexit, for the financial sector.

    ‘Economic miracle’

    “And here’s something that’s changed with the system from 10 years ago – we are absolutely upfront about those risks, our view of those risks.

    “We have stressed test our banks against those risks to make sure they have enough of a safety net, both in terms of their own funds plus liquid funds, in case we had a no deal Brexit.”

    He said when he thought of the major risks globally, China was at the top of the risk register.

    “China is a great source for growth for the global economy, it’s an absolute economic miracle, lots of positives,” the governor said.

    “At the same time, their financial sector has developed very rapidly, and it has made many of the same assumptions that were made in the run up to the last financial crisis.

    “So there’s a big so-called shadow-banking sector in China, there’s a lot of lending that’s based on very good past-experience.

    “But there’s so much lending that the quality has gone down quite substantially.

    “The level of debt is enormous relative to the size of the economy.”

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  • Workers are £800 a year poorer post-crisis

    Mr Johnson added: “Pensioners have done much better than younger people on average. In part this is because they are less reliant on earnings and so haven’t suffered from falls in earnings.”

    In addition, however, “government has chosen to protect the state pensions and other benefits received by pensioners,” Mr Johnson said.

    Even more stark is the analysis from the IFS that, if wage growth trends between 1998 and 2008 had continued, people would on average be earning £3,500 more.

    That’s 15% higher than today’s average figure.

    How did the crisis affect your finances?

    Homes: House prices in London and the south east may have risen sharply in the decade since the crisis. But in large swathes of the UK prices have still not recovered to the levels seen in 2008.

    Savings: The last decade has been a disaster for Britain’s savers, especially many elderly people who rely on their savings income. Savers who once enjoyed rates of 5%-plus now get a fraction of that.

    Borrowing: Average household debt has climbed from less than £3,000 to £4,000 in the last decade. There are lots of reasons for this, not least the easy credit available through plastic cards.

    Banking: The way we bank has completely changed. Challenger banks have emerged, and mobile technology means we increasingly sort our finances using phones. But online banking has brought branch closures – and cyber-attacks.

    Read our report on a decade of changes

    “We should never stop reminding ourselves just what an astonishing decade we have just lived through, and continue to live through,” said Mr Johnson.

    “The UK economy has broken record after record, and not generally in a good way.

    “Record low earnings growth, record low interest rates, record public borrowing followed by record cuts in public spending.

    “On the upside employment levels are remarkably high and, in spite of how it may feel, the gap between rich and poor has actually narrowed somewhat, but the gap between old and young has grown and grown.”

    Low growth

    A regional breakdown of the effect of the financial crisis on wages shows that London, the East Midlands and the south-west of England have been worst hit.

    The IFS said that the financial crisis of a decade ago sparked the deepest recession since the Second World War and had been remarkable for the “persistence of its effects”.

    Economic growth is still low by historic standards and the total debts of the government have grown by £1tn.

    The public spending cuts pushed through by the governments of 2010 and 2015 were “historically unprecedented” the IFS said.

    The government has said that there are now record levels of employment and that the introduction of the National Living Wage and tax cuts had helped support many millions of working people.

    The deficit – that is the difference between what the government spends on services and receives in tax revenues – has also been substantially reduced.

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  • Hammond: ‘Shock’ of financial crisis still with us

    Philip Hammond Image copyright Reuters

    The “shock” of the financial crisis continues to impact the economy and peoples’ finances, UK chancellor Philip Hammond has said.

    Ten years after the financial system went into meltdown, he admitted “people are still suffering the effects”.

    But he said, in an interview with BBC economics editor Kamal Ahmed, there is “light at the end of the tunnel”.

    Rising wages and falling inflation were good news, he said, but uncertainty about Brexit was an economic dampener.

    A decade ago this week, the US investment bank Lehman Brothers collapsed, sending shockwaves through the global financial system.

    Research carried out for the BBC to mark the occasion showed that wages remain substantially below what they would have been with the crisis.

    Mr Hammond told the BBC: “We suffered a very big shock to our economy in 2008/09, and that’s a shock from which people are still suffering the effects today.”

    He was “acutely conscious” of the impact on wage stagnation and living. But he added: “We have got through this in much better shape than many of our neighbours.

    “We haven’t suffered catastrophic rises of unemployment, on the contrary, we’ve seen employment grow by three million jobs over this period.

    “We didn’t see widespread repossessions of homes, collapses of businesses, in the way we’ve done in previous recessions, so I think the way this has been managed has minimised the impact.”

    Independent analysis from the Office for Budget Responsibility projected real wage growth over the coming years, he added.

    Workers are £800 a year poorer post-crisisCarney warns against complacencyLehman gamble paid out for brave investors

    Mr Hammond also defended government efforts to cut debt, which many people argue led to austerity and worsened the impact on peoples’ incomes and the economy.

    “In the aftermath of the crisis, the urgent need was to reassure markets and investors about our intentions,” Mr Hammond said. “Government borrowing had grown to unprecedented levels – almost 10% of our total national income in the year after the crash – and the markets needed to know that we were going to be able to get that under control.”

    Debt burden

    He had, in fact, relaxed fiscal rules when becoming chancellor in 2016, Mr Hammond pointed out. That gave “more headroom” he said.

    But the challenge the economy faces “is not lack of demand, it’s poor productivity. It we want to see sustainable rises in living standards and real wages, we have to address the productivity challenge,” he said.

    He understood the calls for more spending on, say, the NHS and police. “We’ve made a huge commitment to the NHS, committing to spending £24bn across the UK by the end of this five-year period,” Mr Hammond said.

    But he added: “We do have to get our debt down. We have to do that for two reasons: Firstly the cost of our debt, is crippling – £50bn a year of money that we could be spending on schools and hospitals and police forces, being paid out in interest on the debt.

    “Secondly, having a debt that is this high, 85% of our GDP, reduces our ability to respond to another shock to the economy, another recession.”

  • Free cash machines closing at record rate

    ATM Image copyright Getty Images

    More than 250 free-to-use cash machines are disappearing a month as operators shut unprofitable ones, the network co-ordinator Link has said.

    There are 53,000 free machines in the UK – but the number is shrinking at a record rate as people use less cash.

    Now the Payment Services Regulator (PSR) is cracking down on the closures and asking for more network protection.

    “Free-to-use ATMs continue to play a vital role in helping people access their money,” the regulator said.

    Hannah Nixon, the PSR’s managing director, said: “The requirements we intend to place on Link will help ensure that Link achieves their commitment to protecting the geographic spread of free-to-use ATMs across the UK.”

    Falling demand

    Link’s ATM Footprint Report found that between the end of January and the start of July 2018, the number of free-to-use ATMs fell from 54,500 to 53,200.

    That is partly because people are using cash less, Link said, thanks to the rise in popularity of new payment methods such as contactless transactions.

    But it is also because cash machine operators such as Cardtronics and Note Machine, who get a fee from our banks each time we use one, are finding that fewer of their machines are economic to run.

    Row intensifies over cash machines fee Who do we trust after cash? The High Streets with ‘too many’ ATMs

    Under pressure from banks, Link is cutting the fee it pays to operators while trying to restrict the resulting closures in city centres,

    Link said it had set up “specific arrangements to protect free-to-use ATMs more than 1km away from their next nearest free-to-use ATM”.

    The organisation has earmarked some 2,365 free machines in remote and rural areas that it wants to remain open.

    But 76 of these protected cash machines closed between January and July, 21 of them without even a Post Office nearby to get cash over the counter.

    The PSR says it is concerned and is taking action to ensure Link meets its commitments.

    It is also seeking renewed commitments from banks that consumers will continue to be offered services, allowing them to access their cash.

  • Mark Carney: The ‘film star’ Financial Institution of england governor

    Mark Carney Symbol copyright Getty Photographs Image caption Mark Carney has “star quality and is aware of the best way to use it,” says Scott Reid

    Financial Institution Of Britain governor Mark Carney has stated he’s going to be staying on an extra 12 months after his preliminary term involves an end in 2018, to help oversee the united kingdom’s Brexit negotiations with the european Union.

    Mr Carney’s resolution got here after increasing hypothesis about his future because the head of the Bank Of England.

    Governors are historically appointed for an eight-yr time period, but when Mr Carney took the process in 2013 he first of all signed up for 5 years, with an choice for a further three. He has now said he’s going to stay until June 2019.

    In his letter to Chancellor Philip Hammond, Mr Carney said his move may help “give a contribution to securing an orderly transition to the uk’s new courting with Europe”.

    During the referendum, Mr Carney had come stressed from a few Brexit campaigners for his feedback that vote casting to leave the european could push the uk right into a recession – observed by some as outdoor the governor’s non-political remit.

    Image copyright Getty Photographs Symbol caption Mr Carney has overseen the creation of the Financial Institution’s first polymer banknotes

    Nevertheless, this sparked calls for him to resign.

    Mr Carney “by no means seems to wish to realize the end result of the referendum and get on with it,” said one MP, Jacob Rees-Mogg, lately.

    Governor’s role

    Since his arrival three years in the past, Mr Carney has presided over measures designed to spice up the united kingdom economy within the aftermath of the worldwide financial main issue.

    There have been bouts of quantitative easing – pumping cash immediately into the financial system.

    He presented a coverage of “forward guidance” on the Bank, also aimed toward elevating confidence; regardless that simply six months after its implementation in 2013 this wanted a rethink.

    The Bank had in the beginning mentioned it would now not imagine raising rates of interest until the unemployment fee fell to 7% or below.

    But whilst that gave the impression more likely to happen much earlier than expected the Bank altered its stance, pronouncing it would do something about a variety of financial variables as opposed to just the jobless numbers sooner than changing rates.

    Symbol copyright Getty Pictures Image caption Likened more than once to Hollywood actor George Clooney, Mr Carney has develop into one the united kingdom’s perfect-identified relevant bank governors

    In March 2008, only a month after his appointment, he reduce Canadian rates of interest. This and different measures helped spice up market confidence and enabled Canada to recover from the problem more quickly than some of its peers.

    Likened greater than as soon as to the Hollywood actor George Clooney, ahead of his arrival in the uk Mr Carney was touted as a “rock megastar” banker, a transformation from the usual Bank Of England head.

    “He Is got celebrity quality, and he is aware of methods to use it,” stated fellow Canadian and former govt colleague Scott Reid.

    Mr Carney’s appointment used to be a holiday with tradition in many tactics.

    He had a commercial banking, as well as a public sector historical past – in contrast to his most recent predecessors who had spent their careers throughout the Financial Institution Of England and academia.

    Mr Carney worked for funding banking massive Goldman Sachs in Big Apple prior to returning to Canada to paintings for the country’s Finance Division – after which Canada’s central bank.

    Mark Carney: Occupation highlights

    Symbol copyright Getty Pictures Born SIXTEEN March 1965: Fort Smith, Northwest Territories, Canada 1988: Graduates from Harvard School 1991-95: Profits a doctorate in economics at Oxford University 1995: Marries economist Diana Fox, whom he met at Oxford. The couple now have 4 children Works at Goldman Sachs in London, Tokyo, The Big Apple and Toronto, emerging to position of managing director 2004-07: Senior place at Canada’s Department of Finance 2008-13: Governor, Financial Institution of Canada 2013-provide: Governor, Bank Of England

    Some Other difference was the size of his pay packet, which was once well above that of his predecessor, Sir Mervyn King.

    His starting annual revenue of £480,000 (plus £144,000 pension allowance) was once £175,000 more than Sir Mervyn gained – and that is the reason not counting his £250,000 annual lodging allowance.

    A ‘sensible banker’

    So what’s it about Mr Carney that separates him from different principal bankers?

    “He Is extremely charismatic,” says Scott Reid. “You go to his speeches and you’ll to find them simply as dry as anyone’s.

    “But it’s the method he does issues, he takes the time to linger on you… and the general public and the press find that very intoxicating.

    “He one of these fetching figure – but let’s not be shy about that. He Is aware of it. He Is shrewd while it comes to his symbol.”

    Symbol copyright Getty Images Image caption Following the united kingdom’s Brexit vote, many in the markets see Mr Carney as certainly one of the few voices of continuity

    Married to an Englishwoman, the 48-12 months-vintage’s postgraduate training was once at Oxford College, where he studied economics.

    His former show all through his Masters stage, economist Peter Oppenheimer, says “he used to be a in most cases vibrant, transatlantic pupil”.

    “That sounds extraordinarily old skool, but he wasn’t the kind of young man who walked round in torn sweaters.”

    Prof Oppenheimer says Mr Carney used to be a fascinating choice to run the Financial Institution Of England. “He wasn’t an insider, he wasn’t an academic economist, and he was a sensible banker of a undeniable type.

    “The really good governors of the submit-2Nd International Battle duration have been individuals with sensible banking revel in, akin to Gordon Richardson and Robin Leigh-Pemberton.

    “They had been the outstanding governors. Extra so than Financial Institution insiders, or individuals with long instructional careers.”

    Marketplace hopes

    It’s been said Mr Carney wanted to stay to help the united kingdom in the course of the challenges of Brexit, and that leaving early might be seen by means of a few of his critics as admitting defeat.

    Symbol copyright Getty Pictures Symbol caption Mrs Would Possibly believes Mark Carney is “the appropriate man for the process”

    Crucially, he has the backing of the Prime Minister, Theresa Would Possibly, who believes he’s the fitting person to be Bank Of England governor.

    There could also be the problem of marketplace confidence.

    Following the referendum outcome and all the body of workers adjustments within the Conservative government, many in the markets see Mr Carney as considered one of the few voices of continuity in the united kingdom.

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