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| Bank of England's Vlieghe: no-deal Brexit could mean near zero interest rates - business live | Bank of England's Vlieghe: no-deal Brexit could mean near zero interest rates - business live |
| (about 1 hour later) | |
| US producer prices picked up by just 0.1% June, suggesting wider inflationary pressures are weak, according to Michael Pearce, senior US economist at Capital Economics: | |
| The small gain in producer prices in June suggests the increase in tariffs on $200bn of imports from China has yet to generate a pick-up in inflation and confirms that underlying domestic inflationary pressures remain subdued. | |
| That should help ease any fears, following the June CPI figures released yesterday, that underlying consumer price inflation will rise back above 2%. | |
| Wall Street is open and the Dow Jones and S&P 500 have both hit record highs, after comments from Fed chairman Jerome Powell boosted expectations of a US rate cut this month. | |
| Dow Jones: +0.2% at 27,139 | |
| S&P 500: 0.1% at 3,003 | |
| Nasdaq: 0.2% at 8,209 | |
| Figures published earlier showed industrial production in the eurozone increased by 0.9% in May, beating economists’ expectations of a 0.2% rise. | |
| Chris Hare, economist at HSBC, said that although it was better than expected, the broader trend remains soft. | |
| He says: | |
| Good news is good news, and it’s fair to say that May’s bounce in the eurozone ... was materially stronger than we had expected. But there are a couple of caveats worth mentioning in the form of erratic factors. First, German car production, which has been highly volatile recently, rose by 7.4% m-o-m. Second, there was a 3.6% m-o-m increase in transport equipment output in France, possibly relating to aircraft production, which can be lumpy. Strength in both these sub-categories is unlikely to be sustained in June. | |
| Meanwhile, the broader trend remains soft. The level of production in the eurozone, Germany and Italy is still below levels seen at the start of 2018. And output would need to grow by 0.2% in June - despite the possible unwinding of erratic factors - to achieve positive growth in Q2 as a whole. What’s more, the eurozone manufacturing PMI remains in contractionary territory, notably in June where world trade tensions escalated - that could pose a risk to the ‘hard’ data in the coming months . | |
| In other words, one swallow doesn’t make a summer. And we want to see a more sustained recovery to feel confident that headwinds from global trade weakness will not prove too damaging. We suspect the ECB will take a similar view. | |
| A cryptocurrency exchange in Tokyo has halted services after it lost $32m (£25m) in the latest apparent hack on volatile virtual monies. | A cryptocurrency exchange in Tokyo has halted services after it lost $32m (£25m) in the latest apparent hack on volatile virtual monies. |
| Full story here: | Full story here: |
| $32m stolen from Tokyo cryptocurrency exchange in latest hack | $32m stolen from Tokyo cryptocurrency exchange in latest hack |
| Bank of England policymaker Gertjan Vlieghe has won support today for suggesting the MPC should publish its own preferred interest rate, rather than focusing its forecasts on the market’s expectations for rates. | Bank of England policymaker Gertjan Vlieghe has won support today for suggesting the MPC should publish its own preferred interest rate, rather than focusing its forecasts on the market’s expectations for rates. |
| Professor Costas Milas of Liverpool University’s Management School, has written in on the point: | Professor Costas Milas of Liverpool University’s Management School, has written in on the point: |
| MPC Member Gertjan Vlieghe suggested that the Bank of England’s Inflation Report should publish its preferred path of interest rates. Currently, the Bank’s Inflation Report conditions its inflation and output growth forecasts on two alternative scenarios: (a) the current interest rate (which stays the same in the future) and (b) an interest rate moving up or down in line with the expectations of financial markets. | MPC Member Gertjan Vlieghe suggested that the Bank of England’s Inflation Report should publish its preferred path of interest rates. Currently, the Bank’s Inflation Report conditions its inflation and output growth forecasts on two alternative scenarios: (a) the current interest rate (which stays the same in the future) and (b) an interest rate moving up or down in line with the expectations of financial markets. |
| Nevertheless, as my colleague Michael Ellington and I have recently argued, the Bank’s forecasting record under the assumption of constant interest rates is pretty weak. The same holds under the assumption of interest rates moving in line with market expectations. | Nevertheless, as my colleague Michael Ellington and I have recently argued, the Bank’s forecasting record under the assumption of constant interest rates is pretty weak. The same holds under the assumption of interest rates moving in line with market expectations. |
| Even worse, market expectations of interest rates are often at odds with the Bank’s repeated message that interest rates will rise gradually over the next 2 to 3 years. | Even worse, market expectations of interest rates are often at odds with the Bank’s repeated message that interest rates will rise gradually over the next 2 to 3 years. |
| With this in mind, the Bank is currently facing an embarrassing situation where it produces forecasts based on what others (the markets, that is) believe. Would it not make more sense for the Bank to provide forecasts based on what it actually thinks itself as the most appropriate interest rate? | With this in mind, the Bank is currently facing an embarrassing situation where it produces forecasts based on what others (the markets, that is) believe. Would it not make more sense for the Bank to provide forecasts based on what it actually thinks itself as the most appropriate interest rate? |
| Deutsche Bank has scaled back its redundancy packages for laid off City workers, according to a report in Financial News. | Deutsche Bank has scaled back its redundancy packages for laid off City workers, according to a report in Financial News. |
| The German bank is offering less generous terms compared with previous rounds of redundancy, the report claims: | The German bank is offering less generous terms compared with previous rounds of redundancy, the report claims: |
| Deutsche is offering staff affected by its latest round of sweeping job cuts a package of statutory redundancy pay plus a one-off payment of less than 10% of salary, according to people familiar with matter. They are also being paid for notice periods — typically three months — which is taxable. | Deutsche is offering staff affected by its latest round of sweeping job cuts a package of statutory redundancy pay plus a one-off payment of less than 10% of salary, according to people familiar with matter. They are also being paid for notice periods — typically three months — which is taxable. |
| Those in the first wave have received less than the German lender has historically paid out, according to people affected and recruiters. Deutsche has traditionally paid a lump sum that amounts to around a month’s salary for every year of service, former staff at the bank and employment lawyers told Financial News. | Those in the first wave have received less than the German lender has historically paid out, according to people affected and recruiters. Deutsche has traditionally paid a lump sum that amounts to around a month’s salary for every year of service, former staff at the bank and employment lawyers told Financial News. |
| Sacked Deutsche Bank workers: Thank god it's over, it's kinda of a relief you know, at least things can't get worse:Deutsche Bank: *DEUTSCHE BANK SCALES BACK REDUNDANCY PACKAGES FOR U.K. STAFF | Sacked Deutsche Bank workers: Thank god it's over, it's kinda of a relief you know, at least things can't get worse:Deutsche Bank: *DEUTSCHE BANK SCALES BACK REDUNDANCY PACKAGES FOR U.K. STAFF |
| Deutsche Bank chief executive Christian Sewing has spoken out after it emerged that top executives at its City of London office were fitted for £12,000 suits on the day that thousands of the bank’s staff lost their jobs. | Deutsche Bank chief executive Christian Sewing has spoken out after it emerged that top executives at its City of London office were fitted for £12,000 suits on the day that thousands of the bank’s staff lost their jobs. |
| Tailors from Fielding & Nicholson, an upmarket tailor, were pictured walking out of the bank’s office with suit bags on Monday. The men were initially assumed to be workers who had been made redundant. | Tailors from Fielding & Nicholson, an upmarket tailor, were pictured walking out of the bank’s office with suit bags on Monday. The men were initially assumed to be workers who had been made redundant. |
| Sewing told the German newspaper Handelsblatt that he had personally reprimanded those executives involved: | Sewing told the German newspaper Handelsblatt that he had personally reprimanded those executives involved: |
| That someone would let a tailor come on such a day is disrespectful. In no way is this behaviour in keeping with our values. | That someone would let a tailor come on such a day is disrespectful. In no way is this behaviour in keeping with our values. |
| I assume in any case that the two colleagues will not forget my telephone call. | I assume in any case that the two colleagues will not forget my telephone call. |
| Deutsche Bank bosses fitted for £1,200 suits as thousands lose their jobs | Deutsche Bank bosses fitted for £1,200 suits as thousands lose their jobs |
| The business secretary Greg Clark has urged his fellow Conservatives to do everything possible to avoid a no-deal Brexit, warning that it would lead to the loss of “many thousands” of jobs. | The business secretary Greg Clark has urged his fellow Conservatives to do everything possible to avoid a no-deal Brexit, warning that it would lead to the loss of “many thousands” of jobs. |
| He said MPs should “strain every sinew” to avoid crashing out of the EU under the next prime minister, with leadership rivals Boris Johnson and Jeremy Hunt both saying they would be prepared to leave the bloc on 31 October without a deal. | He said MPs should “strain every sinew” to avoid crashing out of the EU under the next prime minister, with leadership rivals Boris Johnson and Jeremy Hunt both saying they would be prepared to leave the bloc on 31 October without a deal. |
| He told Sky News: | He told Sky News: |
| It’s evident that if you have the disruption that comes from a no-deal Brexit there will be people that will lose their jobs. It’s many thousands of jobs. Everyone knows that. | It’s evident that if you have the disruption that comes from a no-deal Brexit there will be people that will lose their jobs. It’s many thousands of jobs. Everyone knows that. |
| I think every person that considers the evidence that companies have given – whether it’s in the automotive sector, whether it’s in the food sector, whether it’s in aerospace, in industries up and down the country – you know if you become less efficient and your ability to trade is impeded, then of course losing your competitiveness means there will be jobs lost. | I think every person that considers the evidence that companies have given – whether it’s in the automotive sector, whether it’s in the food sector, whether it’s in aerospace, in industries up and down the country – you know if you become less efficient and your ability to trade is impeded, then of course losing your competitiveness means there will be jobs lost. |
| Greg Clark: no-deal Brexit would destroy 'thousands' of jobs | Greg Clark: no-deal Brexit would destroy 'thousands' of jobs |
| Equity markets are fairly subdued across Europe this morning: | Equity markets are fairly subdued across Europe this morning: |
| FTSE 100: +0.3% at 7,530 | FTSE 100: +0.3% at 7,530 |
| Germany’s DAX: -0.1% at 12,322 | Germany’s DAX: -0.1% at 12,322 |
| France’s CAC: +0.5% at 5,577 | France’s CAC: +0.5% at 5,577 |
| Italy’s FTSE MIB: +0.3% at 22,237 | Italy’s FTSE MIB: +0.3% at 22,237 |
| Spain’s IBEX: +0.1% at 9,289 | Spain’s IBEX: +0.1% at 9,289 |
| Europe’s STOXX 600: | Europe’s STOXX 600: |
| It’s fair to say there hasn’t been a huge response from currency traders to Vlieghe’s speech and his assertion that UK interest rates could be cut to virtually zero in the event of a no-deal Brexit. | It’s fair to say there hasn’t been a huge response from currency traders to Vlieghe’s speech and his assertion that UK interest rates could be cut to virtually zero in the event of a no-deal Brexit. |
| The pound is up 0.07% against the dollar at $1.2535, and up 0.1% against the euro at €1.1131. | The pound is up 0.07% against the dollar at $1.2535, and up 0.1% against the euro at €1.1131. |