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You can find the current article at its original source at https://www.theguardian.com/business/live/2017/oct/17/uk-inflation-wage-squeeze-mark-carney-bank-of-england-live
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| Bank of England's Mark Carney says inflation hasn't peaked yet after hitting 3% today - business live | Bank of England's Mark Carney says inflation hasn't peaked yet after hitting 3% today - business live |
| (35 minutes later) | |
| 2.51pm BST | |
| 14:51 | |
| The outlook for US manufacturing looks upbeat even if the recent hurricanes have a negative effect on the short term figures, reckons James Knightley, chief international economist at ING Bank. Following the industrial production figures, he said: | |
| US Industrial production rose 0.3% month on month, in line with expectations. A two-tenths upward revision to August was also announced (-0.7% versus -0.9% originally reported). | |
| The details show that manufacturing output rose 0.1% month on month, utilities grew 1.5% month on month while mining was up 0.4% month on month. The Federal Reserve had suggested in advance of the report’s publication that the data would be liable to revision given a lack of information on which operations were back up and running after Hurricane Harvey while Hurricane Irma will have had a depressing effect on figures from Florida. | |
| Nonetheless, the outlook remains positive with manufacturing set to strengthen in coming months. The domestic story is encouraging with the ISM manufacturing headline figure at a 13 year high while the softer dollar (relative to last year) and strengthening foreign demand should support exports. Meanwhile, mining output should gradually move higher given rising oil prices and rig counts. Consequently, we look for the sector to make a meaningful contribution to fourth quarter GDP even if it has disappointed in third quarter through the hit from the storms. | |
| 2.47pm BST | |
| 14:47 | |
| Over in the US, industrial production for September has edged up in line with forecasts. | |
| It rose 0.3% compared to a decline of 0.7% in August, itself revised up from an initial 0.9% fall. | |
| #UnitedStates Industrial Production month-on-month at 0.3% https://t.co/d2vCgluAuV pic.twitter.com/hMBHGW6Noq | |
| On Wall Street, the Dow Jones Industrial Average has added around 15 points or 0.07% in early trading to a new record high. The S&P 500 slipped 0.5 points at the open, while the Nasdaq Composite dipped 3.44 points. The uncertain start came despite reasonable results from investment banking giants Goldman Sachs and Morgan Stanley. | |
| Updated | |
| at 3.08pm BST | |
| 2.38pm BST | 2.38pm BST |
| 14:38 | 14:38 |
| The pound is down around 0.5%, partly on the downbeat Brexit comments from the OECD and Bank of England governor Mark Carney. It has also been affected by Carney saying interest rates would rise in the months ahead, which was taken to mean not necessarily in November as expected, as well as dovish remarks from other members of the Bank’s monetary policy committee. | The pound is down around 0.5%, partly on the downbeat Brexit comments from the OECD and Bank of England governor Mark Carney. It has also been affected by Carney saying interest rates would rise in the months ahead, which was taken to mean not necessarily in November as expected, as well as dovish remarks from other members of the Bank’s monetary policy committee. |
| The fall in sterling has given a lift to the FTSE 100, which has a large number of exporters who benefit from a weaker pound. The leading index is currently up 20 points or 0.28%. | The fall in sterling has given a lift to the FTSE 100, which has a large number of exporters who benefit from a weaker pound. The leading index is currently up 20 points or 0.28%. |
| Updated | Updated |
| at 2.39pm BST | at 2.39pm BST |
| 2.28pm BST | 2.28pm BST |
| 14:28 | 14:28 |
| Early afternoon summary | Early afternoon summary |
| Time for a quick recap. | Time for a quick recap. |
| Britain’s inflation rate has hit a new five-year high, taking another bite out of wages and bringing more pain for those relying on government benefits. | Britain’s inflation rate has hit a new five-year high, taking another bite out of wages and bringing more pain for those relying on government benefits. |
| The Consumer Prices Index rose by 3.0% in the 12 months to September, the highest level since early 2012. Food and transport costs were important factors behind the rise, which economists are blaming on the weak pound driving up import costs. | The Consumer Prices Index rose by 3.0% in the 12 months to September, the highest level since early 2012. Food and transport costs were important factors behind the rise, which economists are blaming on the weak pound driving up import costs. |
| The figures mean that the state pension is on track to rise by 3% next year, under the ‘triple-lock’ policy. | The figures mean that the state pension is on track to rise by 3% next year, under the ‘triple-lock’ policy. |
| It also means that real wages have continued to fall -- average earnings only rose by 2.1% in the three months to July; new labour market figures due tomorrow are unlikely to show much improvement. | It also means that real wages have continued to fall -- average earnings only rose by 2.1% in the three months to July; new labour market figures due tomorrow are unlikely to show much improvement. |
| Here's what contributed to the rise in CPI inflation: transport, food and recreation/culture costs pic.twitter.com/nwXGjEajAN | Here's what contributed to the rise in CPI inflation: transport, food and recreation/culture costs pic.twitter.com/nwXGjEajAN |
| Bank of England governor Mark Carney predicted that inflation will probably rise higher in the next couple of months, before dipping back. | Bank of England governor Mark Carney predicted that inflation will probably rise higher in the next couple of months, before dipping back. |
| Testifying to the Treasury committee, Carney warned that European states have not done as much work as the UK on the possibility of Britain leaving the EU without a deal. | |
| He also told MPs that firms are losing confidence that Brexit will proceed smoothly to a new trading arrangement. | |
| Carney also argued forcefully that a transition period, of at least two years, would help resolve issues such as Britain’s massive derivatives market. | |
| #BOE's Carney makes financial case for a strong #Brexit transition deal https://t.co/P8uszQeYMo via @JohnEGlover pic.twitter.com/VW4WDtUWbP | |
| The rise in inflation could spur the Bank of England to raise interest rates next month. But some City experts warn that this would harm the economy, and do little to bring down import prices. | The rise in inflation could spur the Bank of England to raise interest rates next month. But some City experts warn that this would harm the economy, and do little to bring down import prices. |
| Lukman Otunuga, Research Analyst at FXTM, says Mark Carney et al have a difficult decision: | Lukman Otunuga, Research Analyst at FXTM, says Mark Carney et al have a difficult decision: |
| This has been a tricky year for the central bank, especially when considering how elevated inflation levels have squeezed household spending - impacting the outlook for the economy. With inflation leaving average earnings in the dust, consumers are feeling the pinch and as such, it threatens the sustainability of Britain’s consumer-driven growth. | This has been a tricky year for the central bank, especially when considering how elevated inflation levels have squeezed household spending - impacting the outlook for the economy. With inflation leaving average earnings in the dust, consumers are feeling the pinch and as such, it threatens the sustainability of Britain’s consumer-driven growth. |
| While the argument for higher rates is to put a lid on inflation, this may end up punishing the fragile UK economy. | While the argument for higher rates is to put a lid on inflation, this may end up punishing the fragile UK economy. |
| Union leaders have urged the government to raise public sector wages, which would help nurses, teachers, police officers et al to handle inflation. | Union leaders have urged the government to raise public sector wages, which would help nurses, teachers, police officers et al to handle inflation. |
| Liberal Democrat Leader Vince Cable agrees, saying: | Liberal Democrat Leader Vince Cable agrees, saying: |
| “The Brexit squeeze caused by the falling pound is getting worse, and it is hitting the poorest families hardest. | “The Brexit squeeze caused by the falling pound is getting worse, and it is hitting the poorest families hardest. |
| “This above-target inflation is increasing the cost of the weekly shop and cutting into people’s living standards. | “This above-target inflation is increasing the cost of the weekly shop and cutting into people’s living standards. |
| “The Chancellor must end the benefits freeze that is set to leave millions of families hundreds of pounds poorer a year. | “The Chancellor must end the benefits freeze that is set to leave millions of families hundreds of pounds poorer a year. |
| Above all, the government must change course from a destructive Brexit that would damage living standards and push up prices further.” | Above all, the government must change course from a destructive Brexit that would damage living standards and push up prices further.” |
| Updated | |
| at 2.54pm BST | |
| 1.58pm BST | 1.58pm BST |
| 13:58 | 13:58 |
| Here’s a clip of Mark Carney today, warning that inflation will probably rise further in October or November: | Here’s a clip of Mark Carney today, warning that inflation will probably rise further in October or November: |
| "Inflation will peak" in next couple of months - Bank of England Governor Mark Carney tells @CommonsTreasury https://t.co/8I5mA6Udpu pic.twitter.com/GzZ8C6xciv | "Inflation will peak" in next couple of months - Bank of England Governor Mark Carney tells @CommonsTreasury https://t.co/8I5mA6Udpu pic.twitter.com/GzZ8C6xciv |
| 1.29pm BST | 1.29pm BST |
| 13:29 | 13:29 |
| Carney: Bank of England is trying to tackle its gender pay gap | Carney: Bank of England is trying to tackle its gender pay gap |
| And finally, governor Carney is asked about the Bank of England’s gender pay gap. | And finally, governor Carney is asked about the Bank of England’s gender pay gap. |
| He says Bank is planning to publish details next month. But he’s happy to give some top lines now. Namely... | He says Bank is planning to publish details next month. But he’s happy to give some top lines now. Namely... |
| The median gender pay gap is 24% | The median gender pay gap is 24% |
| The mean pay gap is 21%. | The mean pay gap is 21%. |
| But, on an equal work for equal pay assessment, there is no gender pay gap. | But, on an equal work for equal pay assessment, there is no gender pay gap. |
| The gaps exists because there are more men at the top of the Bank than lower down the ranks, who are paid more. | The gaps exists because there are more men at the top of the Bank than lower down the ranks, who are paid more. |
| Carney insists the Bank is committed to improving diversity. He cites ‘blind’ recruitment panels, spreading the recruitment net beyond economists, hiring from 40 universities (up from just 10). | Carney insists the Bank is committed to improving diversity. He cites ‘blind’ recruitment panels, spreading the recruitment net beyond economists, hiring from 40 universities (up from just 10). |
| If you start from a position of being almost exclusively a white male institution, you need to have a deliberate strategy of movement. | If you start from a position of being almost exclusively a white male institution, you need to have a deliberate strategy of movement. |
| In the end, the Bank expects to be in the “middle of the pack” for the financial services industry on gender, but near the top for the public sector. | In the end, the Bank expects to be in the “middle of the pack” for the financial services industry on gender, but near the top for the public sector. |
| And that’s the end of the session. | And that’s the end of the session. |
| Carney is over after a question on gender pay gap. The median gap is 24% and the mean is 21%. No gap on equal pay for equal work terms. | Carney is over after a question on gender pay gap. The median gap is 24% and the mean is 21%. No gap on equal pay for equal work terms. |
| Updated | Updated |
| at 1.31pm BST | at 1.31pm BST |
| 1.15pm BST | 1.15pm BST |
| 13:15 | 13:15 |
| Back in the Thatcher Room, Mark Carney is invited to dwell on the benefits of Brexit.... | Back in the Thatcher Room, Mark Carney is invited to dwell on the benefits of Brexit.... |
| The governor cited a few, including: | The governor cited a few, including: |
| But, Parliament will have to decide the balance of those opportunities versus striking a transition deal and a new arrangement with the EU. | But, Parliament will have to decide the balance of those opportunities versus striking a transition deal and a new arrangement with the EU. |
| 1.05pm BST | 1.05pm BST |
| 13:05 | 13:05 |
| Carney denies that the Bank’s quantitative easing programme, which has bought £425bn of bonds with newly created money, is the monetary equivalent of heroin. | Carney denies that the Bank’s quantitative easing programme, which has bought £425bn of bonds with newly created money, is the monetary equivalent of heroin. |
| Carney asked if @nickmacpherson2 is right and QE is like heroinAnswer: We're clean. Not addicted and not about to go through withdrawal | Carney asked if @nickmacpherson2 is right and QE is like heroinAnswer: We're clean. Not addicted and not about to go through withdrawal |
| 12.59pm BST | 12.59pm BST |
| 12:59 | 12:59 |
| Treasury hits back at OECD over Brexit | Treasury hits back at OECD over Brexit |
| Breaking away from Mark Carney (and inflation), the Treasury has slapped down the OECD after it suggested that Britain could stay in the European Union. | Breaking away from Mark Carney (and inflation), the Treasury has slapped down the OECD after it suggested that Britain could stay in the European Union. |
| The Paris-based think tank argued this morning that Britain’s economy would get a boost if it chose not to follow through with Brexit. | The Paris-based think tank argued this morning that Britain’s economy would get a boost if it chose not to follow through with Brexit. |
| In its annual assessment of the UK, the OECD predicted that growth would slow in 2018 year and business investment fall. | In its annual assessment of the UK, the OECD predicted that growth would slow in 2018 year and business investment fall. |
| It also warned that a hard Brexit would “would hurt trading relationships and reduce long-term growth”. | It also warned that a hard Brexit would “would hurt trading relationships and reduce long-term growth”. |
| But there would be a “significant” boost if the Brexit vote was reversed, perhaps through a second referendum, it suggested. | But there would be a “significant” boost if the Brexit vote was reversed, perhaps through a second referendum, it suggested. |
| In response, the Treasury has insisted that the public won’t get a chance to change last June’s referendum result: | In response, the Treasury has insisted that the public won’t get a chance to change last June’s referendum result: |
| ‘We are working to achieve the best deal with the EU that protects jobs and the economy. We aim to agree a Free Trade Agreement that is comprehensive and ambitious. Our £23 billion National Productivity Investment Fund which will improve our country’s infrastructure, increase research and development and build more houses. | ‘We are working to achieve the best deal with the EU that protects jobs and the economy. We aim to agree a Free Trade Agreement that is comprehensive and ambitious. Our £23 billion National Productivity Investment Fund which will improve our country’s infrastructure, increase research and development and build more houses. |
| We are leaving the EU and there will not be a second referendum.’ | We are leaving the EU and there will not be a second referendum.’ |
| The OECD’s report was presented to the press in London this morning, but chancellor Philip Hammond didn’t hang around long enough to take questions.... | The OECD’s report was presented to the press in London this morning, but chancellor Philip Hammond didn’t hang around long enough to take questions.... |
| Amazing moment when, after introducing the OECD to outline their bleak Brexit forecast, Hammond legs it before press can ask any questions pic.twitter.com/i6CMVwMnmI | Amazing moment when, after introducing the OECD to outline their bleak Brexit forecast, Hammond legs it before press can ask any questions pic.twitter.com/i6CMVwMnmI |
| 12.52pm BST | 12.52pm BST |
| 12:52 | 12:52 |
| Q: Should fiscal policy be taking more of the strain to help the UK economy? | Q: Should fiscal policy be taking more of the strain to help the UK economy? |
| Unsurprisingly, Mark Carney won’t be lured into commenting on tax and spending policies. We take fiscal policy as given, he insists, it’s not for us to advise the government. | Unsurprisingly, Mark Carney won’t be lured into commenting on tax and spending policies. We take fiscal policy as given, he insists, it’s not for us to advise the government. |
| And on house prices, he says the housing market faces “structural problems” (ie, we’re not building enough new homes) but argues that prices aren’t in a bubble (reminder, they rose by 5% per year in August). | And on house prices, he says the housing market faces “structural problems” (ie, we’re not building enough new homes) but argues that prices aren’t in a bubble (reminder, they rose by 5% per year in August). |
| He says the government’s Help to Buy hasn’t had a major impact on the market, either in terms of prices or stimulating a lot of new builds. | He says the government’s Help to Buy hasn’t had a major impact on the market, either in terms of prices or stimulating a lot of new builds. |
| 12.33pm BST | 12.33pm BST |
| 12:33 | 12:33 |
| The pound has dropped by half a cent against the US dollar since Mark Carney’s testimony began. | The pound has dropped by half a cent against the US dollar since Mark Carney’s testimony began. |
| Sterling may be suffering from the governor’s warnings about a no-deal Brexit | Sterling may be suffering from the governor’s warnings about a no-deal Brexit |
| The pound is falling while Mark Carney is talking https://t.co/8fp0TNvHFN pic.twitter.com/MUNzvV0Trl | The pound is falling while Mark Carney is talking https://t.co/8fp0TNvHFN pic.twitter.com/MUNzvV0Trl |
| 12.32pm BST | 12.32pm BST |
| 12:32 | 12:32 |
| Q: Does the Bank of England have a clue about why UK productivity is so weak? | Q: Does the Bank of England have a clue about why UK productivity is so weak? |
| Carney says he does have a clue yes...and after more prodding from the committee he cites weak business investment and the wider impact of economic uncertainty. | Carney says he does have a clue yes...and after more prodding from the committee he cites weak business investment and the wider impact of economic uncertainty. |
| John Mann extra deadpan at the Treasury Committee today. Here he is asking if Carney "has a clue" about why productivity is so low pic.twitter.com/Ig0CSFx5E7 | John Mann extra deadpan at the Treasury Committee today. Here he is asking if Carney "has a clue" about why productivity is so low pic.twitter.com/Ig0CSFx5E7 |
| 12.26pm BST | 12.26pm BST |
| 12:26 | 12:26 |
| Q: The UK’s debt burden is growing, thanks to consumer credit products such as PCPs used to buy new cars. When will the bubble blow up? | Q: The UK’s debt burden is growing, thanks to consumer credit products such as PCPs used to buy new cars. When will the bubble blow up? |
| Carney argues that auto finance is not as serious as some claim. | Carney argues that auto finance is not as serious as some claim. |
| If someone walks away from a PCP plan then the debt falls on the car vendor - or in many cases the manufacturer of the car. | If someone walks away from a PCP plan then the debt falls on the car vendor - or in many cases the manufacturer of the car. |
| He says banks are well-capitalised to handle a rise in bad debts. | He says banks are well-capitalised to handle a rise in bad debts. |
| 12.23pm BST | 12.23pm BST |
| 12:23 | 12:23 |
| Q: When must a transition deal be agreed, before firms take matters into their own hands and trigger their contingency plans? | Q: When must a transition deal be agreed, before firms take matters into their own hands and trigger their contingency plans? |
| Carney won’t commit to a fixed date, but says the issue is particularly urgent for the City. | Carney won’t commit to a fixed date, but says the issue is particularly urgent for the City. |
| Transition deal needed by Q1 for financial sector, Carney says, for other sectors 'there is a bit of a lag'. So urgency greatest at banks | Transition deal needed by Q1 for financial sector, Carney says, for other sectors 'there is a bit of a lag'. So urgency greatest at banks |
| 12.19pm BST | 12.19pm BST |
| 12:19 | 12:19 |
| Carney: Businesses are losing faith in smooth Brexit | Carney: Businesses are losing faith in smooth Brexit |
| Q: How have businesses and consumers’ attitude to Brexit changed? | Q: How have businesses and consumers’ attitude to Brexit changed? |
| Mark Carney indicates that UK firms have become “less confident about a smooth transition” and less confident about the end state of Brexit. | Mark Carney indicates that UK firms have become “less confident about a smooth transition” and less confident about the end state of Brexit. |
| Households are less worried, he says, | Households are less worried, he says, |
| At present, household expectations are broadly consistent with a smooth outcome to a future arrangement. | At present, household expectations are broadly consistent with a smooth outcome to a future arrangement. |
| But consumer confidence has fallen, partly due to lower real incomes (due to rising inflation). | But consumer confidence has fallen, partly due to lower real incomes (due to rising inflation). |
| Carney adds that financial markets are the most concerned - they have already priced in a significant adjustment to the UK’s future prospects, and they may have to ‘mark up’ the UK’s future performance [if Brexit goes better than some fear]. | Carney adds that financial markets are the most concerned - they have already priced in a significant adjustment to the UK’s future prospects, and they may have to ‘mark up’ the UK’s future performance [if Brexit goes better than some fear]. |
| Updated | Updated |
| at 12.20pm BST | at 12.20pm BST |
| 12.10pm BST | 12.10pm BST |
| 12:10 | 12:10 |
| Q: What preparations are you making for Brexit? | Q: What preparations are you making for Brexit? |
| Carney says the Bank of England has looked at worse-case scenarios, and what we can do to mitigate those risks. | Carney says the Bank of England has looked at worse-case scenarios, and what we can do to mitigate those risks. |
| That includes making sure that banks are sufficiently capitalised to handle a very bad outcome. | That includes making sure that banks are sufficiently capitalised to handle a very bad outcome. |
| On the upside, the Bank could raise its growth forecasts if Britain agrees a “full, comprehensive, ambitious arrangement” with the rest of the EU. | On the upside, the Bank could raise its growth forecasts if Britain agrees a “full, comprehensive, ambitious arrangement” with the rest of the EU. |
| .@catmckinnell asking about the basis of @bankofengland forecasting. Mark Carney: we have looked at worst case scenarios as well as the best pic.twitter.com/AZtaeduLEA | .@catmckinnell asking about the basis of @bankofengland forecasting. Mark Carney: we have looked at worst case scenarios as well as the best pic.twitter.com/AZtaeduLEA |
| Updated | Updated |
| at 12.11pm BST | at 12.11pm BST |
| 12.06pm BST | 12.06pm BST |
| 12:06 | 12:06 |
| Carney: Need Brexit solutions on derivative contracts, insurance, data... | Carney: Need Brexit solutions on derivative contracts, insurance, data... |
| The Treasury committee are probing Mark Carney about how the trillions worth of derivatives contracts between the UK and other EU country members will be handled after Brexit. | The Treasury committee are probing Mark Carney about how the trillions worth of derivatives contracts between the UK and other EU country members will be handled after Brexit. |
| Mark Carney says this cannot be resolved if Britain crashes out without a deal. | Mark Carney says this cannot be resolved if Britain crashes out without a deal. |
| Q: Is a two-year transition period enough to resolve this problem? | Q: Is a two-year transition period enough to resolve this problem? |
| Carney says that the best solution would be legislation that would “grandfather those contracts”, so that they could continue to be honoured after Brexit. | Carney says that the best solution would be legislation that would “grandfather those contracts”, so that they could continue to be honoured after Brexit. |
| He also cites cross-border insurance (European companies and individuals who have taken out insurance from UK entities) and cross-border data concerns. | He also cites cross-border insurance (European companies and individuals who have taken out insurance from UK entities) and cross-border data concerns. |
| And...he repeats his argument that a hard Brexit would hurt Europe more than the UK on these issues. | And...he repeats his argument that a hard Brexit would hurt Europe more than the UK on these issues. |
| There’s more data that is relevant to the EU in the UK than vice versa... | There’s more data that is relevant to the EU in the UK than vice versa... |
| These issues are bigger for Europe than they are for us, but they’re material for us. | These issues are bigger for Europe than they are for us, but they’re material for us. |
| 11.59am BST | 11.59am BST |
| 11:59 | 11:59 |
| Bang on cue, Mark Carney argues that a ‘no-deal’ Brexit poses a threat to Europe’s financial stability. | Bang on cue, Mark Carney argues that a ‘no-deal’ Brexit poses a threat to Europe’s financial stability. |
| He tells the Treasury committee that Europe would be ‘short of financial services capacity’ in the short term, if Britain leaves the EU without a deal. | He tells the Treasury committee that Europe would be ‘short of financial services capacity’ in the short term, if Britain leaves the EU without a deal. |
| The entire economic impacts are greater for the UK, he says, but the financial stability impact is greater for the EU in the short term. | The entire economic impacts are greater for the UK, he says, but the financial stability impact is greater for the EU in the short term. |