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☆ Analysis: Despite tax U-turn, UK's Hunt still faces tough budget choices
▼ + stars: | 2022-10-17 | by ( William Schomberg | ) www.reuters.com time to read: +5 min

LONDON, Oct 17 (Reuters) - The screeching about-turn on tax cuts by finance minister Jeremy Hunt on Monday will not spare Britain from painful spending cuts and new tax hikes to fix the country's public finances. Paul Johnson, director of the Institute for Fiscal Studies, a think-tank, said Monday's tax cuts U-turn was relatively simple compared with the balance Hunt must strike between more tax increases and spending cuts over the next two weeks. Hunt said the tax U-turns announced so far would raise about 32 billion pounds a year in extra revenues. That was 40 billion pounds above the level needed to cut debt as a share of the economy which currently is about 97%. "With tens of billions of spending cuts still to come, and a new energy support package needing to be devised, many of Jeremy Hunt's tough choices still lie ahead," Torsten Bell, chief executive of the Resolution Foundation, said.

"The ongoing squeeze on household finances continues to weigh on growth, and likely to have caused the UK economy to enter a technical recession from the third quarter of this year," Yael Selfin, chief economist at KPMG UK, said. Manufacturing fell by 1.6% from July and more maintenance than unusual in the North Sea hit the mining and quarrying sector which includes oil and gas. "Many other consumer-facing services struggled, with retail, hairdressers and hotels all faring relatively poorly," ONS Chief Economist Grant Fitzner said. GDP in September is likely to be weakened by a one-off public holiday to mark the funeral of Queen Elizabeth. The International Monetary Fund said on Tuesday it expected British GDP to grow in 2023 but only by 0.3%.

☆ UK house prices could plunge 15% because of soaring mortgage rates
▼ + stars: | 2022-09-28 | by ( Anna Cooban | ) edition.cnn.com time to read: +3 min

London CNN Business —House prices in the United Kingdom could plummet by as much as 15% if the country presses ahead with its tax-slashing economic gamble. Credit Suisse (AMJL) said on Tuesday that UK house prices could “easily” fall between 10% and 15% over the next 18 months if the Bank of England aggressively hikes interest rates to keep inflation in check. Some analysts now expect the Bank of England to raise interest rates to 6% next year, up from its current 2.25%, to prop up the ailing currency. Capital Economics, which likewise forecasts a drop in house prices of between 10% and 15%, warned the slump could be “devastating.”“The resulting drop in buying power makes a significant drop in house prices inevitable,” Andrew Wishart, senior economist at Capital Economics, said in a research note on Tuesday. “Mortgage arrears and default would rise just as house prices likely would be tumbling, placing huge strain on banks’ balance sheets,” Tombs said.

☆ Brazil's inflation extends downtrend in mid-September on lower fuel prices
▼ + stars: | 2022-09-27 | by ( Gabriel Araujo | ) www.reuters.com time to read: +3 min

Inflation in the 12 months to mid-September hit 7.96%, well below the 8.14% forecast by economists, likely backing the central bank's recent decision of pausing its aggressive rate hiking cycle. Adding to energy state tax cuts announced earlier this year, oil giant Petroleo Brasileiro SA reduced refinery gate gasoline prices twice since mid-August, leading to lower prices at the pump. The inflation drop in September, however, was not widespread as prices fell in only three of the nine groups of products and services surveyed, IBGE said - communication, food and beverages, and transportation. The latest inflation data comes as Brazil's central bank last week chose to keep interest rates unchanged at 13.75%, pausing an aggressive tightening after 12 consecutive increases aimed at curbing high inflation. William Jackson, chief emerging markets economist at Capital Economics, said the inflation figures confirmed that the monetary tightening cycle was over.

☆ UK lenders halt mortgage deals to customers after market chaos
▼ + stars: | 2022-09-27 | by ( Sophie Kiderlin | ) www.cnbc.com time to read: +3 min

Oli Scarff | Getty Images News | Getty ImagesLONDON - U.K. lenders Virgin Money, Halifax and Skipton Building Society pulled some of their mortgage deals to customers after the tumult in British bond markets. Virgin Money and Skipton Building Society temporarily paused mortgage offers for new customers, while Halifax — owned by the Lloyds Banking Group — is planning to halt any mortgage products with fees where lower interest rates are usually offered. Skipton Building Society said they had paused their products in order to "reprice following the market response over recent days." Markets have begun pricing in a base rate rise to as high as 6% for next year, from 2.25% currently, raising concerns among mortgage lenders and borrowers. "Households refinancing a two-year fixed rate mortgage in the first half of next year will see monthly repayments jump to about £1,490 early next year, from £863 when they took on the mortgage two years prior."

☆ Spring and summer 2023 will finally be a good time to buy a home
▼ + stars: | 2022-09-27 | by ( Alcynna Lloyd | ) www.businessinsider.com time to read: +3 min

Inflation and interest rate hikes have made it even more expensive to buy a home. In addition, a slowing economy overall could bring 30-year mortgage rates back down. As economic volatility further seeps into the US real estate market, housing activity is fading fast. That's because inflation and interest rate hikes have dampened affordability for many would-be shoppers, leading to a steady decline in buyer demand. This combination of cooling prices and declining mortgage rates could indicate the typically busy real estate seasons of spring and summer could ring in a more affordable housing market in 2023.

☆ UK mortgage borrowers are in for a nasty shock from soaring rates
▼ + stars: | 2022-09-27 | by ( Anna Cooban | ) edition.cnn.com time to read: +4 min

London CNN Business —Millions of mortgage borrowers in the United Kingdom are bracing themselves for huge hikes to their monthly payments as a consequence of the run on the pound. Markets had already been expecting the central bank to raise interest rates to 4.75% by next spring. There are 9 million outstanding residential mortgages in the United Kingdom, according to UK Finance, an association of banks and financial services firms. About 20% of those loans are tracker, or variable rate products, that typically become more expensive when the central bank hikes rates. Halifax, owned by Lloyds Bank (LLDTF), removed some of its mortgage products, while Virgin Money stopped taking mortgage applications from new customers until later this week.

☆ The Truss tax plan cushions the wealthy while pushing borrowers toward a financial cliff
▼ + stars: | 2022-09-27 | by ( Allison Morrow | ) edition.cnn.com time to read: +7 min

That’s because the Bank of England is now widely expected to hike interest rates even further to tackle inflation that will be exacerbated by the government’s sweeping tax cuts. That means many as 1.8 million borrowers are now hurtling toward a financial cliff as they prepare to refinance next year, when the mortgage rate may well have doubled. The vast majority (nearly two-thirds) of the tax gains go to the wealthiest one-fifth of households, according to one think tank estimate. According to the US Treasury, tax cuts reduced federal revenues by about 9% in the first couple of years. However, Congress eventually decided the sweeping tax cuts were unsustainable and, with Reagan’s approval, raised taxes by a lot in 1982.

The British pound plunged to a record low against the U.S. dollar Monday. The pound, historically one of the strongest currencies in the world, fell to as low as $1.04 before bouncing back to approximately $1.07. For most of the past few decades, the pound averaged a price of about $1.50 against the dollar. The decline in the British pound in itself won't have a direct impact on the U.S. economy, experts say. But as the value of the pound has dropped, the value of the U.S. dollar has reached all-time highs.

☆ The drop in the pound is sending UK rate expectations to 6% in 2023 - and that means a spike of 73% for some mortgage payments, economist says
▼ + stars: | 2022-09-26 | by ( Carla Mozée | ) www.businessinsider.com time to read: +3 min

Expectations are rising that the UK's benchmark rate will reach 6% in 2023 on the back of the pound's slide. That could mean monthly payments for some refinanced mortgages could jump by 73% to nearly £1,500 in the first half of next year, said Pantheon Macroeconomics's chief UK economist. In dollar terms Monday, monthly payments could rise to $1,593 from $923. A 2-year fixed rate mortgage is the shortest-term offered in the UK for a fixed home loan, according to product comparison website Money.co.uk. The UK's central bank has raised the benchmark interest rate to 2.25% in seven hikes since December to control inflation.

☆ Take no prisoners: In the Fed’s inflation fight, no one is spared
▼ + stars: | 2022-09-26 | by ( Christine Romans | ) edition.cnn.com time to read: +5 min

Global central banks are jacking up interest rates with no end in sight until high inflation is vanquished. The Federal Reserve is aggressively fighting inflation by lifting its benchmark interest rate five times so far this year. There isn’t.”Higher interest rates make life more expensive for anyone who borrows money. The higher rates ding home affordability but also might be holding back home sales. Higher interest rates make financing a car — when you can find one — even more expensive.

☆ US home prices could plunge 20% by next summer as a housing recession kicks in, a top economist says
▼ + stars: | 2022-09-23 | by ( Theron Mohamed | ) www.businessinsider.com time to read: +3 min

The US housing market is in a recession, Pantheon Macroeconomics' Ian Shepherdson said. Federal Reserve officials have indicated they want a correction in the housing market. "Housing, in short, is in recession, and everything connected to housing either is in recession now or soon will be," they added. "We've had a time of a red-hot housing market all over the country," Powell noted. "The deceleration in housing prices that we're seeing should help bring prices more in line with rents and other housing-market fundamentals.

☆ US stocks fall after steep sell-off as investors assess outlook for more aggressive rate hikes to come
▼ + stars: | 2022-09-22 | by ( Carla Mozée | ) www.businessinsider.com time to read: +3 min

The Federal Reserve's rate hike Wednesday was followed by rate hikes at other central banks. Other central banks including Switzerland and Norway followed suit with their own rate hikes as inflation burns hot throughout the global economy. The Bank of England raised its key rate by 50 basis points as inflation sits at 9.8%. US weekly jobless claims released Thursday rose slightly, by 5,000 to 213,000, but the labor market remains strong. Here's what else is happening today:"Bond King" Jeff Gundlach said the Fed's commitment to big rate hikes means a 75% chance of a US recession in 2023.

The Federal Reserve on Wednesday hiked its key interest rate by 0.75% for the third time in a row as it races to get ahead of the galloping inflation that is sapping the earnings of American consumers. This month, the Bureau of Labor Statistics reported inflation had climbed by 8.3% year on year and 0.1% month on month. By raising interest rates, the Fed hopes to rein in consumption and borrowing, which in turn should put downward pressure on prices. One area in which higher interest rates are taking a significant bite is housing. Bankrate's McBride laid out some financial advice Americans should keep in mind as interest rates climb.

☆ The Fed has to balance its latest rate hike with trying not to tank the economy. Here's what to know.
▼ + stars: | 2022-09-21 | by ( Phil Rosen | ) www.businessinsider.com time to read: +7 min

Today, I'm breaking down what to know about the Fed's third jumbo rate hike, and how markets could look in its aftermath. In this March 21, 2018, file photo, Federal Reserve Chairman Jerome Powell speaks following the Federal Open Market Committee meeting in Washington. A third, outsized rate hike is an unprecedented move by the Federal Reserve. For this meeting in particular, billionaire David Rubenstein warned that a 100-basis-point hike this week would shock and depress markets and investors. What's on deck for markets after a third consecutive large rate hike?

☆ Russia's early resilience to sanctions is fading - its economy is on the back foot and Moscow could soon lose its place among the world's energy superpowers.
▼ + stars: | 2022-09-20 | by ( Phil Rosen | ) www.businessinsider.com time to read: +7 min

Today, though, I'm homing in on another front in the global markets story — specifically, Russia. Official customs data showed China spent a record-breaking $8.3 billion importing Russian oil products, gas, and coal in August. "What happens is that [isolationism] reduces the number of products that [Russia] can buy," Jay Zagorsky, a markets professor at Boston University, told Insider. They told Insider the exact books that got them started on the path to building wealth — see their list of four reads here. That's according to Bank of America analysts, who wrote Monday that global markets will remain strained heading into next year thanks to a variety of factors.

☆ The Fed may raise rates by less than expected in November as the housing market is in a deep recession
▼ + stars: | 2022-09-19 | by ( Carla Mozée | ) www.businessinsider.com time to read: +3 min

A "deep recession" in the housing market may lead the Fed to hike rates by less than expected in November, said Pantheon Macroeconomics. The Fed may opt to raise rates by 50 basis points instead of 75 basis points, which is what investors were widely pricing in. Still, the housing market is in a "deep recession," and the pain will spread beyond homebuilders soon to depress housing-related retail sales, he warned. The Fed has raised interest rates four times in 2022, leading 30-year mortgage rates to rise above 6% for the first time since 2008. The rate of the Housing Market Index's decline has slowed in recent months but the latest report likely doesn't mark the floor, said Shepherdson.

☆ Mortgages and credit cards are about to get even more expensive. It's nothing compared to what we'll see by the end of the year.
▼ + stars: | 2022-09-18 | by ( Ben Winck | Madison Hoff | ) www.businessinsider.com time to read: +5 min

Higher-than-expected inflation in August means the Fed will likely back another jumbo-sized rate hike next week. Rate increases have already made mortgages, car loans, and credit cards much pricier for Americans. Fed officials have been clear that they'll only pull back on their rate hikes once they see "compelling evidence" that inflation is slowing down. And since it usually takes around one year for rate hikes to be fully felt throughout the economy, those tightening effects are set to only get more intense. Fed officials have also made it clear that they want to avoid the biggest risks that come with monetary tightening.

☆ Lower gas prices push consumer confidence to highest level since May
▼ + stars: | 2022-08-30 | by ( Martha C. White For Cnn Business | ) edition.cnn.com time to read: +4 min

CNN —Lower gas prices helped consumer confidence bounce back in August, breaking a three-month stretch of worsening sentiment. “Expectations are more sensitive to movements in gas prices,” Shepherdson said in a research note, adding that the continued slide in gas prices could be a tailwind for the survey results. However, while the consumer confidence number is promising, “this is one month,” she cautioned. Consumer confidence is a pretty fickle reading.”The big risk is that what the gas pump giveth, the gas pump taketh away, as Patrick DeHaan, head of petroleum analysis at GasBuddy, told CNN Business in an opinion column published Tuesday. “It is a real drain on disposable income [and] it ends up acting as a depressant on consumer confidence,” Stovall said.

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