Companies plead with Mark Carney to not raise interest rates 

Businesses have issued last-ditch appeals for that Bank of England to not raise rates of interest now, claiming a mix of weak growth and greater borrowing costs would tip battling retailers into insolvency. 

Mark Carney a few days ago faced pressure from business lobbies to help keep rates at in the past lower levels to aid consumer spending and company investment. The Financial Institution is broadly likely to raise rates the very first time inside a decade on Thursday.

The British Chambers of Commerce cautioned that the rate rise may be the “tipping point” that crashes business confidence and investment.

“It is fairly remarkable, considering that economic the weather is slowing, that we’re speaking about rate of interest increases,” stated Suren Thiru, a BCC economist.

The Financial Institution is broadly likely to raise rates the very first time inside a decade on Thursday Credit: PA

Tej Parikh, economist in the IoD, advised Mr Carney to hang about until progress is made within the Brexit negotiations. “There isn’t enough clearness on the way for economic growth yet. Several things have to be fleshed out when it comes to Brexit negotiations,” he stated.

Mr Parikh stated firms would face ­extra pressure from the rate rise his or her customers were already battling and could be extended by rising borrowing costs. Research from restructuring specialists R3 captured demonstrated 79,000 companies believed they’d be not able to pay back their financial obligations following a small increase in rates.

As European Central Bank Eases Emergency Measures, Risks May Lurk

FRANKFURT — The Ecu Central Bank started dismantling on Thursday a decade’s price of emergency measures that helped to help keep the eurozone from disintegrating throughout the economic crisis.

The bank’s action, following a meeting of their Governing Council, highlights the eurozone economy’s astonishing renaissance. However it may also expose weaknesses over the region — and possibly even provoke a brand new bout of monetary discord.

That’s the difficulty the central bank faces. Nobody knows without a doubt what uncomfortable surprises may lurk if this begins the entire process of so-known as tapering — removing the simple money that made it feasible for banks to lend and governments to gain access to despite investors had largely deserted them throughout the worst from the downturn.

The financial institution stated on Thursday it would hold its benchmark rate of interest steady in a historic low of 0 %, but provided a timetable for moving back purchases of presidency and company debt, a kind of virtual money-printing referred to as quantitative easing.

It absolutely was buying 60 billion euros, or about $70 billion, of these bonds each month, and can scale that to €30 billion per month for nine several weeks, beginning in The month of january. Which was consistent with analysts’ expectations.

Since early 2015, the financial institution has utilized recently produced money to purchase bonds along with other assets more vital than €2 trillion — an amount roughly comparable to the annual economic creation of India.

As that tide of money recedes, the risks that lurked underneath the surface can come into view. Their email list is lengthy. For just one, Italian banks continue to be laden with bad loans. Italy’s public debts are excessive the country spends 4 % of their gdp just having to pay interest.

Elsewhere, property prices the german language metropolitan areas like Frankfurt have risen a lot that there’s anxiety about a house bubble. Stock values are in record-high levels and could be past due for any correction. And Britain’s impending exit in the Eu will disrupt the economical order.

Consumers, companies and politicians have become familiar with — some would say spoiled by — low interest.

The central bank’s benchmark rate of interest is zero, and investors are extremely eager for safe places to place their cash that corporations like Daimler, the German automotive giant, have had the ability to issue bonds that don’t pay interest.

Low interest also have weakened the euro from the dollar along with other currencies, a benefit for exporters whose goods are usually cheaper for foreign customers consequently. The euro will likely rise as financial policy returns to normalcy.

The eurozone economy is humming, but which may be no insurance against another crisis. Such occasions have happened regularly because the world’s economic forces abandoned fixed forex rates in 1973, a current report by analysts at Deutsche Bank stated.

“It would therefore have a huge leap of belief to state that crises won’t continue being a normal feature of the present economic climate,Inches stated the report, which listed the withdrawal of central bank support as you component that might trigger the following meltdown.

To prevent provoking restored turmoil, the ecu Central Bank is moving very carefully.

The central bank’s Governing Council stressed inside a statement on Thursday it “stands ready” to improve the asset purchases as a result of worsening financial conditions or maybe inflation unsuccessful to increase.

“Ideally, the E.C.B. want to announce tapering as noiselessly as you possibly can,Inches analysts at Nederlander bank ING authored inside a note to clients.

Additionally, in the past low interest will stay in position for that near future. The central bank has stated it won’t begin raising rates until it’s stopped buying bonds, and just when the eurozone inflation rates are on the right track hitting the state target of two percent.

Still, some economists fear the finish of nearly free money can come like a shock for many less strong companies, free-spending consumers and excessively in financial trouble governments.

“The success of the relaxed financial course is obvious not at the start, however when it ends,” Jörg Krämer, the main economist of Commerzbank along with a critic of central bank policies, stated inside a note to clients. “There are lots of risks involved, and also the longer the E.C.B. delays before altering course, the higher they become.”

Correction: October 26, 2017

An early on version want to know , misstated the time where the European Central Bank tends to buy €30 billion of bonds each month. It will likely be for nine several weeks beginning in The month of january, not for any twelve month.

Lawrence Summers: One further time on who advantages of corporate tax cuts

lately stated that Kevin Hassett deserved a failing grade for his “analysis” projecting the Trump administration proposal to lessen the organization tax rate from 35 to twenty percent would enhance the wages of the average American family between $4,000 to $9,000. I selected harsh language because Hassett had, for which appeared like political reasons, impugned the integrity of individuals like Len Burman and Gene Steuerle who’ve devoted their lives to honest rigorous look at tax measures by calling the work they do “scientifically indefensible” and “fiction.” Since there has been a number of comments around the financial aspects of corporate tax reduction, some additional discussion appears warranted.

Case study from Hassett, chief from the White-colored House Council of monetary Advisors (CEA), depends on correlations between corporate tax rates and wages far away to reason that a decline in the organization tax rate would boost returns to labor very substantially. Possibly unintentionally, the CEA ignores our very own historic experience of their analysis. As Frank Lysy noted, the organization tax cuts from the late 1980s didn’t lead to elevated real wages. Really, real wages fell. This is also true within the Uk, as highlighted by Kimberly Clausing and Edward Kleinbard. These examples feel much more highly relevant to the organization tax issue analysis than comparisons to small economies and tax havens like Ireland and Europe where the CEA relies.

There’s been lots of backwards and forwards, but particularly nobody has defended the $4,000 claim like a “very conservatively believed lower bound,” not to mention endorsed the plausibility from the $9,000 claim. Actually, the Wall Street Journal op-erectile dysfunction page printed two very positive versions of the items the wage increase might be, that have been below CEA’s lower bound.

Casey Mulligan and Greg Mankiw also don’t defend CEA’s figures, but do utilize simple academic abstract models that don’t capture the reasons of the policy situation to reason that wage increases might be bigger compared to tax cut. The inadequacy of the analyses illustrate why well-resourced, team-based institutions having a strong culture of focus on detail such as the Congressional Budget Office, the GAO, the Joint Tax Committee Staff or even the Tax Policy Center are extremely important.

Mankiw’s blog is really a fine little bit of economic pedagogy. It asks students to gauge the outcome of the corporate rate reduction on wages inside a so known as “Ramsey” model or equivalently in a tiny fully open economy, with perfect capital mobility. Despite these assumptions, he doesn’t get solutions in the plethora of the CEA’s estimates.

Like a device for motivating students to learn to manipulate oversimplified academic models, Mankiw’s blog is terrific as you would expect from your outstanding economist and one of the main textbook authors of his generation. As helpful tips for the results from the Trump administration’s tax cut, I don’t believe it is very useful for 3 important reasons.

First, a decline in the organization tax rate from 35 to twenty percent in the existence of expensing of considerable or total investment has hardly any effect on the motivation to take a position. Think of the situation of full expensing. If your clients are allowed to subtract all its investment costs after which is taxed on all its investment profits, the tax rate doesn’t have impact whatsoever around the investment incentive. If investments are financed partly with deductible interest, as could be true even underneath the Trump plan (where expensing could be total), a decrease in the organization tax rate could easily lessen the incentive to take a position.  Mankiw assumes unconditionally that capital lasts forever and firms take no depreciation and interact in no debt finance.  This isn’t the planet we reside in.

Second, neither the Ramsey model nor the little open economy model is really a reasonable approximation for that world we reside in. Within the Ramsey model, savings are infinitely elastic, therefore the real rate of interest always returns with a fixed level. Actually, real rates of interest vary vastly through space and time, and generations of monetary research reveal that the savings rate instead of being infinitely responsive to interest rates are almost entirely insensitive towards the rate of interest.

The U . s . States isn’t a small open economy. Whether it were, the result of the effective investment incentive will be a major rise in the trade deficit as capital inflows forced an excessive amount of imports over exports. I suppose President Trump a minimum of feels that the greatly augmented trade deficit is harmful to American workers.

Third, a large decline in the organization rate does not occur in isolation like a break for brand new investment.  Mankiw’s model doesn’t recognize the potential of monopoly profits or returns to intellectual capital or any other ways that a company tax cut benefits shareholders without encouraging investment. This means either increases in other taxes or enlarged deficits, each of which have negative effects on households. Additionally, it implies that capital moves from the noncorporate sector in to the corporate sector, looking after hurt workers within the noncorporate sector.

Mulligan accuses me of rejecting the outcomes of my 1981 paper on Q Theory that they states like and educate. I’m flattered he appreciates my paper, but am fairly confident he draws the incorrect conclusions from this.

One central facet of this paper was very good the corporate tax rates are, unlike Mulligan and Mankiw’s assumption, not really a sufficient statistic for assessing the outcome from the corporate tax system.  When I described above, the paper emphasizes that to look at the outcome of the corporate tax change, it’s important to construct in assumptions about depreciation allowances, debt finance and so on, even when they are being held constant. If Mulligan did this, he’d obtain a completely different answer.

The primary reason for my paper, which Mulligan entirely ignores, was that due to slow adjustment costs, the outcome of tax changes was felt mainly on asset prices for any lengthy time. This resulted in as my paper demonstrated, the main impact of the corporate tax cut is always to raise after-tax profits and the stock exchange. Therefore, when i noted, mainly benefits wealthy individuals. Observe that just because a corporate rate cut benefits investments already made, this conclusion doesn’t rely on assumptions about depreciation allowances and so on that are essential for new investment.

Mulligan also does not notice that a company rate cut benefits capital and hurts labor outdoors the organization sector since it draws capital from the noncorporate sector, raising its marginal productivity and reducing those of labor. It is a fact when the organization sector is small, this effect is small when it comes to return, but by assumption it’s large as a whole since it pertains to a sizable volume of capital and labor.

It’s important to note that Ray Kotlikoff and Jack Mintz’s reaction to criticisms from the Trump tax plan is affected with exactly the same deficiencies as Mulligan’s. The authors include no corporate tax detail, no recognition from the impact from the tax proposal on asset prices, with no management of your budget effects of tax cuts.

The most recent boldest little bit of claim inflation concerning the goverment tax bill originates from the company Roundtable: “a competitive 20 % corporate tax rate could increase wages sufficient to aid 2 million new jobs.” This could, along with job growth forecasted even even without the a company rate cut, go ahead and take unemployment rate well below 3 %! I’d be very interested to determine the actual analysis.  I’d be amazed if it’s convincing.

Undoubtedly the greatest quality assessment of corporate tax issues continues to be supplied by Jane Gravelle, writing underneath the auspices from the Congressional Research Service.  It appears at the literature. It sees that the problems are complex and can’t be taken with a single model or regression equation. It doesn’t begin with an item of view. Regrettably it offers little support for claims that corporate rate cuts will raise revenue, assist the middle-class or spur rapid wage growth.

Within my years in government, I offered with 7 CEA chairs — Martin Feldstein, Laura Tyson, Joe Stiglitz, Jesse L. Yellen, Martin Baily, Christy Romer and Austan Goolsbee. I observed these fighting with people in politics within their Administrations because they was adamant that CEA analysis needed to be of the kind that might be respected and validated by outdoors economists. They declined to cheerlead for Administration policies at the fee for their professional credibility. I am unable to imagine them releasing a quote as not even close to the professional mainstream as $4000 to $9000 wage increase from the corporate rate cut claim. Chairman Hassett should with regard to their own credibility, those of the Administration he serves and also the institution he leads, back away.

Inflation hits its highest level in five-and-a-half years; MPC right to cut interest rates after Brexit vote says Carney

  • Inflation rises to 3pc, its highest level in five-and-a-half years; the increase will crank up the pressure on the Bank of England to hike interest rates next month to curb inflation
  • RPI remains at its highest since 2012; business rates will jump by 3.9pc next April as a result
  • Sterling sinks as Mark Carney speaks at a select committee; the pound falls 0.7pc against the dollar to below $1.32
  • FTSE 100 nudges higher as the pound retreats; theme park owner Merlin nosedives 20pc after a “difficult” summer of trading, blaming terrorism and bad weather

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Virgin Money insists its credit card business is safer than the bigger banks

Virgin Money chief executive Jayne-Anne Gadhia

Virgin Money has insisted it has a safer credit card business than Britain’s big banks, amid growing fears over ballooning consumer credit.

The challenger bank’s chief executive Jayne-Anne Gadhia told analysts today the company had conducted its own “extreme” in-house stress test of its expanding credit card book and found in a downturn it would face fewer problems than its peers.

Last month the Bank of England warned lenders they risked losing as much as £30bn on personal lending if the economy took a turn for the worse, with as much as a quarter of credit cards defaulting.

But Ms Gadhia said Virgin’s own credit card business – which has grown balances to £2.9bn – would fare better than its peers.

Read Iain Withers’ full report here


Dow Jones on course for another record finish; US industrial production rebounds

The Dow Jones has nudged up 0.1pc

US markets have opened and the Dow Jones has nudged up into positive territory, leaving it on course for another record finish. 

The index has been dragged up by UnitedHealth’s 4.8pc jump on hopes that a decline in medical costs at the health insurer could boost full-year figures.

There’s a bit of economics data to update you with from the States this afternoon. 

Industrial production growth bounced back in September to rise by 0.3pc after being disrupted by hurricane season the previous month. 

Paul Ashworth, chief US economist, said there were still “signs of disruption evident last month, leaving scope for a much bigger rebound in production in October”.

He added:

“Overall, with global trade and economic growth booming and the dollar still down substantially from its peak early this year, the outlook for US manufacturing looks bright. That optimism comes through in the upbeat survey evidence. As a result, we expect solid gains in manufacturing output in the fourth quarter.”


Revolution Bars suitor leaves empty handed as investors reject £100m bid

Investors have left Revolution Bars shaken after rejecting a cash offer for the company

Shares in Revolution Bars dropped as much as 8pc after a second potential suitor in two weeks was left unable to secure a deal.

Stonegate, the owner of the Slug & Lettuce chain, had bid 203p a share for its rival, valuing the chain at £100m. But it failed to secure shareholder support for its cash offer, sending the target’s shares down to 176p.

Owners of just 60pc of Revolution’s shares voted in favour of the Stonegate bid at each of the two separate Court and General meetings held by the company to allow investors to express their view on the deal.

To be successful, the bid needed 75pc of shareholders to vote in favour.

Read Bradley Gerrard’s full report here


Asos profits double as overseas growth offsets weak pound

Asos makes two thirds of its sales overseas

Asos profits have doubled in the past year as the online retailer’s rampant overseas expansion allowed it to storm past its struggling British high street rivals.

The fashion site has delivered a 145pc jump in pre-tax profits to a record £80m while group sales have surged by 33pc to £1.9bn in the year to August 31.

Asos’ upbeat numbers are partly down to the rapid consumer shift from traditional bricks and mortar shopping to clicks on mobile devices. This has resulted in the online fashion market growing at twice the rate of the overall fashion sector over the last five years.

However, Nick Beighton, Asos boss, said that it was “not enough to just be online”. He added: £There has been a continual channel shift as twentysomethings use their mobile phones, but you can’t just be digital, you’ve got to be selling what people want to buy.”

Read Ashley Armstrong’s full report here


Pearson stems decline in key US market

Pearson chief executive John Fallon is under pressure

The troubled education giant Pearson has suffered a further decline in its core American textbook business in the third quarter but avoided its worst fears, to the relief of investors.

On the back of a string of profit warnings, Pearson said the improved trend meant it could narrow its full-year profit forecast to the upper end of the range.

The company, which has cast off media assets such as the Financial Times to focus on education in recent years, now expects a minimum adjusted operating profit of £576m. The previous lowest prediction was £546m.

The improvement reflects a 5 percentage point cut to Pearson’s expected tax rate for the year to 16pc following the “favourable outcome of certain historical tax issues”.

Read Christopher Williams’ full report here


Inflation hits 3pc as cost of living squeeze intensifies 

Prices jumped by 3pc in the past year, the fastest rise in more than five years as imported inflation and higher energy prices pushed up the cost of living.

Food prices climbed as inflation in staples such as bread, rice and meat accelerated in September, while transport costs also rose as petrol became more expensive.

Computer games and theatre tickets also dragged up the consumer price index, the Office for National Statistics said.

Read Tim Wallace’s full report here


Carney grilling ends

Bank of England governor Mark Carney

Final question is about the gender pay gap and he replies that the gap is 24pc on a median basis at the Bank of England and 21pc on mean basis.

He says they are in the middle of a deliberate strategy of changing this at the central bank.

And with that, it’s over. Nothing much new there to be perfectly honest. He defended, as he always does, quantitative easing and the interest rate cut taken shortly after the Brexit vote while also allaying fears about ballooning household debt.

Sterling took a bit of a battering during that appearance, sinking 0.7pc to below $1.32 against the dollar and 0.3pc against a basket of the leading currencies.


Carney on QE: We’re clean and not addicted

We’ve move onto quantitative easing and Mr Carney is given a quote comparing it to heroin.

Extending the metaphor, he replies: “We’re clean and not addicted to QE or will go through withdrawal symptoms.”

He adds that the Bank of England will not just unwind for fun and prove a point, adding that the central bank will observe the Fed’s balance sheet unwinding programme.


Household debt only requires macro-prudential response

When asked if he is too relaxed on household debt, Mr Carney says that the Bank of England is taking action on household debt but to an appropriate degree. It only merits a macro-prudential response, adding that “we’re never relaxed about anything”. 

On Government fiscal policy, he says that he will not and cannot give his opinion and when asked if Help to Buy has pushed up house prices, Mr Carney says that it hasn’t had a multiplier effect on supply.


Carney: We shouldn’t take the lead on Brexit from the markets

Moving onto household debt, Mr Carney is relatively upbeat. He explains away fears of a car finance bubble and says that the quality of “borrowers has gone up substantially”. 

We shouldn’t take the lead from the markets on Brexit given its complexity, he adds. It matters more how households and businesses react.


New BoE policymakers lean on the dovish side

New deputy governor Sir Ramsden is not ready to vote for an interest rate hike

I missed new Bank of England policymakers Silvana Tenreyo and Sir Dave Ramsden’s grillings this morning but fortunately Reuters was watching. Here’s what happened:

New Bank of England rate-setter Silvana Tenreyro said she was not ready to vote to raise the Bank’s record low interest rates in November although she might do so in the coming months if inflation pressure builds in Britain’s labour market.

“My view is that we are approaching a tipping pint at which it would be necessary or justified to remove some of that stimulus,” she told British lawmakers on Tuesday.

New deputy governor Dave Ramsden said he was not close to voting for an interest rate hike, raising some questions for investors about when the BoE would make its widely expected first hike in more than a decade. 

Deputy Governor Dave Ramsden said he was not part of the majority of BoE policymakers who believe a rate hike is likely to be needed “in the coming months” because he saw little sign of inflation pressure building in Britain’s labor market.

They’re still questioning Mr Carney but the debate has centered on Brexit on which the governor can’t give many certain answers. They’ve just moved onto household debt. I must admit this select committee is lacking some teeth, he’s having quite an easy ride.


Sterling sinks against the dollar as Carney speaks

Since Mr Carney started speaking the benchmark 10-year Gilt yield has fallen 3.2 basis points to 1.30pc. Meanwhile on the currency markets, against a basket of the leading currencies, the pound has sunk to a 0.2pc loss for the session while against the dollar sterling has slipped 0.6pc to $1.32.

Spreadex analyst Connor Campbell commented on the appearances by MPC members this morning:

“There were conflicting messages from the BoE this Tuesday. The central bank’s newest deputy governor, Sir Dave Ramsden, stated he wasn’t one of the MPC members who said they were close to raising rates last month. In contrast, policymaker Silvana Tenreyro said she would be ‘minded to vote for a bank rate increase’ if the UK’s data justified it.  

“As for head honcho Mark Carney, he dismissed a question from the Treasury Committee asking whether it would be wise to raise borrowing costs in order to give the BoE room to cut in the case of a recession, arguing that it isn’t ‘appropriate or necessary given that policy can move quite nimbly’.”


Carney warns against moving clearing out of London; BoE working on hard Brexit contingency plan

They move onto the subject of clearing and Mr Carney warns against moving clearing out of London, saying that fragmenting European clearing would create costs for the European real economy.

He adds that the Bank of England is working on a contingency plan for a hard exit without any transition period but believes there will be a transition deal.


Carney: Interest rate cut after Brexit was not unnecessary 

Mr Carney disagrees with a select committee member arguing that the interest rate cut after Brexit was unnecessary.

The pound has largely been determined by the prospects of the trade deal with the European Union. It was the markets judgement on how Brexit will affect real incomes. 

That will ruffle a few feathers.

Raising rates now to potentially support the economy later with a cut is not consistent monetary policy, he says to another question.

He also reiterates that the MPC believes that a hike in interest rates in the coming months will be appropriate.


Watch Mark Carney here


Mark Carney Treasury Committee appearance begins

Bank of England governor Mark Carney has just started his appearance at the Treasury Commitee.

He said that the Bank of England expects inflation to peak in October, admitting that it is likely that he will be writing a letter to the Chancellor explaining why inflation is so far from the 2pc target rate.

He emphasises that the effects of monetary policy takes time to feed through, adding that some factors pushing up inflation are out of the central bank’s control such as rising oil prices.


Attention turns to tomorrow’s wage growth reading

All eyes will turn to tomorrow’s wage growth reading, which is expected to remain flat and lag far behind inflation at 2.1pc. Back to the reaction to today’s figures.

Capital Economics’ UK economist Paul Hollingsworth believes that the Bank of England “will probably be focussed more on tomorrow’s wage growth figures for any signs that domestic cost pressures are building”.

He added:

“Nonetheless, the fact that this is the last set of inflation figures before the key MPC meeting on 2nd November, they will be a key factor in the Committee’s thinking. What’s more, September’s inflation figures are used for the uprating of some benefits.”

Kate Smith, head of pensions at Aegon, explains how today’s figures affect the Lifetime Allowance:

“This month inflation figures are uniquely important because they are used by the government to calculate the rise in the Lifetime Allowance (LTA) for the first time. The increase for the LTA in 2018/19 will be £1,030,000 based on today’s figures, and following a series of reductions it is welcome that the base-level is set to start growing again, even if on the surface the numbers aren’t large.

“Despite being small, this is a complex area, so those affected should seek financial advice to make sure their pension is protected from additional tax charges”

A quick sitrep on the pound. Sterling has nudged a little further down against the dollar to a 0.3pc loss for the session at $1.3250 while against the euro it remains 0.2pc higher at €1.1270.


Inflation reaction: Painful squeeze on consumers will ease next year

Inflation will exceed 3pc in October before falling back towards the 2pc target by the end of 2018, according to Pantheon Macro

Just a reminder that Mark Carney and two other Bank of England policymakers are currently appearing in a Treasury Select Committee and we’ll bring you the latest from Parliament as it comes.

Let’s have a look at what the experts made of today’s figures.

Pantheon Macro UK economist Samuel Tombs believes that inflation will slip below 2pc by 2019, meaning that the MPC will be discouraged from raising interest rates more than once in the next 12 months.

He added: 

“Inflation looks set to fall sharply in 2018, now that retailers have nearly completed sterling-related price rises.

“Domestically-generated inflation has remained muted; indeed, inflation in the services sector was just 2.7% in September, well below its 3.7% average in the decade before the recession.”

EY ITEM Club’s chief economic advisor Howard Archer believes that it would take a surprisingly weak earnings figure tomorrow and particularly poor third quarter GDP growth to stop the MPC from lifting interest rates next month.

The painful squeeze on consumers will begin to gradually ease during 2018, he added. 


Inflation key takeaways

  1. Inflation nudged up to 3pc in September, its highest level since April 2012. Inflation remaining far above the Bank of England’s 2pc target rate will crank up the pressure on the central bank to raise interest rates at next month’s Monetary Policy Committee meeting.
  2. The ONS said that rising prices on food and recreational goods along with transport costs were the main factors putting upward pressure on the reading.
  3. RPI remained flat at 3.9pc, an almost six-year high, meaning that business rates (which are determined by today’s figure) will rise substantially next April. This “will be the last straw” for many SMEs, said the Federation of Small Businesses.
  4. The increase in the headline figure was forecast by economists and thus the pound is unchanged following the release, remaining 0.2pc lower against the dollar this morning at $1.3260.

RPI reading will heap more misery on small businesses

Although the Retail Price Index reading came in flat at 3.9pc, a slightly softer figure than economists were expecting, it will heap more misery on small businesses, according to the Federation of Small Businesses.

Today’s RPI reading means that business rates bills will rise by 3.9pc next April and that increase “will be the last straw many” SMEs, its national chairman Mike Cherry said.

He added:

“Today’s RPI figure follows six months of business rates misery for our small business community. Since April’s bruising revaluation we’ve had the staircase tax, introduction of an unworkable appeals platform and chronic delays to the Chancellor’s £435 million relief package. A near four per cent bill increase next April, on top of losing year one transitional caps, will be the last straw for many.

“The Chancellor should give careful consideration to his inaugural Autumn Budget. The last thing our businesses need is new tax increases or loss of entrepreneurial reliefs.”


3pc inflation turns up the heat on the Bank of England; sterling largely unchanged

Mr Carney will not be dusting off the parchment and pen to write the chancellor to explain why inflation has veered so far from the Bank of England’s 2pc target rate and he has done it by the skin of his teeth.

While the rise to 3pc was expected, inflation hitting its highest point in five-and-a-half years will  turn up the heat on the Bank of England’s Monetary Policy Committee. 

The central bank’s policymakers have dropped some very strong hints in the last month or so on raising interest rates but this combined with reasonably solid economics data of late will make it very difficult for the MPC to leave the base rate unchanged in November’s meeting.

Meanwhile on the currency markets, sterling has barely budged an inch after today’s headline CPI figure came in line with economists’ forecast 


Inflation hits a five-and-a-half-year high

Inflation increased to 3pc in September, its highest level in five-and-a-half years. The reading was in line with economists’ forecasts but will crank up the pressure on Bank of England policymakers to raise interest rates at the next Monetary Policy Committee in November. More to follow…


Merlin shares plunge after terror fears hit attractions

Shares in the Legoland owner have plunged today

Shares in the owner of Madame Tussauds and Alton Towers tumbled in early trade as it revealed the impact of recent terror attacks on trading in the UK.

Merlin’s latest trading figures confirmed the hit from terrorist attacks on UK attractions in the peak summer months, which left group like-for-like revenue growth almost grinding to a halt, edging up 0.3pc in the 40 weeks to October 7.

Poor weather across the UK and Northern Europe and extreme weather in Italy and Florida were also to blame, according to Merlin. Shares plunged 19pc to 365p.

Merlin also unveiled a deal to roll out new Peppa Pig attractions worldwide. The agreement with Entertainment One – which owns the rights to the popular children’s cartoon character – is to develop new attractions and themed accommodation based on the pre-school favourite.

Read the full report here


Inflation preview: what the experts say

Let’s have a quick round-up of what the experts are saying ahead of today’s inflation figures.

CMC Markets analyst Michael Hewson explains how Bank of England governor Mark Carney could be put in an embarrassing spot this morning:

“If CPI rises by more than 1% above the banks 2% target Governor Carney will have the unenviable task of having to write to the Chancellor explaining why inflation is above target, and what the Bank intends to do about it.  

“He can’t very well say, well Phil it turns out that rate cut last year wasn’t such a good idea, but don’t worry we’ve got it in hand and we’re going to put rates back to where they were beforehand.”   

It could be a busy day for Mr Carney will all this letter writing and select committees. Although I imagine he’s had that inflation letter saved in his drafts for some time now.

 Spreadex analyst Connor Campbell provided this preview:

“That’s because investors are eagerly awaiting September’s inflation reading, which is set to see the consumer price index finally hit a 5 year high of 3.0%. Such a reading would put even more pressure on the Bank of England to raise rates, though that hawkish urge may be tempered by the continued fall in real wages (set to be confirmed tomorrow) and a sharp month-on-month drop in retail sales (coming on Thursday).  

“For now, however, the pound is focused on inflation. Cable is up 0.1%, though admittedly half a cent away from the $1.33 levels it was tickling on Monday morning, while against the euro sterling has climbed 0.3%.”


Inflation expected to rise to a five-and-a-half-year high

Some have taken Bank of England policymakers’ sudden hawkish turn on interest rates with suspicion but today’s inflation figures are expected to bolster the consensus view that the Monetary Policy Committee will pull the trigger on interest rates next month.

The headline CPI figure is expected to rise to its highest level in five-and-a-half years and make an increase in the central bank’s base rate almost a done deal.

With no inflation report being released in conjunction with the headline CPI figure, there will be no press conference following the release but Mark Carney will be appearing in front of the Treasury Select Committee later today, who I’m sure won’t skirt around the issue.

Today will also be the best opportunity yet to size up the newest members of the MPC,  Silvana Tenreyro and Sir David Ramsden, who will be appearing alongside Mr Carney.


Agenda: Inflation figures dominate markets’ focus; Merlin plunges 20pc on flat revenue growth

It could be a rollercoaster day for Merlin Entertainment shares

UK inflation figures steal the limelight this morning with the headline CPI reading expected to nudge up to 3pc and confirm that the squeeze on UK households has become a little tighter.

If inflation pushes any higher, Bank of England governor Mark Carney will be put in the embarrassing predicament of having to write a letter to chancellor Philip Hammond explaining why the headline reading has strayed so far from the central bank’s 2pc target rate.

Combined with tomorrow’s wage growth reading, today’s figure is expected to crank up the pressure on the BoE’s Monetary Policy Committee to reverse last year’s emergency interest rate cut and push up the base rate to 0.5pc in November’s meeting.

Ahead of the figures, the pound is having a mixed morning on the currency markets, dipping 0.2pc to $1.3265 against the dollar and nudging up 0.2pc to €1.1271 against the euro.

On the retreating FTSE 100, theme park operator Merlin Entertainments has nosedived 20pc after enduring a “difficult” summer of trading. The Thorpe Park owner blamed terrorism and bad weather and admitted that revenue growth for 2017 is now expected to be “approximately flat”.

At the other end, publisher Pearson, which has suffered from a string of profit warnings of late, has popped 7pc after reporting that full-year operating profit will be in the upper end of estimates.

Interim results: B.P. Marsh & Partners

Full-year results: Utilitywise, Bioventix, Orchard Funding, Bellway, ASOS, DotDigital Group, Genedrive

Trading statement: SEGRO,, Merlin Entertainments, Pearson, Mediclinic International, Virgin Money, Evraz, BHP Billiton

AGM: Frontier Developments

Economics: PPI m/m (UK), RPI y/y (UK), CPI y/y (UK), HPI y/y (UK), Import Prices m/m (US) Industrial Production m/m (US), NAHB Housing Market Index (US), ZEW Economic Sentiment (EU), Final CPI y/y (EU)