Huw Pill, chief economist at the Bank of England, speaks during an interview in London, UK. Bloomberg
Huw Pill, chief economist at the Bank of England, speaks during an interview in London, UK. Bloomberg
Huw Pill, chief economist at the Bank of England, speaks during an interview in London, UK. Bloomberg
Huw Pill, chief economist at the Bank of England, speaks during an interview in London, UK. Bloomberg

Bank of England warns of 'persistent inflation' and higher interest rates


Soraya Ebrahimi
  • English
  • Arabic

Inflation in the UK could become “more persistent” amid prevailing tough economic conditions, and interest rates may rise further, according to the Bank of England’s chief economist.

During a speech on monetary policy due to be delivered in New York, Huw Pill is expected to say that Britain is probably in a recession.

As a senior official influential in the Bank of England’s decisions over interest rates, he also confirms that the Monetary Policy Committee would be prepared to act “forcefully” if the outlook suggests more persistent inflation.

In the same speech, he will say that higher natural gas prices, a tight labour market and global supply bottlenecks create “the potential for inflation to prove more persistent”.

“It is therefore in this nexus that I focus in coming to my own assessment of the risks surrounding inflation persistence, which … will strongly influence my monetary policy position in the coming months,” he says.

The remarks suggest that Mr Pill would support another interest rate rise at the next committee meeting to put a lid on inflation.

Bank of England governor explains decision to increase interest rates — video

The base rate of interest is currently 3.5 per cent, the highest rate since October 2008, with the committee voting to increase the rate at each of its past nine meetings.

Mr Pill confirms in his remarks bringing down inflation to its 2 per cent target was the key driving force for the bank’s monetary policy decisions.

Higher energy prices across Europe, prompted by Russia’s invasion of Ukraine, have given a “significant impetus” to inflation over the past year.

But, even if natural gas prices stabilise or fall back down, inflation could remain high because households and businesses will still try to protect their incomes against higher energy bills, Mr Pill is expected to say.

UK's finance minister says he is focused on bringing down inflation as economy shrinks — video

“In an attempt to protect their own real income from the unavoidable impact of higher external prices, the longer that firms try to maintain real profit margins and employees try to maintain real wages at pre-energy price shock levels, the more likely it is that domestically generated inflation will achieve its own self-sustaining momentum, even as the external impulse to UK inflation recedes,” he explains.

It echoes similar recent remarks from the bank’s governor, Andrew Bailey, who said that while workers will want to seek pay rises as living costs soar, it could have the adverse effect of “locking in” high inflation in the UK.

Mr Pill also says that supply chain disruptions, which were worsened by Brexit, appear to have eased in recent months.

What is a recession? — video

The end of the zero-Covid policy in China this week could ease supply constraints, but the current surge in infection rates could “create its own disruption” to production, he cautions.

Furthermore, the tightening labour market, again influenced by Brexit and the impact of the free movement of EU workers into the UK, has had a bearing on inflation, Mr Pill says.

He concludes that both indicators will have to be watched closely by the bank.

The six points:

1. Ministers should be in the field, instead of always at conferences

2. Foreign diplomacy must be left to the Ministry of Foreign Affairs and International Co-operation

3. Emiratisation is a top priority that will have a renewed push behind it

4. The UAE's economy must continue to thrive and grow

5. Complaints from the public must be addressed, not avoided

6. Have hope for the future, what is yet to come is bigger and better than before

The biog

Favourite film: Motorcycle Dairies, Monsieur Hulot’s Holiday, Kagemusha

Favourite book: One Hundred Years of Solitude

Holiday destination: Sri Lanka

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Proudest achievement: Building Robotics Labs at Khalifa University and King’s College London, Daughters

Driverless cars or drones: Driverless Cars

How Islam's view of posthumous transplant surgery changed

Transplants from the deceased have been carried out in hospitals across the globe for decades, but in some countries in the Middle East, including the UAE, the practise was banned until relatively recently.

Opinion has been divided as to whether organ donations from a deceased person is permissible in Islam.

The body is viewed as sacred, during and after death, thus prohibiting cremation and tattoos.

One school of thought viewed the removal of organs after death as equally impermissible.

That view has largely changed, and among scholars and indeed many in society, to be seen as permissible to save another life.

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.”

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2. Paul Pogba - to Manchester United in 2016/17 - €105m
3. Gareth Bale - to Real Madrid in 2013/14 - €101m
4. Cristiano Ronaldo - to Real Madrid in 2009/10 - €94m
5. Gonzalo Higuain - to Juventus in 2016/17 - €90m
6. Neymar - to Barcelona in 2013/14 - €88.2m
7. Romelu Lukaku - to Manchester United in 2017/18 - €84.7m
8. Luis Suarez - to Barcelona in 2014/15 - €81.72m
9. Angel di Maria - to Manchester United in 2014/15 - €75m
10. James Rodriguez - to Real Madrid in 2014/15 - €75m

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Name: N2 Technology

Founded: 2018

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Match statistics

Abu Dhabi Harlequins 36 Bahrain 32

 

Harlequins

Tries: Penalty 2, Stevenson, Teasdale, Semple

Cons: Stevenson 2

Pens: Stevenson

 

Bahrain

Tries: Wallace 2, Heath, Evans, Behan

Cons: Radley 2

Pen: Radley

 

Man of the match: Craig Nutt (Harlequins)

Omar Yabroudi's factfile

Born: October 20, 1989, Sharjah

Education: Bachelor of Science and Football, Liverpool John Moores University

2010: Accrington Stanley FC, internship

2010-2012: Crystal Palace, performance analyst with U-18 academy

2012-2015: Barnet FC, first-team performance analyst/head of recruitment

2015-2017: Nottingham Forest, head of recruitment

2018-present: Crystal Palace, player recruitment manager

 

 

 

 

Updated: January 10, 2023, 2:01 AM