Economy

Bank of England’s Bailey vows to ‘see the job through’ on inflation

Published

1 year ago

July 11, 2023

Bank of England's Bailey vows to 'see the job through' on inflation

By David Milliken and Andy Bruce

LONDON (Reuters) -Bank of England Governor Andrew Bailey said on Monday the British central bank had to “see the job through” on bringing down an inflation rate that is running higher than in any other major rich economy.

Bailey, under pressure from politicians and some economists over the surge in inflation, said price growth had proved to be stickier than the BoE had expected.

“It is crucial that we see the job through, meet our mandate to return inflation to its 2% target and provide the environment of price stability in which the UK economy can thrive,” Bailey said in the text of a speech he was due to deliver later on Monday to finance executives at London’s Mansion House.

Bailey’s comments largely echoed previous remarks which have convinced investors that more interest rate hikes are coming.

Interest rate futures on Monday pointed to a peak in Bank Rate of between 6.25% and 6.5% in early 2024 which would be the highest in 25 years and up from 5% now.

The BoE has raised rates at each of its past 13 meetings. Bailey said “some” of that tightening was yet to be felt as mortgage-holders gradually have to refinance.

While Britain’s economy had barely grown in comparison with its pre-pandemic level, Bailey said there had been unexpected resilience in the labour market and a recession had been avoided so far.

“This is a good thing in many ways. No one wishes to see unemployment higher or growth weaker,” Bailey said.

But this had also resulted in stronger inflationary pressures, he added.

BoE officials are closely watching data from the labour market and on services price inflation ahead of their next policy announcement on Aug. 3, Bailey said.

“Both price and wage increases at current rates are not consistent with the inflation target,” Bailey said. “Currently at 8.7% in the latest data, consumer price inflation is unacceptably high, and we must bring it down to the 2% target.”

Bailey used most of his speech to address issues around rules for Britain’s financial sector.

He said the BoE was reviewing a record 50,000 responses to its public consultation on a potential central bank digital currency, before a joint decision with the finance ministry on whether to go ahead.

Bailey said the aim was to provide a digital equivalent to cash rather than require the public to rely entirely on services provided by banks or other companies for online payments.

The BoE wanted to preserve the current mix of sources of money in the economy rather than allow banking services provided by the BoE to supplant those of commercial banks, he added.

“I don’t think we should be using enhanced digitalisation materially to shift the mix of commercial bank and central bank retail money towards the latter,” Bailey said.

He also said more clarity was needed for bank depositors about what would happen to savings above the 85,000 pounds ($109,000) which are currently guaranteed in the event of a bank collapse, like that of Silicon Valley Bank this year.

“It should be no surprise that the authorities are thinking carefully about this issue. It doesn’t automatically mean all money is guaranteed, but we must ensure the rules keep up to date,” Bailey said.

Economy

Russian central bank says it needs months to make sure CPI falling before rate cuts -RBC

Published

12 months ago

December 26, 2023

Russian central bank says it needs months to make sure CPI falling before rate cuts -RBC

MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.

The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.

Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.

“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.

Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.

“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.

The bank will next convene to set its benchmark rate on Feb. 16.

The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.

Economy

China identifies second set of projects in $140 billion spending plan

Published

12 months ago

December 25, 2023

China identifies second set of projects in $140 billion spending plan

© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo

SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.

With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.

The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.

China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.

The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.

“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.

The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.

($1 = 7.1315 renminbi)

Economy

Russian central bank says it needs months to make sure CPI falling before rate cuts -RBC

Published

12 months ago

December 25, 2023

Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.

“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.

Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.

“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.

The bank will next convene to set its benchmark rate on Feb. 16.

The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.