Babak Belurs

Rabu, 28 September 2022

Keir Starmer demands tax rethink after IMF alert — follow live - The Times

The Bank of England has announced an emergency intervention in Britain’s financial markets to head off a “material risk to UK financial stability” after last week’s budget.

In a highly unusual move the Bank said it would start buying long-term government debt to tackle a surge in the cost of borrowing, which it said risked “contagion” to households and businesses.

Some of the country’s largest pension funds had warned the Bank that they were facing a cash crisis caused by the unprecedented rise in yields on long-dated government bonds.

The Bank also announced it was delaying longstanding plans to begin winding down quantitative easing, which was due to start next week.

It follows days of market turmoil that has pushed up the cost of government

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2022-09-28 09:40:00Z
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IMF urges UK to 're-evaluate' tax cuts in biting attack on fiscal plan - Financial Times

The IMF has launched a biting attack on the UK’s plan to implement £45bn of debt-funded tax cuts, urging the government to “re-evaluate” the plan and warning that the “untargeted” package threatens to stoke soaring inflation.

The multilateral lender said it was “closely monitoring” developments in the UK and was “engaged with the authorities” after Chancellor Kwasi Kwarteng unveiled the tax cuts last week, sparking a collapse in the value of sterling and a surge in the country’s borrowing costs.

“Given elevated inflation pressures in many countries, including the UK, we do not recommend large and untargeted fiscal packages at this juncture,” the IMF said in a statement. “It is important that fiscal policy does not work at cross purposes to monetary policy.”

Janet Yellen, US Treasury secretary, said the US was “monitoring developments very closely”. She declined to be drawn on the merits of the plan but noted that the US and the UK had “significant inflation problems and central banks focused on . . . bring[ing] inflation down”.

She added the financial turmoil of recent days appeared to be confined to Britain rather than spreading to the global economy and that financial markets that had sold off sharply were “functioning well”.

The pound remained under pressure on Wednesday morning, trading 0.3 per cent lower against the dollar at $1.070. UK government bonds steadied after enduring a historic sell-off in the past three trading sessions, pushing borrowing costs down slightly. Ten-year gilt yields were 0.03 percentage points lower at 4.48 per cent, up from 3.5 per cent last week.

At an event hosted by the Economic Club of Washington DC, Brian Deese, director of the White House’s National Economic Council, said he “wasn’t surprised” by the reaction to the UK’s fiscal plan, saying “it puts the [central bank] in a position of potentially having to move even tighter”.

He added: “It is particularly important to maintain a focus on fiscal prudence.”

In its first assessment of the UK situation, Moody’s, the credit rating agency, offered critical commentary, saying that large unfunded tax cuts would lead to rising borrowing costs and lower growth.

Though it did not change the UK’s credit rating, Moody’s warned that a “large unfunded fiscal stimulus . . . will prompt more aggressive monetary policy tightening, weighing on growth in the medium term”.

The IMF’s pointed criticism of Kwarteng’s fiscal plan came as some business leaders in the UK hit out at the tax cuts, while the Bank of England’s chief economist warned it would need to react with a “significant monetary response”.

The IMF said it understood the UK government’s desire to help “families and businesses deal with the energy [price] shock” while “boosting growth” with supply-side reforms.

But it raised the concerns that the tax cuts, which will disproportionately benefit high earners, “will likely increase inequality”. It called on Kwarteng to use the budget on November 23 to “provide support that is more targeted and re-evaluate the tax measures”.

Following the IMF statement, the UK Treasury said the November budget would “set out further details on the government’s fiscal rules, including ensuring that debt falls as a share of GDP in the medium term”. It added the government had acted “at speed to protect households and businesses through this winter and the next”.

The opposition Labour party seized on the IMF statement, with shadow chancellor Rachel Reeves saying it “should set alarm bells ringing in” Westminster and calling on the government to “urgently lay out how it will fix the problems it has created”.

Eswar Prasad, a former senior IMF official, said: “This is a hard-hitting and pointed criticism that pulls few punches. This is as close as IMF language comes to calling a set of policies irresponsible, ill-advised and ill-timed.”

Mark Sobel, a former US Treasury official and ex-IMF representative, said the statement was “unusual in its sharpness” but that he approved of the fund being “a ruthless truth teller”.

Adnan Mazarei, former deputy director at the IMF, described the statement as “on the strong side” and said the fund was “concerned, especially about the risks of a spillover”, which he described as “tangible”.

He added: “The UK authorities have embarked on an unnecessarily risky path.”

Ray Dalio, the billionaire founder of hedge fund Bridgewater, said the UK was “operating like the government of an emerging country”.

Dalio’s remarks came after Larry Summers, former US Treasury secretary, on Monday called the policy “utterly irresponsible” and said the violent market reaction was “a hallmark of situations where credibility has been lost”.

The pair joined Raphael Bostic, president of the Atlanta branch of the Federal Reserve, who this week warned that the UK’s plan increased economic uncertainty and raised the odds of a global recession.

Last week, Jason Furman, an economic adviser to former US president Barack Obama, wrote on Twitter: “I can’t remember a more uniformly negative reaction to any policy announcement by both economists and financial markets than the UK’s policy.”

Additional reporting by Tommy Stubbington in London

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2022-09-28 08:19:51Z
1583847459

Selasa, 27 September 2022

William promises to improve his Welsh during first visit as prince - The Times

The Prince of Wales admitted that he needs to brush up on his Welsh as he made his first trip to the nation since taking up his new title.

The couple’s visit to Holyhead came as a royal source said that William had “no plans” for an investiture like his father’s at Caernarfon in 1969.

William and the Princess of Wales were given a warm welcome as they visited a lifeboat station where a small boy who had been waiting for four hours to see the couple was plucked from the crowd to give them flowers.

The couple were welcomed at the RNLI station with a bouquet of flowers from a boy aged four

PAUL ELLIS/GETTY IMAGES

Rebecca Crompton, Theo’s mother, said they had been on their way to school when they changed their mind at the last minute to see the couple at the Holyhead

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2022-09-27 15:45:00Z
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Mortgage lenders pull deals due to interest rate rise fears - BBC

A young woman looks at housing options through an estate agents' window

Some mortgage deals have been withdrawn by banks and building societies after a fall in the pound fuelled forecasts of a sharp rise in interest rates.

Virgin Money and Skipton Building Society halted mortgage offers for new customers while Bank of Ireland said it had withdrawn all mortgages.

Halifax said it would stop mortgages with product fees.

The Bank of England said on Monday it would "not hesitate" to hike interest rates after the pound hit record lows.

The pound plunged against the dollar on Monday after comments at the weekend from Chancellor Kwasi Kwarteng pledging more tax cuts, on top of Friday's mini-budget when he announced the biggest tax cuts for 50 years. Overnight, the pound stabilised at $1.08 after hitting a record low of $1.03 on Monday.

The mini-budget plans will require a large increase in government borrowing and concerns among investors about the country's ability to meet that debt led to the value of the pound being pushed down while the cost of UK government borrowing also soared.

Former US Treasury Secretary Larry Summers tweeted: "I was very pessimistic about the consequences of utterly irresponsible UK policy on Friday. But, I did not expect markets to get so bad so fast."

A weaker pound also makes imports and goods priced in dollars, such as oil, much more costly and risks fuelling price rises at a time when UK inflation is at its highest for 40 years.

The Bank of England said it would make a full assessment as to whether it should change interest rates at its next meeting on 3 November, following speculation it might have intervened earlier.

Bank will not hesitate to raise interest rates
Why has the pound tumbled?
Has your mortgage deal been withdrawn? Are you worried about rising interest rates? Share your experiences by emailinghaveyoursay@bbc.co.uk

Following Monday's volatility, financial markets updated predictions and said interest rates could now more than double by next spring to 5.8%, from their current level of 2.25%, to curb inflation - the rate at which prices for consumers rise.

Experts said a rise in the cost of long-term borrowing meant the current cost to mortgage lenders of offering new deals was now more expensive. There are also concerns that would-be borrowers will rush to secure mortgages at favourable rates before interest rates rise and if they do jump, homeowners will not be able to afford higher repayments.

Some 8.3 million people have mortgages in the UK, according to UK Finance, the trade association.

The number of residential mortgages on offer by lenders fell to 3,596 on Tuesday, according to financial information firm Moneyfacts, compared with 3,961 deals on Friday when the mini-budget was announced. It is also a sharp fall from the number available in December last year when the Bank of England started raising interest rates.

Julie-Ann Haines, chief executive at Principality Building Society, said: "As a lender what we need to do is one of two things. Firstly to make sure that customer mortgages are affordable. We have to do that under regulation and we therefore need to stress-test and make sure that if the Bank of England base rates go up that consumers can still afford their mortgage.

"And of course the second thing is banks and building societies have to be able to make a margin and so they have to price that increased financial market view of the interest rates into their products, and that's why you're seeing [mortgage] rates start to really go up quite fast over the past two to three months."

The Bank has already lifted interest rates seven times in a row since December to the highest rate in 14 years.

In August, the Bank scrapped a mortgage affordability rule which required banks and building societies to stress test whether homeowners could cope with a 3% rise in interest rates.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said if interest rates rise as predicted, the average household refinancing a two-year fixed rate mortgage in the first half of next year would see monthly payments jump to £1,490 from £863.

"Many simply won't be able to afford this," he said.

Virgin Money confirmed a decision to halt deals for new customers was due to the market conditions.

Both Virgin and Skipton Building Society said submitted applications would still be processed. The lenders also said they would issue a new range of mortgage deals in the coming weeks.

Bank of Ireland said it had "withdrawn all residential and buy to let rates" on Monday, adding that it "will launch new ranges as soon as possible".

Halifax said from Wednesday it would remove mortgage products that come with a fee "as a result of significant changes in mortgage market pricing we've seen over recent weeks".

Mortgage deals which have product fees can result in lower monthly repayments for homeowners, with the fee being added to the total mortgage debt.

But although mortgage rates may be lower per month, the overall cost of the loan will be higher due to more interest accruing over time.

Halifax said it had not changed its mortgage rates and it continued to offer product fee-free options for borrowers.

HSBC said it had no plans to change mortgage offers, while NatWest said its rates were under "continual review in line with market conditions". Nationwide said it had not withdrawn any mortgage deals and will "continue to keep the market under review".

TSB declined to comment.

The statement from the Bank of England came shortly after a separate statement by the Treasury, seemingly intended to reassure investors, laying out a timetable for when more details of the government's plans would be given.

It said cabinet ministers would announce measures to boost growth over the coming weeks and that the chancellor would set out a "medium-term fiscal plan", including measures to reduce the national debt, on 23 November.

It also said the plan would come with a forecast of expected UK growth and government borrowing from the independent Office for Budget Responsibility, the omission of which from Friday's mini-budget had drawn criticism.

Analysis box by Chris Mason, political editor

In government, there is nervousness about talking about what is going on.

And there is nervousness about NOT talking about what is going on.

What does that tell you?

It tells you the government has been a reluctant passenger on this big dipper of market volatility that it strapped itself and the rest of us into.

There appears to be some relief that the markets overnight are not as bumpy.

They think, they hope - and there's a lot of hoping going on - that the double dose of attempted reassurance from the Treasury and the Bank of England on Monday shows a road map without a panic.

But guess what? No sooner had I just said what you've just read on the radio and a minister texted me suggesting this was "too optimistic."

"The impact on mortgage rates of these ill-considered policies will be very damaging. I can't see the pound rising substantially, in fact it feels more likely to drift down further over time if this path is continued."

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2022-09-27 11:05:55Z
1582371945

Senin, 26 September 2022

Pensioner killed in hit-and-run in Tesco car park in north London - Sky News

A man in his 80s has died in a hit-and-run in a Tesco car park in north London, police have said.

Officers are searching for the driver of the van involved in the fatal incident at the Coppetts Centre in Barnet shortly before 5pm on Saturday.

Detective Inspector Ian Watson said: "The car park was extremely busy with people going about their day when this collision occurred.

"If you saw anything, or captured events on dashcam or a mobile device, then please get in touch."

Both the land and air ambulance were called to the scene.

But the pensioner, who was taken to hospital, died on Sunday.

His family has been told.

Two men were arrested on suspicion of causing serious injury by dangerous driving and failing to stop at the scene of a collision but have been released pending further enquiries.

Anyone with information can call police on 020 8246 9820 quoting the reference 4826/24SEP, or to remain anonymous contact Crimestoppers on 0800 555 111.

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2022-09-26 08:28:22Z
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Pound sinks to record low against the dollar and UK economy predicted to flatline next year - as PM and chancellor defend mini-budget - Sky News

The pound has fallen to a record low against the dollar amid a fresh investor rush towards the US currency globally.

Sterling slipped by nearly 5% early on Monday to $1.0327 - building on fresh 1985 lows seen on Friday after UK chancellor Kwasi Kwarteng unveiled the biggest programme of tax cuts for 50 years.

The £45bn tax-slashing package saw the market deliver a verdict on the sustainability of the public finances, given the additional demands it will place on borrowing.

Bond markets also continued to reflect the crisis of confidence with the rates being demanded in return for investor cash hitting levels not seen since 2008.

The pound plunged below its all-time low against the greenback - set in February 1985 - of $1.054 early on Monday in Asian trading, fuelling fears that parity was possible ahead.

And the Organisation for Economic Co-operation and Development (OECD) has said the UK economy will grow slower than previously predicted in 2022 - and it will flatline entirely in 2023.

Cost of living latest

This morning the pound has stabilised around $1.07 - still over 1% below the previous session's close and 5% down on where it had stood early on Friday morning before the mini-budget.

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The government's growth plan was clearly the catalyst for Friday's plunge but traders said it had since intensified the focus more widely as the dollar also shot up against a basket of other international currencies.

Joseph Capurso, head of international economics at Commonwealth Bank of Australia. wrote: "The poor situation in the UK exacerbates support for the USD, (which) can track higher again this week.

"If a sense of crisis about the world economy were to emerge, the USD could jump significantly."

The euro fell to fresh 20-year lows versus the greenback amid growing recession fears linked to the war in Ukraine and in the wake of Italy's elections that will see a far-right leader become the country's new PM.

The Japanese yen was among other currencies in focus.

The trouble for both the UK and Europe more generally is that weak currencies raise dollar denominated import costs, fuelling inflation further.

The UK also faces goods from the continent becoming more expensive because the pound's value has also slipped sharply versus the euro, standing at €1.0948 - leaving it 10 cents lower since August.

The rise in government borrowing costs saw the yield on the benchmark 10-year gilt hit almost 4.1% - the highest since April 2010. Shorter-term bonds were at levels not seen since the financial crisis.

Neil Wilson, chief market analyst at markets.com, said the market reaction to the government's growth plan had resulted in a "very swift and very aggressive repricing".

He wrote: "Does the Bank of England (BoE) intervene? Talk is of an emergency interest rate hike by the Bank to steady the ship.

"Traders now price in 150bps (1.5 percentage points) of hikes by the BoE by November, implying an expectation it comes out with a hike before the next meeting."

Both the chancellor and Prime Minister Liz Truss defended their programme over the weekend while shadow chancellor Rachel Reeves told Sky News on Monday it was clear that a "credible plan for the public finances" was now needed to address the market concerns.

In an interview with CNN on Sunday, Ms Truss rejected comparisons with US President Joe Biden's approach after he said he was "sick and tired of trickle-down economics".

She said: "We all need to decide what the tax rates are in our own country, but my view is we absolutely need to be incentivising growth at what is a very, very difficult time for the global economy."

Asked whether she was "recklessly running up the deficit," Ms Truss said: "I don't really accept the premise of the question at all."

Mr Kwarteng suggested his announcements were just the beginning of the government's agenda to revive the UK's stagnant economy.

"We've only been here 19 days. I want to see, over the next year, people retain more of their income because I believe that it's the British people that are going to drive this economy," he told the BBC's Sunday With Laura Kuenssberg programme.

Mr Kwarteng is reportedly considering abolishing a charge for parents who earn more than £50,000 and claim child benefit, increasing the annual allowances on pension pots and a tax break for people who stay at home to care for children or loved ones.

If sterling fell to parity with the US dollar, it could trigger a rebellion among Tory backbenchers who could refuse to vote for the government's finance bill or submit letters of no confidence, the Daily Telegraph reported, citing backers and critics of the prime minister.

Asked whether he was nervous about the dropping pound, falling stock markets and rising cost of government borrowing, Mr Kwarteng said: "We've got to have a much more front-footed approach to growth and that's what my Friday statement was all about.

"I think that if we can get some of the reforms... if we get business back on its feet, we can get this country moving and we can grow our economy, and that's what my focus is 100% about."

He refused to comment on market movements, saying: "I've been focused on the longer term and the medium term, and I think it was absolutely necessary that we had a long-term growth plan."

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2022-09-26 08:46:15Z
1578005664

Minggu, 25 September 2022

Pound sinks to record low against the dollar as chancellor and prime minister defend mini-budget - Sky News

The pound has fallen to a record low against the dollar amid a fresh investor rush towards the US currency globally.

Sterling slipped by nearly 5% early on Monday to $1.0327 - building on fresh 1985 lows seen on Friday after UK chancellor Kwasi Kwarteng unveiled the biggest programme of tax cuts for 50 years.

The £45bn tax-slashing package saw the market deliver a verdict on whether the public finances would be sustainable.

The pound plunged below its all-time low against the greenback of $1.054 early on Monday in Asian trading, fuelling fears at that time that parity was even possible.

However, it later stabilised around $1.05405 - still 3% below the previous session's close.

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Both the chancellor and Prime Minister Liz Truss defended their programme.

In an interview with CNN on Sunday, Ms Truss rejected comparisons with US President Joe Biden's approach after he said he was "sick and tired of trickle-down economics".

Asked whether she was "recklessly running up the deficit," Ms Truss said: "I don't really accept the premise of the question at all".

Mr Kwarteng suggested his announcements were just the beginning of the government's agenda to revive the UK's stagnant economy.

"I think that if we can get some of the reforms... if we get business back on its feet, we can get this country moving and we can grow our economy, and that's what my focus is 100% about."

He refused to comment on market movements, saying: "I've been focused on the longer term and the medium term, and I think it was absolutely necessary that we had a long-term growth plan."

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Rabu, 28 September 2022

Selasa, 27 September 2022

Senin, 26 September 2022

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