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Bank of England deputy opposes rate hike, as UK house prices rebound - business live Bank of England deputy opposes rate hike, as UK house prices rebound - business live
(35 minutes later)
10.34am BST
10:34
The news that UK house prices rose by 1.1% this month (but not in London!) has caused plenty of chatter in the City.
Caroline Simmons, Deputy Head of the UK Investment Office at UBS Wealth Management, predicts that prices will only rise modestly over the next year.
“Whilst house price growth bounced back in June the figures still point to a slowing picture overall with annual house price growth now at just 3%. Going forward, recent political uncertainty from Theresa May’s minority government and Brexit negotiations is likely to weigh on consumer confidence, denting UK house sales in the near term. There was a notable decline in new buyer enquiries following the General Election, which we expect to persist over the short term.
“Over the medium-term the picture looks slightly rosier. Structural demand remains supportive given household formation rates and credit conditions remain supportive for house prices. The banks’ increased capital strength and ability to lend, alongside persistently low interest rates aiding home owners’ ability to service mortgages, should continue to support house price growth.
“We are forecasting 2-3% house price growth over the next 12 months.
This chart from Nationwide shows how London is now the second-slowest region for house price growth:
10.01am BST10.01am BST
10:0110:01
Watchdog gets its teeth into UK investment industryWatchdog gets its teeth into UK investment industry
In other news, Britain’s investment industry has been ordered to clean up its game and bring in radical reforms to help savers.In other news, Britain’s investment industry has been ordered to clean up its game and bring in radical reforms to help savers.
The City regulator, the FCA, is demanding that fund managers overhaul their charging structures and improve governance standards, to restore confidence in the sector and give customers a better deal.The City regulator, the FCA, is demanding that fund managers overhaul their charging structures and improve governance standards, to restore confidence in the sector and give customers a better deal.
My colleague Angela Monaghan explains:My colleague Angela Monaghan explains:
To improve competition, the regulator said companies should charge a single “all-in fee”, and make costs and charges more consistent and transparent for investors.To improve competition, the regulator said companies should charge a single “all-in fee”, and make costs and charges more consistent and transparent for investors.
Other measures included a requirement for fund managers to appoint a minimum of two independent directors to their boards.Other measures included a requirement for fund managers to appoint a minimum of two independent directors to their boards.
Shares in Hargreaves Lansdown, the UK’s largest platform for investing in funds, have fallen by 2.5% to the bottom of the FTSE 100 leaderboard this morning. That suggests the City expect the reforms to have some effect. The FCA is also launching a separate investigation of investment platforms. That news hit Hargreaves Lansdown, the UK’s largest platform for investing in funds; its shares have fallen by 2.5% to the bottom of the FTSE 100 leaderboard this morning.
Martin Gilbert, chief executive of Aberdeen Asset Management, has publicly backed the FSA, saying investors deserve better governance and transparent fees.Martin Gilbert, chief executive of Aberdeen Asset Management, has publicly backed the FSA, saying investors deserve better governance and transparent fees.
“I have stated several times that I am in favour of all-in fees including all costs as the industry has an obligation to deliver what the customer wants. Incorporating dealing charges for equity funds should be straightforward particularly for those managers, like ourselves, who have low portfolio turnover.“I have stated several times that I am in favour of all-in fees including all costs as the industry has an obligation to deliver what the customer wants. Incorporating dealing charges for equity funds should be straightforward particularly for those managers, like ourselves, who have low portfolio turnover.
It is more challenging to calculate all-in-fees for bond funds, but I’m encouraged the industry is already looking at ways of doing this. We need to embrace the concept and commit to finding a solution for the best interests of clients.It is more challenging to calculate all-in-fees for bond funds, but I’m encouraged the industry is already looking at ways of doing this. We need to embrace the concept and commit to finding a solution for the best interests of clients.
Here’s a more pithy reaction:Here’s a more pithy reaction:
"the FCA has hit the nuclear button" https://t.co/JzlBPgoX4N"the FCA has hit the nuclear button" https://t.co/JzlBPgoX4N
BREAKING: UK Fund Industry reacts to FCA Asset Management Report pic.twitter.com/0u0nFvbshiBREAKING: UK Fund Industry reacts to FCA Asset Management Report pic.twitter.com/0u0nFvbshi
Updated
at 10.17am BST
9.38am BST9.38am BST
09:3809:38
Hawks vs Doves at the Bank of EnglandHawks vs Doves at the Bank of England
The Bank of England’s next interest rate decision is scheduled for August 3rd.The Bank of England’s next interest rate decision is scheduled for August 3rd.
This will be an exciting vote, but I don’t think there’s enough support for an interest rate hike among the Monetary Policy Committee.This will be an exciting vote, but I don’t think there’s enough support for an interest rate hike among the Monetary Policy Committee.
As things stand, we can expect Ian McCafferty and Michael Saunders to vote for a quarter-point rate rise again (as they both did at June’s meeting)As things stand, we can expect Ian McCafferty and Michael Saunders to vote for a quarter-point rate rise again (as they both did at June’s meeting)
Andy Haldane, BoE chief economist, could also join them, following his hint last week that rates should rise later this year.Andy Haldane, BoE chief economist, could also join them, following his hint last week that rates should rise later this year.
But at least four MPC members are firmly in the no-change camp. Governor Mark Carney planted his flag there last week in his delayed Mansion House speech, and he’s now got Jon Cunliffe with him.But at least four MPC members are firmly in the no-change camp. Governor Mark Carney planted his flag there last week in his delayed Mansion House speech, and he’s now got Jon Cunliffe with him.
It’s also hard to see Ben Broadbent, the other deputy governor, defying Carney.It’s also hard to see Ben Broadbent, the other deputy governor, defying Carney.
Gertjan Vlieghe, the former hedge fund economist, is another likely dove (he’s argued that it’s better to tighten too late than too early).Gertjan Vlieghe, the former hedge fund economist, is another likely dove (he’s argued that it’s better to tighten too late than too early).
That leave the newest member of the MPC, economist Silvana Tenreyro, whose term starts in July. We don’t have many clues about her position.That leave the newest member of the MPC, economist Silvana Tenreyro, whose term starts in July. We don’t have many clues about her position.
One MPC seat is unfilled, following the untimely exit of Charlotte Hogg (she resigned after failing to declare that her brother worked for Barclays).One MPC seat is unfilled, following the untimely exit of Charlotte Hogg (she resigned after failing to declare that her brother worked for Barclays).
If Hogg hasn’t been replaced by August, then there could be a 4-4 split, giving Carney the casting vote.If Hogg hasn’t been replaced by August, then there could be a 4-4 split, giving Carney the casting vote.
UpdatedUpdated
at 9.41am BSTat 9.41am BST
8.56am BST8.56am BST
08:5608:56
Sir Jon Cunliffe has “drawn the battle lines” for August’s monetary policy committee meeting by arguing against an early interest rate rise, says Bloomberg’s Lucy Meakin.Sir Jon Cunliffe has “drawn the battle lines” for August’s monetary policy committee meeting by arguing against an early interest rate rise, says Bloomberg’s Lucy Meakin.
Here’s a flavour of her piece:Here’s a flavour of her piece:
While some members of the BOE’s rate-setting committee have argued that consumer-price inflation of 2.9 percent means an increase in bank rate is required imminently, Cunliffe said that has been driven by the pound’s depreciation since the Brexit referendum and that wage pressures have remained low.While some members of the BOE’s rate-setting committee have argued that consumer-price inflation of 2.9 percent means an increase in bank rate is required imminently, Cunliffe said that has been driven by the pound’s depreciation since the Brexit referendum and that wage pressures have remained low.
Inflation above the 2 percent target is “not a comfortable place,” Cunliffe said in an interview on BBC radio. However, “we do have to look at what’s happening with domestic inflation pressures and on the data we have at the moment, that gives us a bit of time to see how this evolves.”Inflation above the 2 percent target is “not a comfortable place,” Cunliffe said in an interview on BBC radio. However, “we do have to look at what’s happening with domestic inflation pressures and on the data we have at the moment, that gives us a bit of time to see how this evolves.”
#BOE's Cunliffe says domestic price pressures buy time on rates https://t.co/OgPhIGSGEc via @lucy_meakin pic.twitter.com/L5VTmX9QZM#BOE's Cunliffe says domestic price pressures buy time on rates https://t.co/OgPhIGSGEc via @lucy_meakin pic.twitter.com/L5VTmX9QZM
8.33am BST8.33am BST
08:3308:33
London house price growth hits five-year lowLondon house price growth hits five-year low
London house price are now rising at the slowest rate since 2012, says Nationwide.London house price are now rising at the slowest rate since 2012, says Nationwide.
This chart shows how house prices in the UK capital have come off the boil, having outpaced the rest of the country for several years.This chart shows how house prices in the UK capital have come off the boil, having outpaced the rest of the country for several years.
London house prices barely rising, weakest annual growth since 2012 - Nationwide pic.twitter.com/yUQ4TMpTWDLondon house prices barely rising, weakest annual growth since 2012 - Nationwide pic.twitter.com/yUQ4TMpTWD
It’s a remarkable reversal, says Jonathan Hopper, managing director of Garrington Property Finders:It’s a remarkable reversal, says Jonathan Hopper, managing director of Garrington Property Finders:
“First came Britain’s electoral map, then its property map. June has seen them both redrawn.“First came Britain’s electoral map, then its property map. June has seen them both redrawn.
“For London’s house prices to be growing at the second slowest rate in the country would have been unthinkable for much of the past decade.“For London’s house prices to be growing at the second slowest rate in the country would have been unthinkable for much of the past decade.
“Instead growth is now spread much more evenly across the country, with the market fragmenting into a patchwork of smaller hotspots and coldspots.“Instead growth is now spread much more evenly across the country, with the market fragmenting into a patchwork of smaller hotspots and coldspots.
UpdatedUpdated
at 8.36am BSTat 8.36am BST
8.28am BST8.28am BST
08:2808:28
House prices rebound: What the experts sayHouse prices rebound: What the experts say
Jeremy Leaf, north London estate agent, agrees that the rebound in UK house prices in June is “a little surprising”.Jeremy Leaf, north London estate agent, agrees that the rebound in UK house prices in June is “a little surprising”.
He says that current low interest rates helped to push prices up by 1.1% last month, as did is a lack of supply:He says that current low interest rates helped to push prices up by 1.1% last month, as did is a lack of supply:
‘However, looking forward the shortage of supply and lack of housebuilding are certainly two of the factors supporting the market.‘However, looking forward the shortage of supply and lack of housebuilding are certainly two of the factors supporting the market.
These will need to improve if we are going to see more sustainable growth in housing transactions.These will need to improve if we are going to see more sustainable growth in housing transactions.
Neal Hudson of Residential Analysts points out that the housing market had a weak start to the year.Neal Hudson of Residential Analysts points out that the housing market had a weak start to the year.
Nationwide shows stronger house price growth in June after weak springMy current estimate for the change in house prices over 2017 is 1.9% pic.twitter.com/fyywsfrrqKNationwide shows stronger house price growth in June after weak springMy current estimate for the change in house prices over 2017 is 1.9% pic.twitter.com/fyywsfrrqK
Property advisor Pete Wargent agrees that low availability of housing stock is a key factory:Property advisor Pete Wargent agrees that low availability of housing stock is a key factory:
Odd-looking jump in UK house prices, with stock levels low; but other signals suggesting moderation (Nationwide) pic.twitter.com/gcyM26FQUpOdd-looking jump in UK house prices, with stock levels low; but other signals suggesting moderation (Nationwide) pic.twitter.com/gcyM26FQUp
Lucy Pendleton, Founder Director of independent estate agents James Pendleton, warns that the housing market faces four threats:Lucy Pendleton, Founder Director of independent estate agents James Pendleton, warns that the housing market faces four threats:
A gentle slide in prices could continue but it’s got less to do with Brexit and more to do with four factors that can be the Four Horsemen of the Apocalypse for markets - inflation, consumer credit, wage growth and mortgage activity - all of which have been dragging their heels recently.A gentle slide in prices could continue but it’s got less to do with Brexit and more to do with four factors that can be the Four Horsemen of the Apocalypse for markets - inflation, consumer credit, wage growth and mortgage activity - all of which have been dragging their heels recently.
“In May, mortgage approvals hit an eight-month low, wage growth slumped, inflation rose unexpectedly to 2.9%, a near four-year high, and consumer credit also fell dramatically.“In May, mortgage approvals hit an eight-month low, wage growth slumped, inflation rose unexpectedly to 2.9%, a near four-year high, and consumer credit also fell dramatically.
“This combination of factors is not fertile soil for house price growth. What I expect to see from those buyers and sellers who don’t have to come to market right away, is the classic wait-and-see wobble as vendors put off selling, and buyers hold out for better deals.“This combination of factors is not fertile soil for house price growth. What I expect to see from those buyers and sellers who don’t have to come to market right away, is the classic wait-and-see wobble as vendors put off selling, and buyers hold out for better deals.
“It’s this wait-and-see approach that can cause short-term falls to become a bit of a self-fulfilling prophecy but solid demand, particularly in urban areas, will cushion any retreat in prices.”“It’s this wait-and-see approach that can cause short-term falls to become a bit of a self-fulfilling prophecy but solid demand, particularly in urban areas, will cushion any retreat in prices.”
8.24am BST8.24am BST
08:2408:24
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8.09am BST8.09am BST
08:0908:09
UK house prices rebound in JuneUK house prices rebound in June
Now here’s a surprise.... UK house prices have rebounded quite strongly this month, despite a slowdown in London.Now here’s a surprise.... UK house prices have rebounded quite strongly this month, despite a slowdown in London.
Prices rose by 1.1% in June, according to the latest figures from Nationwide, reversing three months of falls. That means the average house costs 3.1% more than a year ago, at £211,301.Prices rose by 1.1% in June, according to the latest figures from Nationwide, reversing three months of falls. That means the average house costs 3.1% more than a year ago, at £211,301.
But Robert Gardner, Nationwide’s Chief Economist, remains caution, saying:But Robert Gardner, Nationwide’s Chief Economist, remains caution, saying:
“The annual rate of house price growth, which gives a better sense of the underlying trend, continues to point to modest price gains. Annual house price growth edged up to 3.1% from 2.1% in May.“The annual rate of house price growth, which gives a better sense of the underlying trend, continues to point to modest price gains. Annual house price growth edged up to 3.1% from 2.1% in May.
In effect, after two sluggish months, annual price growth has returned to the 3-6% range that had been prevailing since early 2015.In effect, after two sluggish months, annual price growth has returned to the 3-6% range that had been prevailing since early 2015.
The figures also show some interesting changes at the regional level. In London, prices have only risen by 1.2% in the last year, while East Anglia has enjoyed 5% house price inflation.The figures also show some interesting changes at the regional level. In London, prices have only risen by 1.2% in the last year, while East Anglia has enjoyed 5% house price inflation.
8.00am BST8.00am BST
08:0008:00
Jon Cunliffe also admitted that the recent surge in inflation, to 2.9%, means the Bank of England isn’t in a “comfortable place” right now.Jon Cunliffe also admitted that the recent surge in inflation, to 2.9%, means the Bank of England isn’t in a “comfortable place” right now.
Bank of England Cunliffe says the MPC is not "in a comfortable place" as civil war rages on the MPC with a clear split in opinions forming. pic.twitter.com/O5IB7UO1WLBank of England Cunliffe says the MPC is not "in a comfortable place" as civil war rages on the MPC with a clear split in opinions forming. pic.twitter.com/O5IB7UO1WL
7.56am BST7.56am BST
07:5607:56
Cunliffe: Now's not the time to raise ratesCunliffe: Now's not the time to raise rates
The split at the Bank of England over when to raise interest rates has widened further this morning, after deputy governor Sir Jon Cunliffe waded in.The split at the Bank of England over when to raise interest rates has widened further this morning, after deputy governor Sir Jon Cunliffe waded in.
Cunliffe has come down firmly in the ‘don’t raise rates yet’ camp, arguing that there’s simply not enough pressure to justify a rate rise.Cunliffe has come down firmly in the ‘don’t raise rates yet’ camp, arguing that there’s simply not enough pressure to justify a rate rise.
With households facing a wage squeeze, Cunliffe argues that inflicting higher borrowing costs would just make the situation worse.With households facing a wage squeeze, Cunliffe argues that inflicting higher borrowing costs would just make the situation worse.
This puts Cunliffe in opposition to at least two other policymakers, and means he’s firmly behind his boss, governor Mark Carney.This puts Cunliffe in opposition to at least two other policymakers, and means he’s firmly behind his boss, governor Mark Carney.
Cunliffe told BBC Radio that:Cunliffe told BBC Radio that:
“[Consumer spending] is slowing as households’ real incomes are squeezed by higher inflation, we expect some of that slowing to be offset by growth in business investment, growth in exports. And I want to see how that plays out.“[Consumer spending] is slowing as households’ real incomes are squeezed by higher inflation, we expect some of that slowing to be offset by growth in business investment, growth in exports. And I want to see how that plays out.
(We) do have to look at what’s happening to domestic inflation pressure, and I think that on the data we have at the moment, gives us a bit of time to see how this evolves.”(We) do have to look at what’s happening to domestic inflation pressure, and I think that on the data we have at the moment, gives us a bit of time to see how this evolves.”
All sensible-sounding stuff.All sensible-sounding stuff.
But just a week ago, chief economist Andy Haldane shocked the markets by revealing that he expects to vote for a rate hike later this year..... Two other policymakers, Ian McCafferty and Michael Saunders, voted to raise rates in June (along with the departing Kristin Forbes).But just a week ago, chief economist Andy Haldane shocked the markets by revealing that he expects to vote for a rate hike later this year..... Two other policymakers, Ian McCafferty and Michael Saunders, voted to raise rates in June (along with the departing Kristin Forbes).
So the next meeting, in August, could be a real humdinger as the hawks and doves trade blows over the state of the UK economy, the inflation threat, and the risks posed by Brexit.So the next meeting, in August, could be a real humdinger as the hawks and doves trade blows over the state of the UK economy, the inflation threat, and the risks posed by Brexit.
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7.30am BST7.30am BST
07:3007:30
The agenda: Central bankers in the spotlight againThe agenda: Central bankers in the spotlight again
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Central bankers are commanding our attention again today. Last night, Federal Reserve chair Janet Yellen gave a rare hostage to fortune by predicting that we’ll probably live out our days without seeing a repeat of the 2008 crisis.Central bankers are commanding our attention again today. Last night, Federal Reserve chair Janet Yellen gave a rare hostage to fortune by predicting that we’ll probably live out our days without seeing a repeat of the 2008 crisis.
Yellen told an audience in London that:Yellen told an audience in London that:
“Would I say there will never, ever be another financial crisis?“Would I say there will never, ever be another financial crisis?
“You know probably that would be going too far but I do think we’re much safer and I hope that it will not be in our lifetimes and I don’t believe it will be.”“You know probably that would be going too far but I do think we’re much safer and I hope that it will not be in our lifetimes and I don’t believe it will be.”
Fed's Yellen expects no new financial crisis in 'our lifetimes' https://t.co/Jj1uL7sNVM pic.twitter.com/IRKVn2IedKFed's Yellen expects no new financial crisis in 'our lifetimes' https://t.co/Jj1uL7sNVM pic.twitter.com/IRKVn2IedK
But do other central bankers agree? We may find out later today, as the European Central Bank holds its annual Forum in Portugal’s Sintra.But do other central bankers agree? We may find out later today, as the European Central Bank holds its annual Forum in Portugal’s Sintra.
Many of the top stars of monetary policy are attending, including ECB president Mario Draghi, the Bank of England’s Mark Carney, Japan’s Haruhiko Kuroda and Stephen Poloz of the Bank of Canada.Many of the top stars of monetary policy are attending, including ECB president Mario Draghi, the Bank of England’s Mark Carney, Japan’s Haruhiko Kuroda and Stephen Poloz of the Bank of Canada.
Yesterday, the Bank of England ordered UK banks to hold more capital in case of a consumer debt crisis. Today, we find out how British house prices are holding up in the face of Brexit uncertainty.Yesterday, the Bank of England ordered UK banks to hold more capital in case of a consumer debt crisis. Today, we find out how British house prices are holding up in the face of Brexit uncertainty.
We’re also getting new US trade figures.We’re also getting new US trade figures.
On the corporate front, electricals retailer Dixons Carphone and packaging giant Bunzl are reporting financial results.On the corporate front, electricals retailer Dixons Carphone and packaging giant Bunzl are reporting financial results.
And Britain’s financial watchdog, the FCA, is releasing a report into UK fund management industry. We’ll dig through the key points.And Britain’s financial watchdog, the FCA, is releasing a report into UK fund management industry. We’ll dig through the key points.
The agenda:The agenda:
7am BST: Nationwide house prices (details to come shortly!)7am BST: Nationwide house prices (details to come shortly!)
1.30pm BST: US trade figures for May1.30pm BST: US trade figures for May
2.30pm: BST: Central bank chiefs panel with Mark Carney, Mario Draghi, Haruhiko Kuroda and Stephen Poloz in Sintra2.30pm: BST: Central bank chiefs panel with Mark Carney, Mario Draghi, Haruhiko Kuroda and Stephen Poloz in Sintra
UpdatedUpdated
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