Two BoE Members Wanted Interest Rate Rise

Looking Into the Interest Rate Crystal Ball

Updated: 12:43pm UK, Wednesday 20 August 2014

By Ian King, Business Presenter

It is certainly dramatic news, on the face of it, that two members of the Bank of England's Monetary Policy Committee (MPC) have voted to raise interest rates.

After all, no MPC member has voted to tighten monetary policy since July 2011.

Yet the development is not as startling as it might have seemed. Many market commentators had been speculating, in advance of the minutes being published at 9.30am on Wednesday, that this would be the month in which the MPC's unanimity finally disappeared.

That the two MPC members who did vote to raise Bank rate were Martin Weale and Ian McCafferty also came as no surprise.

The hugely respected Mr Weale, in particular, is a fiercely independent soul. For example, he was a dissenting voice when the Bank, under its then-new Governor Mark Carney, introduced a policy of 'forward guidance' last year.

Moreover, as recently as June, Mr Weale gave a speech during which he indicated that he thought there was less slack in the economy - the key measure that Mr Carney has said will now guide interest rate policy - than the 1% to 1.5%of GDP that the Bank's quarterly inflation report in May was suggesting.

Since then, there has been further evidence that slack in the economy has fallen away, most notably with the continued fall in unemployment at a rate that continues to surprise.

Mr Weale has also previously indicated that he favours raising the Bank rate this year because - as he stated in an interview with Sky News in February this year - it would be difficult to do so during the run-up to the General Election.

So his vote ought to have come as no shock.

Mr McCafferty, meanwhile, also nailed his colours to the mast during a speech in June in which he said that an early rise in interest rates would enable the MPC to move more gradually and in a way that would minimise disruption to households and businesses.

So his vote should really be no surprise either.

What will confuse some, though, is that details of the vote come just days after the Bank's latest quarterly inflation report struck a markedly more dovish tone.

This is not the first time that the MPC minutes have appeared to be at odds with the way in which Mr Carney has presented the inflation report.

The big question households and businesses will now be asking is whether this makes an early rise in Bank rate more likely. The answer is - only slightly.

There is an outside chance that the committee will raise the base rate before Christmas - November would be the likeliest month as Mr Carney would then be able to explain the move at that month's quarterly inflation report press conference - but more likely is that the MPC will wait until February next year.

These latest minutes note that, for most MPC members, there is "insufficient evidence of inflationary pressures to justify an immediate rise in Bank rate".

And that was before the latest figures published on Tuesday showed Consumer Price Index of inflation falling from 1.9% to 1.6% and further away from the Bank's 2% target rate.

Inflation is likely to remain benign in coming months and not least because of the current softness in oil prices.

So a rise in Bank rate early next year, rather than this side of Christmas, remains the way to bet.

12.06 | 0 komentar | Read More

Bank Of America Agrees Record $17bn Settlement

Bank of America has agreed to a record $17bn (£10.2bn) settlement over its sale of mortgage-backed securities in the lead up to the 2008 financial crisis.

The bank will pay $10bn in cash and provide consumer relief valued at $7bn, officials familiar with the deal told the AP news agency.

The settlement is the largest arising from the economic meltdown during which millions of Americans lost their homes to foreclosure.

It also marks the largest settlement in the history of corporate America.

An agreement in principle was reached earlier this month following a conversation between Attorney General Eric Holder and Bank of America CEO Brian Moynihan, the AP reported.

The settlement requires that the bank acknowledge that it made misrepresentations about the quality of its residential mortgage-backed securities, officials said.

It also requires that Bank of America acknowledge similar misrepresentations by Countrywide Financial and Merrill Lynch, which the bank acquired in 2008.

Bank of America and the Department of Justice have declined to comment.

A formal announcement is expected on Thursday.

According to public records, Bank of America, Countrywide and Merrill Lynch issued $965bn (£581bn) in mortgage-backed securities from 2004 to 2008.

The firms promoted the securities as safe investments despite the fact that they contained residential mortgages from borrowers who were unlikely to be able to repay their loans.

The poor quality of the loans led to huge losses for investors and a slew of foreclosures, kicking off the recession that began in late 2007.

The Securities and Exchange Commission last year charged Bank of America and its two subsidiaries with defrauding investors by failing to disclose key risks and misrepresenting facts about the underlying mortgages.

12.06 | 0 komentar | Read More

Inflation Drops More Than Expected In July

The two measures of UK inflation have dropped more than expected in July, prompted by discounting on the high street.

According to official data, the Retail Prices Index (RPI) stood at 2.5% and the Consumer Prices Index (CPI) was 1.6%.

Economists had expected a CPI rate of around 1.8%, after official figures showed a June rate of 1.9%.

CPI now appears to be headed back towards May's figure of 1.5%, which at the time was the lowest level for four-and-a-half years.

Inflation has been below the Bank of England (BoE) 2% target for seven straight months - the first time this has occurred since 2005.

The RPI, which unlike the other measure includes housing costs, was recorded in June at 2.6%.

The Office for National Statistics (ONS) said the biggest contributor to the slowing annual inflation rate was discounting on the high street for clothing and footwear.

This was because retailers held off on price cuts throughout June.

Food and non-alcoholic drinks also fell year-on-year, and the CPI was also eased by falling spirits and wine prices.

The ONS said the average house price in London is now £499,000

Liberal Democrat Chief Secretary to the Treasury Danny Alexander told Sky News: "The fact that inflation has been below the Bank of England target for seven consecutive months shows that subdued inflation is now becoming the norm as the economy recovers.

"Eliminating the deficit fairly, and repairing the UK economy remains central to the role of Liberal Democrats in Government.

"These encouraging inflation numbers should give businesses the confidence they need to deliver the investment required to boost productivity. Rising productivity is the only route to sustainable increases in living standards."

The data comes as commuters learned they would face a 3.5% increase in rail fares next year, which uses the RPI figure plus 1% to calculate increases.

The further drop to the CPI eases pressure on the BoE to hike the 0.5% base rate, which has been at its historic low for the last five years.

Meanwhile, the ONS said UK house prices increased by 10.2% in the year to June, reaching a new high average price of £265,000.

House prices in the capital, however, shot up by 19.3% in the year to June.

It calculated the average house price in London at £499,000, and said that "house prices are increasing strongly across most parts of the UK".

12.07 | 0 komentar | Read More

Ministers Face New Royal Mail Sell-Off Row

By Mark Kleinman, City Editor

Ministers considered selling the Government's entire stake in Royal Mail when the shares were trading close to their post-privatisation peak earlier this year - but decided against doing so because it risked antagonising City investors.

Sky News has learnt that Vince Cable's Department for Business, Innovation and Skills (BIS) and the Shareholder Executive - which oversees state-owned assets - discussed the sale of taxpayers' remaining 30% stake in Royal Mail in March, five months after it listed on the stock market.

By deciding not to press ahead, ministers effectively forfeited a further £500m gain for the public purse.

The disclosure risks reigniting the row over Royal Mail's controversial sell-off, with Mr Cable accused by MPs on the BIS Select Committee and the National Audit Office of costing taxpayers £1bn by pricing the shares too cheaply last autumn.

At the time the sale of taxpayers' remaining 30% shareholding was discussed in mid-March, the postal operator's shares were trading at around 590p, meaning that a sale would have generated close to £1.8bn.

Selling the shares at that point would have entailed breaking a lock-up agreement put in place at the time of the company's initial public offering (IPO) last October, under which the Government pledged not to sell any further shares for at least 180 days.

However, such lock-ups include scope for exemptions with the consent of the underwriting banks and are frequently broken by listed companies, meaning it would have been possible for ministers to sanction the early sale of the shares.

Critics argue that alienating institutional investors should not have been a preoccupation for ministers after some of the so-called 'priority investors' allocated shares during the privatisation sold them almost immediately, despite having been identified as long-term shareholders.

By the time the lock-up agreement expired on April 13, Royal Mail shares had fallen by approximately 20% from their mid-March level to around 490p.

With the shares having declined since then by a further 11%, ministers risk being accused of sacrificing a potential £500m gain by not having sold the 30% shareholding when it was under active consideration.

In a statement, a BIS spokesperson said: "Ministers receive regular advice on Government shareholdings of which Royal Mail is one.

"As is standard market practice, Government gave a commitment at the time of the IPO not to sell any further shares for 180 days post admission to the [London Stock Exchange] in order to provide the company with greater stability.

"The Secretary of State was never advised to break this lock-up period."

Chuka Umunna, the shadow business secretary, said the disclosure offered further evidence that the privatisation of Royal Mail had been "botched".

 "The handling of this since they bungled the IPO has been characterised by incompetence and attempted buck passing that will fool no-one," he said.

The sale of the Government's remaining Royal Mail shares is now considered unlikely before the General Election next May.

Sky News has also learnt that Labour is expected to include a commitment to retain the stake in its election manifesto.

The issue was discussed at the Party's recent National Policy Forum and will be debated at its autumn conference next month.

"The Tories have put the future of the postal service at risk. They pressed ahead with an unnecessary fire sale of Royal Mail, in the process short-changing taxpayers by hundreds of millions of pounds," a Labour spokesman said.

"As part of Labour's commitment to ensuring that the public interest in Royal Mail is upheld, the National Policy Forum discussed how Labour will commit to keeping the remaining stake in public ownership.

"These proposals will be discussed at Annual Conference as part of Labour's priority to safeguard the services consumers and businesses get from a privatised Royal Mail."

12.07 | 0 komentar | Read More

Airlines Warned Over Iceland Volcano Eruption

The aviation industry has been warned about the possibility of flight disruptions caused by activity at Iceland's largest volcano system.

Intense seismic tremors have been recorded at Iceland's Bardarbunga volcano for the past three days, although there are no signs yet of an eruption.

The country's Met Office has raised the risk level to the aviation industry to orange - the fourth level on a five-level scale.

More than 10 million people were affected by the 2010 eruption

The Met Office said in a statement that the strongest earthquake in the region since 1996 was recorded early on Monday.

"As evidence of magma movement shallower than 10km (6.2 miles) implies increased potential of a volcanic eruption, the Bardarbunga aviation colour code has been changed to orange," the statement said.

"Presently there are no signs of eruption, but it cannot be excluded that the current activity will result in an explosive sub-glacial eruption, leading to an outburst flood and ash emission."

In 2010 an ash cloud caused by the eruption of Iceland's Eyjafjallajokull volcano shut down much of Europe's airspace for six days.

More than 10 million people were affected by the disruption.

Bardarbunga is Iceland's largest volcanic system. It is located under the ice cap of the Vatnajokull glacier, in the country's south-west.

Met Office seismologist Martin Hensch said the risk of any disruptive ash cloud similar to the one in 2010 would depend upon several factors, including how high any ash coming from the volcano would be thrown.

He added that the biggest risk in Iceland would be caused by flood waves from an eruption beneath the glacier.

12.07 | 0 komentar | Read More

Gender Pay Gap Continues To Widen For Women

Women in management position still earn significantly less than their male counterparts, according to a new report.

The Chartered Management Institute (CMI) said the pay gap is widening and for women in their 40s earnings are more than a third less than men.

The CMI survey of 68,000 managers across the UK showed there was a £9,000 pay differential, equivalent to 23%, which increased as women got older.

It added that annual bonuses for female directors were also lower, by £11,000, at slightly below £42,000.

As a result of the disparity, a woman must work 14 years longer over a lifetime to earn the same amount of money, the report said.

CMI chief executive Ann Francke said: "Lower levels of pay for women managers cannot be justified, yet our extensive data shows the pay gap persists, with many women hit by a mid-life pay crisis.

"Women and men should be paid on the basis of their performance in their particular roles, but this is clearly not yet the case for far too many.

"It's not right that women would have to work until almost 80 for the same pay rewards as men.

The CMI said it is not acceptable to use raising children or "time served" as excuses for the gap.

XpertHR head of salary surveys Mark Crail, who helped with the study, said: "The data shows that women begin to fall behind at the age when they are most likely to be starting a family, and it just gets worse from then on.

"It appears that employers often give up on women in mid-career and are missing out on a huge pool of untapped knowledge, experience and talent."

12.06 | 0 komentar | Read More

Lastminute Owner Eyes Sale Of UK Dotcom Icon

By Mark Kleinman, City Editor

Lastminute.com, one of the icons of the original dotcom boom, is being put up for sale nearly a decade after its takeover by an American technology giant.

Sky News has learnt that Sabre Holdings, which is listed in New York, is exploring plans to offload Lastminute.

Sabre has appointed bankers at Houlihan Lokey, an advisory firm, to oversee an auction, and has already begun sounding out potential buyers.

A sale of Lastminute could still be aborted if the terms of a deal are not sufficiently attractive to Sabre, but sources said on Saturday that the US company was prepared to accept a substantial loss on the roughly £600m it paid in 2005.

Prospective buyers could include private equity firms or rival online travel groups such as Expedia.

Sabre has itself listed on the public markets, floating on Nasdaq in April with a valuation of nearly $4bn.

It has four main divisions, with Lastminute operating as a subsidiary of Travelocity, Sabre's group of travel e-commerce businesses.

Lastminute was one of the darlings of the early UK internet industry, floating in 2000 two years after being founded by Brent Hoberman and Martha - now Baroness - Lane Fox.

However, Lastminute's performance has been underwhelming, despite it continuing to spend substantial sums on marketing and advertising.

Its biggest market shares are in the UK and France but it has struggled to make an impact elsewhere in Europe.

Analysts say that Travelocity failed to integrate Lastminute effectively or to build the network of hotels or other partners to which it has access during a period when some rivals have expanded aggressively.

Mr Hoberman has also criticised Sabre's exploitation of the Lastminute brand, calling it "an under-utilized asset" last year.

A Sabre spokeswoman said in a statement: "We are always reviewing options to make our technology company as successful, relevant and innovative as possible.

"If we have news to share, we commit to doing so quickly and transparently."

12.06 | 0 komentar | Read More

Wall Street Giants Swoop On Sub-Prime Lender

By Mark Kleinman, City Editor

Two giants of Wall Street are in advanced talks to acquire Kensington, one of the UK's biggest sub-prime mortgage lenders.

Sky News has learnt that divisions of Blackstone and TPG, the US-based private equity groups, are close to securing a takeover of Kensington, which is owned by the Anglo-South African financial services provider Investec.

The sale of Kensington has not yet been finalised and could yet fall apart, but insiders said a deal was likely to be announced this week.

If completed, it will involve the business being taken over by Blackstone's Tactical Opportunities unit and TPG's TSSP special situations and credit platform.

Blackstone are thought to have seen off three other bidders

The two firms are understood to see significant opportunities to grow Kensington's business and are expected to make substantial amounts of capital available for it to do so.

They are said to have lined up a new management team to take the helm once the deal completes.

Investec's £283m takeover of Kensington in the summer of 2007 proved to be an ill-timed foray into the market for sub-prime mortgage lending, coming just as financial markets began to seize up.

Kensington was previously a publicly-listed company whose former chief executives include John Maltby, who is now leading an investment consortium which is buying a stake in 315 Royal Bank of Scotland branches.

Investec, which is the main sponsor of the England cricket team, signalled its intention to sell Kensington in February.

Blackstone and TPG are understood to have seen off competition from at least three other bidders for the business, one of which was said to be Lonestar, a specialist US property investor.

"With the ongoing recovery in mortgage lending and wholesale funding markets we believe that Kensington is now well placed to continue growing and that this growth potential may be better realised under different ownership," Stephen Koseff, chief executive of Investec, said at the start of the auction process.

Analysts say the bank should recoup the majority of its initial outlay, with Kensington's recent performance aided by the strength of the UK housing market.

The auction of Kensington, which is being handled by Fenchurch Advisory, comes amid increasing signs of an overheating housing market in London and the south-east.

Some of the UK's biggest banks have imposed fresh limits on mortgage lending in the capital in recent months.

Blackstone, TPG and Investec declined to comment.

12.06 | 0 komentar | Read More

UK Growth Hits Fastest Annual Pace Since 2007

The annual rate of UK economic growth has been revised upwards to 3.2% - its fastest pace since the end of 2007.

The announcement was made by the Office for National Statistics (ONS) as it confirmed GDP growth of 0.8% in the second quarter of the year.

While that figure represented no change on its original estimate, the ONS said it had measured a stronger performance in the construction sector than previously calculated in its wider revisions.

It confirmed that the service sector - which makes up more than 75% of GDP - remained the main driver of Britain's economy between April and June, expanding by 1%.

Much of this has been attributed to consumer spending despite huge pressure on budgets because of weak wage growth - a situation that had been tipped to ease during 2014 but has worsened again in recent months.

The ONS confirmed on Wednesday that wages shrank at an annual rate of 0.2% in the second quarter while the main measure of inflation rose to 1.9%, meaning the gap between wages and price rises was widening further.

The Bank of England has now made the weak pay issue a core factor in its discussions over the timing of an interest rate rise.

The UK's resilient GDP growth is in sharp contrast to economic fortunes in the euro area.

It was confirmed on Thursday that Germany's GDP was in decline and French growth was stagnating.

Chief UK economist at Citigroup, Michael Saunders, told Sky News he was not overly concerned that the woes being experienced by the country's biggest trading partners would damage the UK's recovery.

He said the suro had been "in economic terms, something of a zombie for a number of years now" and backed calls from France for the European Central Bank (ECB) to provide stimulus.

"The ECB will eventually get around to QE (quantitative easing) - five years too late - I think they're going to do it in the next couple of quarters and that will give some boost but it really is a sad story of multiple policy failures in the euro area," he said.

"Even if it gets a bit better I don't think it will get a lot better in the euro area."

12.06 | 0 komentar | Read More

Lastminute Owner Eyes Sale Of UK Dotcom Icon

By Mark Kleinman, City Editor

Lastminute.com, one of the icons of the original dotcom boom, is being put up for sale nearly a decade after its takeover by an American technology giant.

Sky News has learnt that Sabre Holdings, which is listed in New York, is exploring plans to offload Lastminute.

Sabre has appointed bankers at Houlihan Lokey, an advisory firm, to oversee an auction, and has already begun sounding out potential buyers.

A sale of Lastminute could still be aborted if the terms of a deal are not sufficiently attractive to Sabre, but sources said on Saturday that the US company was prepared to accept a substantial loss on the roughly £600m it paid in 2005.

Prospective buyers could include private equity firms or rival online travel groups such as Expedia.

Sabre has itself listed on the public markets, floating on Nasdaq in April with a valuation of nearly $4bn.

It has four main divisions, with Lastminute operating as a subsidiary of Travelocity, Sabre's group of travel e-commerce businesses.

Lastminute was one of the darlings of the early UK internet industry, floating in 2000 two years after being founded by Brent Hoberman and Martha - now Baroness - Lane Fox.

However, Lastminute's performance has been underwhelming, despite it continuing to spend substantial sums on marketing and advertising.

Its biggest market shares are in the UK and France but it has struggled to make an impact elsewhere in Europe.

Analysts say that Travelocity failed to integrate Lastminute effectively or to build the network of hotels or other partners to which it has access during a period when some rivals have expanded aggressively.

Mr Hoberman has also criticised Sabre's exploitation of the Lastminute brand, calling it "an under-utilized asset" last year.

A Sabre spokeswoman said in a statement: "We are always reviewing options to make our technology company as successful, relevant and innovative as possible.

"If we have news to share, we commit to doing so quickly and transparently."

12.06 | 0 komentar | Read More