LONDON’S BUSINESS NEWSPAPER
INTERVIEW: OSCAR-WINNER OLIVER STONE ON PUTIN, ANGER AND BEING AN OUTSIDER P20-21 THURSDAY 22 JUNE 2023
ISSUE 4,000
4,000TH EDITION
CITYAM.COM
FREE
JULY 2021 IT IS IMPORTANT NOT TO OVER-REACT TO TEMPORARILY STRONG GROWTH AND INFLATION SEPTEMBER 2021 PRESSURES WILL BE TRANSIENT - DEMAND WILL SHIFT BACK FROM GOODS TO SERVICE, GLOBAL SUPPLY CHAINS ARE LIKELY TO REPAIR THEMSELVES NOVEMBER 2021 THE EVIDENCE IS CLEAR THAT THINGS LIKE ENERGY PRICES GO UP AND DOWN AGAIN, THEY DON’T TEND TO STAY HIGHER, CERTAINLY NOT AT PERMANENTLY HIGH LEVELS JULY 2022 WE SEE INFLATION TO FALL VERY RAPIDLY NEXT YEAR, AND RETURN TO TARGET IN 2023 AND THEN GO BELOW TARGET MARCH 2023 THOSE EFFECTS ARE NOW UNWINDING AND IT IS PRIMARILY FOR THIS REASON THAT W EXPECT TO SEE A SHARP FALL IN INFLATION DURING THE COURSE OF THE YEAR, STARTING PROBABLY IN A COUPLE OF MO NTHS FROM NOW MARCH 2023
WHAT A MESS!
INFLATION SURPRISES BANK OF ENGLAND YET AGAIN AHEAD OF RATE HIKE JACK BARNETT THE BANK of England is on track to kick interest rates up their highest level in over 23 years in a bid to rein in what now appears to be embedded inflation. City traders ratcheted up their bets on peak UK interest rates in response to official data that showed inflation was still running at 8.7 per cent last month, way above City expectations. It is the latest blow to Andrew Bailey, the governor of the Bank of England,
who has been criticised for downplaying the stickiness of inflation in recent years. Market participants now think Bailey and the rest of the Monetary Policy Committee – the nine-strong group who set official UK borrowing costs – will lift the rate to at least six per cent. The group will meet today to hike the interest rate, with some believing the Bank could increase by 50 basis points to 5.25 per cent, from the current 4.75 per cent. Any increase would represent the 13th straight increase.
Core inflation rose again and to a 31year high of 7.1 per cent from 6.8 per cent in the previous month. Evidence of price pressures withstanding the toughest tightening cycle since the 1980s suggests they are beginning to be driven by domestic factors. Although inflation was running at five per cent heading into 2022, Russia’s invasion of Ukraine turbocharged prices by jolting international energy markets. Services inflation hit 7.4 per cent in
May, well above the Bank’s expected fall to 6.8 per cent. Such price increases typically require monetary policy to tighten to rein in spending. Goods inflation is also running at 9.7 per cent. Food inflation dropped to 18.3 per cent from 19 per cent. “Today’s data will likely leave the Bank of England with no choice but to opt for another increase in the base rate tomorrow,” Yael Selfin, chief economist at KPMG UK, said. Last night, the Institute for Fiscal
Studies said 1.4m mortgage holders would lose around 20 per cent of their disposable income once the Bank’s decision flows through to mortgage rates. Neil Wilson, chief market analyst at Markets.com, last night said: “Andrew Bailey and co have a remit to maintain stable inflation – they have demonstrably failed in this regard.” £ STATE OF THE ECONOMY SPECIAL: PAGES 4-5
Housebuilders take a beating on back of fears mortgage hikes could crash market CITY A.M. REPORTER HOUSEBUILDERS suffered through a miserable day on the stock market yesterday after the sky-high inflation print ignited further fears of a house price crash. Allied with new house price data which showed an increasingly soft
market, the readout saw major British developers lose favour with investors. Barratt sunk 2.17 per cent, Taylor Wimpey lost three per cent, and Persimmon also fell 2.5 per cent. Berkeley, another housebuilder, told markets in a scheduled trading update that they expected the
market to be ‘choppy’ until interest rates settle, forecasting a 20 per cent drop in house sales. We continue to see good levels of enquiry for well-located homes built to a high standard of design and quality but
recognise that the market is likely to lack urgency until there is more certainty over the trajectory of interest rates,” the firm’s boss Rob Perrins said. Disappointing economic data and stickier-than-expected
inflation has weighed down British stock markets all year. The FTSE 100 has effectively been flat since the turn of the year, whilst the FTSE 250 is down by almost three per cent. By contrast, the S&P 500 in the US is up just shy of 15 per cent, and even the tech-heavy Nasdaq Composite is up 30 per cent.
INSIDE DEUTSCHE-NUMIS DEAL VOTED THROUGH P3 LONDON METAL EXCHANGE AT LONDON HIGH COURT P9 THG BOSS GIVES UP GOLDEN SHARE P10 MARKETS P15 OPINION P16-17