The Bank of England held its main interest rate at the record low of 0.1 per cent on Thursday and stuck with its £895 billion stimulus measures despite fears about rising inflation.
While the Monetary Policy Committee (MPC) voted to keep the central bank’s ultra-loose monetary policy settings in place, there was a shift in tone on the outlook for the economy.
The BoE said developments over the past month have strengthened the case made in August that some tightening of monetary policy could be necessary to meet the central bank's 2 per cent inflation target sustainably in the medium term.
But the MPC said that "considerable uncertainties remain", with policymakers led by Governor Andrew Bailey unanimously agreeing that any future tightening should start with an interest-rate increase.
“There was increasing evidence from a range of global and domestic cost and price indicators that inflationary pressures were likely to persist,” the minutes of the MPC meeting said. “These members judged that, with the existing policy stance, inflation was likely to remain above the 2 per cent target in the medium term.”
With supply chain challenges, staff shortages and surging energy prices hampering business activity, Britain’s private sector lost more momentum in September with the IHS Markit/CIPS flash Composite Purchasing Managers' Index dropping for a fourth consecutive month in September to its lowest reading since February.
Meanwhile, the latest ONS Business insights survey showed that in late August almost one in five businesses were either not able to get the materials, goods or services they needed from within the UK, or were forced to change suppliers or find other alternatives.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said given the challenges the UK economy faces at the moment, it is no surprise the BoE opted "for the least worst option which right now is to do nothing, and make no changes to monetary policy".
"The fact that there was unanimous agreement around the table at the monetary policy committee not to raise rates highlights the conundrum facing policymakers," Ms Streeter said.
"They have a particularly difficult puzzle to piece together right now because rising prices are now acting as a drag on the economic recovery, which limits their room for immediate manoeuvre on action to curb soaring inflation. In just a month pressures have mounted so much that the bank is now downgrading its forecast of economic growth for the third quarter by 1 per cent."
Meanwhile, the MPC's seven-to-two vote to keep the bond-buying target unchanged highlights the committee's "growing hawkish tilt", according to Stuart Cole, chief macroeconomist at stockbroker Equiti Capital, which suggests the case for a policy tightening "is growing".
Mr Cole said the key to any BoE move will be the evolution of the labour market over the next six months and “whether or not the ending of the jobs furlough scheme this month triggers a rise in joblessness and takes additional spending out of the economy”.
Traders brought forward wagers on a BoE rate hike to 0.25 per cent with money markets now seeing a 15-basis-point increase in March 2022, having priced it for May before Thursday’s meeting.
They still see a further quarter of a percentage point rise to 0.5 per cent in November 2022.
While the central bank traditionally shifts its key interest rate by multiples of 25 basis points, it last cut rates by 15 basis points in March 2020, at the height of the coronavirus pandemic. If officials wanted to raise rates, a move back to 0.25 per cent is seen by strategists as the likely first step.
Laith Khalaf, head of investment analysis at AJ Bell, said a record jump in inflation has not stirred BoE policy makers, who are steadfastly maintaining the mantra that price rises are transitory.
"That doesn’t mean they will be short-lived however. The bank expects inflation to hit 4 per cent this winter and still to be above 3 per cent this time next year, so consumer pockets and cash savings are still going to take a big hit. The bank has also conceded that the gas price crunch has elevated inflationary risks heading into 2022," Mr Khalaf said.
Early November will be the next tipping point to cause markets to pause for breath, he said, as both the US Federal Reserve and the BoE could set out their tightening plans.
"Fed chairman Jay Powell has indicated that QE tapering could easily begin at the November meeting, and the BoE will finally have employment data to look at that isn’t distorted by the furlough scheme," Mr Khalaf said.
"Until then, central banks are still playing the same tune, and investors are happy to keep on dancing, with little regard to what happens when the music stops. But if central banks do signal tighter policy at the beginning of November, we can expect some fireworks.”
Nayanthara: Beyond The Fairy Tale
Starring: Nayanthara, Vignesh Shivan, Radhika Sarathkumar, Nagarjuna Akkineni
Director: Amith Krishnan
Rating: 3.5/5
Neil Thomson – THE BIO
Family: I am happily married to my wife Liz and we have two children together.
Favourite music: Rock music. I started at a young age due to my father’s influence. He played in an Indian rock band The Flintstones who were once asked by Apple Records to fly over to England to perform there.
Favourite book: I constantly find myself reading The Bible.
Favourite film: The Greatest Showman.
Favourite holiday destination: I love visiting Melbourne as I have family there and it’s a wonderful place. New York at Christmas is also magical.
Favourite food: I went to boarding school so I like any cuisine really.
'Downton Abbey: A New Era'
Director: Simon Curtis
Cast: Hugh Bonneville, Elizabeth McGovern, Maggie Smith, Michelle Dockery, Laura Carmichael, Jim Carter and Phyllis Logan
Rating: 4/5
How has net migration to UK changed?
The figure was broadly flat immediately before the Covid-19 pandemic, standing at 216,000 in the year to June 2018 and 224,000 in the year to June 2019.
It then dropped to an estimated 111,000 in the year to June 2020 when restrictions introduced during the pandemic limited travel and movement.
The total rose to 254,000 in the year to June 2021, followed by steep jumps to 634,000 in the year to June 2022 and 906,000 in the year to June 2023.
The latest available figure of 728,000 for the 12 months to June 2024 suggests levels are starting to decrease.
Uefa Nations League
League A:
Germany, Portugal, Belgium, Spain, France, England, Switzerland, Italy, Poland, Iceland, Croatia, Netherlands
League B:
Austria, Wales, Russia, Slovakia, Sweden, Ukraine, Republic of Ireland, Bosnia-Herzegovina, Northern Ireland, Denmark, Czech Republic, Turkey
League C:
Hungary, Romania, Scotland, Slovenia, Greece, Serbia, Albania, Norway, Montenegro, Israel, Bulgaria, Finland, Cyprus, Estonia, Lithuania
League D:
Azerbaijan, Macedonia, Belarus, Georgia, Armenia, Latvia, Faroe Islands, Luxembourg, Kazakhstan, Moldova, Liechtenstein, Malta, Andorra, Kosovo, San Marino, Gibraltar
Sustainable Development Goals
1. End poverty in all its forms everywhere
2. End hunger, achieve food security and improved nutrition and promote sustainable agriculture
3. Ensure healthy lives and promote well-being for all at all ages
4. Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all
5. Achieve gender equality and empower all women and girls
6. Ensure availability and sustainable management of water and sanitation for all
7. Ensure access to affordable, reliable, sustainable and modern energy for all
8. Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all
9. Build resilient infrastructure, promote inclusive and sustainable industrialisation and foster innovation
10. Reduce inequality within and among countries
11. Make cities and human settlements inclusive, safe, resilient and sustainable
12. Ensure sustainable consumption and production patterns
13. Take urgent action to combat climate change and its effects
14. Conserve and sustainably use the oceans, seas and marine resources for sustainable development
15. Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss
16. Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels
17. Strengthen the means of implementation and revitalise the global partnership for sustainable development
Background: Chemical Weapons
Sholto Byrnes on Myanmar politics
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RACE CARD
6.30pm Maiden Dh165,000 (Dirt) 1,200
7.05pm Handicap Dh165,000 (D) 1,600m
7.40pm Maiden Dh165,000 (D) 1,600m
8.15pm Handicap Dh190,000 (D) 1,600m
8.50pm Handicap Dh175,000 (D) 1,400m
9.25pm Handicap Dh175,000 (D) 2,000m
The National selections:
6.30pm Underwriter
7.05pm Rayig
7.40pm Torno Subito
8.15pm Talento Puma
8.50pm Etisalat
9.25pm Gundogdu
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More from Neighbourhood Watch
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
2017%20RESULTS%3A%20FRENCH%20VOTERS%20IN%20UK
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The specs
Engine: 2.0-litre 4-cyl turbo
Power: 201hp at 5,200rpm
Torque: 320Nm at 1,750-4,000rpm
Transmission: 6-speed auto
Fuel consumption: 8.7L/100km
Price: Dh133,900
On sale: now
Persuasion
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Who's who in Yemen conflict
Houthis: Iran-backed rebels who occupy Sanaa and run unrecognised government
Yemeni government: Exiled government in Aden led by eight-member Presidential Leadership Council
Southern Transitional Council: Faction in Yemeni government that seeks autonomy for the south
Habrish 'rebels': Tribal-backed forces feuding with STC over control of oil in government territory
Checks continue
A High Court judge issued an interim order on Friday suspending a decision by Agriculture Minister Edwin Poots to direct a stop to Brexit agri-food checks at Northern Ireland ports.
Mr Justice Colton said he was making the temporary direction until a judicial review of the minister's unilateral action this week to order a halt to port checks that are required under the Northern Ireland Protocol.
Civil servants have yet to implement the instruction, pending legal clarity on their obligations, and checks are continuing.
