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☆ UK employment hits record high but the economy is still short 1 million workers
▼ + stars: | 2023-06-13 | by ( Hanna Ziady | ) edition.cnn.com time to read: +4 min

London CNN —The number of people in work in the United Kingdom has climbed above its pre-pandemic level for the first time, reaching a record high. Employment hit a record 33.1 million between February and April, with increases in both the number of employees and self-employed workers, the Office for National Statistics said Tuesday. Employment in the United Kingdom has recovered more slowly than in any other major economy since the pandemic, according to the UK Institute for Employment Studies. This is the fastest rise on record, apart from the period when the figures were distorted by the pandemic, Morgan noted. Food inflation remained above 19% — near a 45-year high — hitting poor households the hardest because they spend more of their available income on food.

Persons: Darren Morgan, Morgan, Liz Truss, Jeremy Hunt, ”, Ashley Webb, Anna Cooban Organizations: London CNN, National Statistics, Employment, UK Institute for Employment Studies, Bank of, “, Capital Economics, Bank, Ill Locations: United Kingdom, Europe, United States

☆ UK inflation surprises for all the wrong reasons
▼ + stars: | 2023-05-24 | by ( Hanna Ziady | ) edition.cnn.com time to read: +3 min

Britain’s stubbornly high inflation is a major drag on its economy because it increases the cost of everyday goods and services, dampening consumption. At the same time, interest rate hikes to combat inflation make loans and mortgages more expensive, which further weighs on spending by businesses and consumers. “The indirect impact of energy prices on business costs means lower gas and electricity prices should eventually feed into lower core inflation. But strong wage growth is likely to keep services inflation high throughout this year,” he added. But it cautioned that high inflation is still a considerable risk to the UK economy.

Persons: Grant Fitzner, Britain’s, ” Paul Dales, Martin Beck, ” Organizations: London CNN —, National Statistics, Bank of England, International Monetary Fund, Bank, Capital Economics, IMF, Bank of England’s Locations: United Kingdom

☆ Inflation is cooling — but many items aren’t cheaper. Here’s why
▼ + stars: | 2023-05-10 | by ( Elisabeth Buchwald | ) edition.cnn.com time to read: +4 min

Instead, the pace of price increases slowed from a year ago. But they may be suffering from even bigger price increases for margarine, which was up 24%. Poorer households spend a greater portion of their income on unavoidable expenses like food and gas, which makes them more vulnerable to price increases. Not everything is responding well to interest rate hikesThe Federal Reserve spent the past year hiking interest rates in the interest of lowering inflation. When the Fed raises interest rates, it costs more for banks and other lenders to borrow money.

☆ Inflation’s real benefits beat theoretical costs
▼ + stars: | 2023-05-05 | by ( Felix Martin | ) www.reuters.com time to read: +7 min

Yet economic theory has a remarkably hard time identifying the social costs imposed by a rising price level. A more serious charge is the uncertainty that rising prices introduce into financial planning. If the theoretical costs of inflation are elusive, the potential advantages it has to offer are more concrete. U.S. house prices, meanwhile, peaked last year at a full 45% higher in real terms than when Rogoff made his plea. In the end, the practical benefits of inflation will trump its theoretical costs.

☆ Ending the retailers’ crisis has a high price tag
▼ + stars: | 2023-05-02 | by ( Aimee Donnellan | ) www.reuters.com time to read: +5 min

BARCELONA, May 2 (Reuters Breakingviews) - High-street retailers are facing a heavy bill to weather the cost-of-living crisis. The cost of heating stores and staff requests for pay rises are squeezing operating margins at top players like H&M (HMb.ST) and Next (NXT.L). Shrinking disposable income is making it hard for these retailers to boost sales to protect margins. Most bricks-and-mortar retailers trade on higher multiples than they did before the war in Ukraine sparked soaring inflation. But that leaves a squeezed middle of retailers like H&M exposed to the brunt of the retail crisis.

☆ Britain’s pound is beating every other major currency this year
▼ + stars: | 2023-04-04 | by ( Julia Horowitz | ) edition.cnn.com time to read: +3 min

The pound, which has advanced about 3.3% versus the greenback since the start of 2023, is the best-performing currency among developed economies this year. The UK currency has been boosted by indications the country’s economy is holding up better than expected. The International Monetary Fund predicted in January that the UK economy would contract by 0.6% this year, while all other advanced economies would grow, if only slightly. “There was a lot of pessimism being priced into the pound,” said Francesco Pesole, a currency strategist at ING. “There was a big re-rating of growth expectations around Europe, and that impacted the UK,” Pesole said.

☆ Bank of England calls for urgent action on funds that nearly toppled UK financial system
▼ + stars: | 2023-03-29 | by ( Julia Horowitz | ) edition.cnn.com time to read: +3 min

London CNN —The Bank of England has called for urgent action to address a weak spot in the UK financial system as persistent worries about the global banking sector threaten to unleash fresh market turmoil. LDI crisisThe role of LDI funds in the UK financial system was thrown into the spotlight in the fall after the Truss budget triggered an unprecedented selloff in UK government bonds. This had an alarming knock-on effect on pension funds that had gone all in on liability-driven investment strategies. “We are monitoring events closely and their impact on financial markets, UK banks and UK economic conditions,” it said. The central bank added that UK banks were “resilient” and “currently healthy.” But it warned that other parts of the financial system might need bolstering.

☆ ECB may copy Bank of England's way of steering rates: Schnabel
▼ + stars: | 2023-03-27 | by ( ) www.reuters.com time to read: +2 min

NEW YORK, March 27 (Reuters) - The European Central Bank could take a leaf from the Bank of England's book as it looks for new ways of managing liquidity in the banking sector and steering short-term interest rates on the market, ECB board member Isabel Schnabel said on Monday. The ECB is now rapidly shrinking its balance sheet but this is unlikely to fall back to its level of before the 2008-2009 global financial crisis, so policymakers are now studying a new way to steer short-term interest rates in a new normal. Using the same rate for providing and remunerating reserves ensures that money market rates will trade closely to the policy rate, Schnabel argued. Another benefit of such a demand-driven framework is that it offers more flexibility on how the central bank provides reserves. "A third benefit is that the Bank of England’s approach may potentially lead to a leaner balance sheet depending on banks’ demand for reserves," Schnabel said.

☆ UK interest rates: Bank of England hikes by a quarter percentage point
▼ + stars: | 2023-03-23 | by ( Hanna Ziady | ) edition.cnn.com time to read: +2 min

London CNN —[Breaking news] The Bank of England hiked interest rates by a quarter of a percentage point Thursday, extending its long-running fight against inflation, which rose unexpectedly in February. The central bank made its 11th consecutive rate hike, taking its benchmark rate to 4.25%, the highest since October 2008. ET]The Bank of England is expected to hike rates by a quarter of a percentage point Thursday following an unexpected jump in inflation. The US Federal Reserve hiked rates by a quarter of a percentage point Wednesday. Announcing its rate hike, Switzerland’s central bank said UBS’s weekend takeover of Credit Suisse had “put a halt” to the banking crisis.

☆ Why the UK spring budget won't fix the economy's problems
▼ + stars: | 2023-03-15 | by ( Hanna Ziady | ) edition.cnn.com time to read: +7 min

London CNN —The last time a British finance minister unveiled a “budget for growth,” UK financial markets crashed and mortgage rates shot up, threatening to tip an already weak economy into a deep recession. But he will deliver his budget against essentially the same gloomy backdrop: the UK economy is stuck in the doldrums. John Springford, deputy director at the Centre for European Reform, estimates that Brexit had cost the UK economy 5.5% of GDP by June 2022. SVB could depress UK bank lendingAnother factor that could weigh on the UK economy in the near term: Silicon Valley Bank. “It is likely that UK financial conditions will remain tighter (or potentially significantly tighter) over coming months than they would have been without the US banking troubles,” Pickering said in a research note Monday.

☆ Central banks are fighting a war on inflation. They're not done yet
▼ + stars: | 2023-01-31 | by ( Julia Horowitz | ) edition.cnn.com time to read: +6 min

London CNN —One of the main jobs of central banks is to keep prices under control, allowing households and businesses to plan for the future with some certainty on what things will cost. Tolga Akmen/EPA-EFE/ShutterstockPolicymakers face difficult questions about exactly when to pause interest rate hikes. The European Central Bank’s main rate is 2%, while the Bank of England’s is 3.5%. Still, investors are becoming increasingly confident that major central banks will change course soon. “Central banks are relatively close to the end,” Sels said.

☆ VIEW Bank of England raises rates to 3.5%, says inflation has peaked
▼ + stars: | 2022-12-15 | by ( ) www.reuters.com time to read: +7 min

LONDON, Dec 15 (Reuters) - The Bank of England on Thursday raised interest rates by a widely expected 50 basis points (bps) to 3.50%, in its ninth straight increase - and its eighth this year. UK rates began rising in December 2021, making the BoE the first of the world's major central banks to kick off a monetary policy-tightening cycle. MONEY MARKETS: Interest rate swaps showed investors expected rates to peak at 4.46% by next August, compared with an anticipated terminal rate of 4.53% just before the decision. Their own numbers have been pointing to a recession for a little while, and they've still materially hiked interest rates. EDWARD HUTCHINGS, HEAD OF RATES, AVIVA INVESTORS, LONDON:"The Bank of England duly delivered on financial markets expectations of a 0.50% hike.

☆ Interest-Rate Paths for U.S., Europe Set to Diverge
▼ + stars: | 2022-12-11 | by ( Tom Fairless | ) www.wsj.com time to read: 1 min

The European Central Bank is expected to unveil plans to start reducing its multitrillion-dollar bondholdings in the coming months. FRANKFURT—The Federal Reserve’s aggressive campaign against high inflation dominated global financial markets this year. Starting this week, the action shifts to Europe, where inflation could prove stickier and harder to tame. That shift is likely to reverse some of the key market dynamics of 2022, most significantly a superstrong dollar. At monetary-policy meetings this week, the Federal Reserve’s key rate is expected to rise by 0.5 percentage point, the European Central Bank’s by 0.5 to 0.75 point, and the Bank of England’s by 0.5 point.

☆ CBI says UK recession could turn into a 'lost decade' of growth
▼ + stars: | 2022-12-05 | by ( Hanna Ziady | ) edition.cnn.com time to read: +3 min

London CNN Business —The United Kingdom faces a “lost decade” of growth if action isn’t taken to address slumping business investment and worker shortages, a leading business lobby group has warned. “Britain is in stagflation — with rocketing inflation, negative growth, falling productivity and business investment. The CBI expects the UK economy to shrink by 0.4% in 2023 — a significant downgrade from the growth of 1% it predicted in June. The group expects business investment to fall from the middle of next year, leaving it 9% below its pre-pandemic level at the end of 2024. “We cannot afford to have another decade where both [investment and productivity] are stagnant,” Danker said.

☆ UK banks’ Big Bang thankfully looks like big flop
▼ + stars: | 2022-11-30 | by ( Liam Proud | ) www.reuters.com time to read: +4 min

Yet, the mooted changes would probably only benefit middling lenders like Santander UK, Virgin Money (VMUK.L) and Banco Sabadell’s (SABE.MC) TSB Bank, according to the FT. And on Wednesday, the BoE’s supervisory body said it planned largely to stick to international bank-capital rules, dubbed Basel 3.1. But the big flop might not be such a bad thing for the country’s financial sector. Separately, the government’s City minister Andrew Griffith said on Nov. 29 that he wanted to relax the so-called ringfencing regime that forces large British lenders to separate their retail and investment banking arms. According to the Financial Times, the ringfencing regime would still apply to the biggest UK banks but there could be exemptions for lenders with limited trading operations including Santander UK, Virgin Money and TSB Bank.

☆ At November Fed meeting, officials flagged market resilience amid volatile conditions
▼ + stars: | 2022-11-23 | by ( Michael S. Derby | ) www.reuters.com time to read: +3 min

Those concerns were aired in meeting minutes for the rate-setting Federal Open Market Committee’s Nov. 1-2 policy meeting, released Wednesday. Thus far, the Treasury market, which serves as the backbone of the world’s credit system, has held together, although there has been ample concern about low liquidity that’s made trading difficult. Fed officials have thus far described the market as resilient. Fed staff briefing officials concurred,The minutes flagged recent events in Britain as a point of concern. The Fed's top financial stability official, Vice Chair for Supervision Michael Barr, last week told Congress he was worried about "blowback" to the wider financial system from crypto-related failures.

☆ Fed's standing repo facility a key tool some say could be improved
▼ + stars: | 2022-11-16 | by ( Michael S. Derby | ) www.reuters.com time to read: +3 min

The Fed’s Standing Repo Facility allows eligible firms, who are mainly large banks, to quickly convert their Treasuries into short-term cash loans. But many experts and market participants say its existence should help if trouble arrives. Focus has gravitated to the Standing Repo Facility given the market fragility as major central banks around the world have pursued aggressive rate increases to lower the highest levels of inflation in four decades. But observers believe the Treasury market might be okay in the face of the trouble in part because the Standing Repo Facility will help ensure liquidity is there for those who need it. Meanwhile, Hammack said one other way the Standing Repo Facility could be made strong is for bank regulators to take it on board when assessing financial firms’ overall liquidity positions.

☆ UK inflation jumps to 41-year high of 11.1%
▼ + stars: | 2022-11-16 | by ( Hanna Ziady | ) edition.cnn.com time to read: +1 min

London CNN Business —Soaring energy costs drove UK inflation to a fresh high in October, the latest piece of bad news for an economy sliding into recession. The annual rate of inflation rose to 11.1% in October, up from 10.1% in the 12 months to September, the Office for National Statistics said on Wednesday. Food price inflation rose to 16.4%. That means that in the space of one month, prices rose by as much as they did in the entire year to July 2021. Data last week from the ONS showed that the UK economy shrank in the third quarter.

☆ A More Dovish Bank of England Still Wants a Recession
▼ + stars: | 2022-11-03 | by ( Jon Sindreu | ) www.wsj.com time to read: 1 min

The Bank of England Thursday announced an increase in its key rate to 3%. Judging by the Bank of England’s gloomy economic forecasts, U.K. interest rates won’t go as high as the market expects. Unfortunately for investors, the central bank also seems set to mostly ignore its own forecasts. On Thursday, the BOE announced an increase in its key rate by three-quarters of a percentage point to 3%—the highest level of borrowing costs since 2008. This comes a day after the Federal Reserve raised rates by the same amount, warning that they could go higher than previously expected.

☆ Bank of England fights inflation with biggest rate hike in 33 years
▼ + stars: | 2022-11-03 | by ( Hanna Ziady | ) edition.cnn.com time to read: +2 min

London CNN Business —The Bank of England raised interest rates by three quarters of a percentage point on Thursday, the biggest hike in 33 years, as it tries to contain soaring inflation even as the UK economy slides towards recession. The central bank made its eighth interest rate hike in less than a year, taking its benchmark rate to 3%, the highest it has been since November 2008. The huge hike matches moves made by the US Federal Reserve on Wednesday and the European Central Bank last week. The annual rate of inflation rose to 10.1% in September, from 9.9% in August, returning to the 40-year high hit in July. In a sign of renewed confidence in the United Kingdom, investors placed about £2.45 billion ($2.8 billion) worth of bids for the bonds, Reuters reported.

The central bank made its eighth interest rate hike in less than a year, taking its benchmark rate to 3%, the highest it has been since November 2008. The huge hike matches moves made by the US Federal Reserve on Wednesday and the European Central Bank last week. The annual rate of inflation climbed to 10.1% in September, from 9.9% in August, returning to the 40-year high hit in July. Bailey acknowledged the “tough road ahead.”The central bank doesn’t think inflation will start to fall back until next year. In a sign of renewed confidence in the United Kingdom, investors placed about £2.45 billion ($2.8 billion) worth of bids for the bonds, Reuters reported.

☆ Pound holds ground as Rishi Sunak leads race to become UK prime minister
▼ + stars: | 2022-10-24 | by ( Julia Horowitz | ) edition.cnn.com time to read: +6 min

London CNN Business —Britain’s third prime minister in seven weeks will face the huge challenge of projecting stability after a period of historic political and financial market chaos. Rishi Sunak emerged over the weekend as the clear front-runner in the dramatic race to replace Liz Truss, who’s set to be the shortest-serving prime minister in UK history. “A key focus for the next Prime Minister and their chosen Chancellor needs to be fiscal responsibility,” Carl Emmerson, deputy director of the Institute for Fiscal Studies, said in a statement. An economy in recessionThe Bank of England forecast last month that the UK economy was already in recession. 10 Downing Street, investors and economists expect the revamped economic plan outlined by current finance minister Jeremy Hunt to remain intact.

☆ Lurking behind Britain’s political mess is an economy on the edge
▼ + stars: | 2022-10-21 | by ( Julia Horowitz | ) edition.cnn.com time to read: +5 min

London CNN Business —The spectacle surrounding Liz Truss, who on Thursday secured her fate as the shortest-serving prime minister in UK history, has quickly given way to a frenetic race to determine who will replace her. 10 Downing Street next will inherit an economic mess with no easy fixes. “A key focus for the next Prime Minister and their chosen Chancellor needs to be fiscal responsibility,” Carl Emmerson, deputy director of the Institute for Fiscal Studies, said in a statement on Friday. An economy in recessionEconomists agree that if the United Kingdom isn’t already in recession, one is likely to arrive soon. The cost of uncertaintyTruss has said the Conservative Party will install a new prime minister within a week.

☆ U.K. Inflation Reaches 10.1% as Government U-Turns Cloud Outlook
▼ + stars: | 2022-10-19 | by ( Paul Hannon | ) www.wsj.com time to read: 1 min

The U.K.’s annual rate of inflation returned to double digits in September, cementing expectations of another rise in the Bank of England’s key interest rate early next month even as the medium-term outlook for prices has been clouded by changes in government policy. The sharp rise in world energy prices since Russia’s invasion of Ukraine has pushed the U.K.’s inflation rate to four-decade highs, and prompted the BOE to raise its key interest rate more aggressively than it had planned before the war.

☆ U.K. Pension Funds Rush to Raise Cash as Central-Bank Deadline Looms
▼ + stars: | 2022-10-12 | by ( Julie Steinberg | ) www.wsj.com time to read: 1 min

LIVERPOOL, England—Pension funds, used to thinking in decades, have been thrown into real-time firefighting mode by the crisis roiling British markets. Many U.K. pensions are rushing to raise cash to satisfy collateral calls triggered by rapid moves in usually staid government bonds. Adding to the urgency: the Bank of England’s plans to end its emergency bond-buying this Friday, after which many fear volatility could surge again.

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