Aurelia Butler

Britain’s companies and households need to accept that high energy prices and inflation will make them “all worse off”, the Bank of England’s chief economist said on Tuesday, in an attempt to head off a wage-price spiral. Huw Pill told a Columbia University podcast that high inflation would persist if companies remained unwilling to take a hit on their profit margins and employees resisted declines to their purchasing power. “Somehow, in the UK, someone needs to accept that they’re worse off and stop trying to maintain their real spending power by bidding up prices [or] wages or passing the energy costs on to customers,” Pill said.“You don’t need to be much of an economist to realise that if what you’re buying has gone up relative to what you’re selling, you’re going to be worse off,” he added, referring to the impact of energy price rises on the UK as a big net importer of natural gas.Pill added that interest rate rises in the US and UK over the past year were designed to cool spending power and the ability of companies and people to pass on the pain of inflation to others. The BoE increased rates to their current level of 4.25 per cent in March.But the chief economist said inflation would stay high if companies and households refused to accept that they were poorer than before and instead played “pass the parcel” with price rises.“What we’re facing now is that reluctance to accept that, yes, we’re all worse off,” he said. In a similar message, Ben Broadbent, BoE deputy governor, said on Tuesday there was “no getting round the impact on real incomes of . . . jumps in import prices”, which he said had “led to second-round effects on domestic wages and prices”.Pill did not say whether he thought the BoE’s interest rate rises to date were sufficient to head off such inflationary spirals or indicate whether he thought further interest rate rises were needed.The BoE chief economist has previously said the onus on monetary policy is to ensure that it will “see the job through” to bringing down inflation to the bank’s 2 per cent target. More

Migration, long a politically sensitive topic, will become an economic necessity over the next decade as countries struggle with the strains of an ageing population, the World Bank said on Tuesday. The multilateral lender said the rising share of older people — especially in richer economies, where almost a fifth of people are now aged over the standard retirement age of 65 — would place increasing strain on global economic growth, public finances and social cohesion.“Over the next decade, all countries, whatever their income level, will find migration increasingly necessary,” the bank said, adding that governments needed to do more to attract foreign workers. Current approaches created “large inefficiencies and missed opportunities” while leading to human suffering.Poorer countries should make emigration part of their development strategy, by expanding training in skills that are in high demand and doing more to help workers send money home at low cost, said the World Bank. Meanwhile, host countries should partner with them to help finance training and cut recruitment costs, while also working to build a political consensus on the role of migration, and make the most of refugees’ talents. Lower-skilled refugees needed more support to access jobs in host countries; legal routes for migration to reduce the incentives for trafficking and people smuggling; and more humane systems to manage returns and resettlement when this was necessary.

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The World Bank’s warning comes hard on the heels of population projections from the UN that underline the extent to which leading economies may need to rethink their growth models as they age.India is likely to have overtaken China as the world’s most populous country this month, and its population — which the UN estimates at 1.42bn — is seen as almost certain to continue growing. Yet even in India, the fertility rate has now fallen below the replacement rate, and the UN estimates the population could stabilise by the middle of the 2060s.John Wilmoth, director of the population division at the UN’s Department of Economic and Social Affairs, said on Monday that this meant it was a “critical period” for India to maximise the “demographic dividend” while its workforce was still growing, while other countries whose populations were ageing rapidly would need to focus on policies to help parents juggle work with family duties, and enable older people to remain in employment.Though the World Bank expects the problems with a lack of workers to be more acute in richer economies, fertility rates have also plunged in middle-income countries, such as China and India, raising the risk that “many . . . will grow old before they become rich”.

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Changes in demographic trends are already fuelling competition to attract skilled workers. Australia and Canada are expanding opportunities for migration. Germany, which has previously been able to recruit inside the EU, is seeking new sources of labour from outside the bloc. However, in many countries, public debate on migration policy remains focused on efforts to curb flows of unauthorised migrants and to share the costs of sheltering asylum seekers and refugees.Meanwhile, the population of many low-income countries is set to grow rapidly even as climate change cuts economic opportunities and threatens to render entire regions uninhabitable. The World Bank judged, in a report on global migration patterns, that most movements because of climate change had so far been over relatively short distances, within the same country, but it warned this could soon change. More

(Reuters) – Wall Street was set to open lower on Tuesday following a mixed batch of earnings reports, while a plunge in deposits of regional lender First Republic Bank (NYSE:FRC) stoked concerns about the banking sector.First Republic shares tanked 22.8% in premarket trading after the beleaguered lender reported a more than $100 billion flight in deposits in the first quarter following the biggest banking crisis since 2008 last month.Other regional banks PacWest Bancorp and Western Alliance (NYSE:WAL) Bancorp fell 2.5% and 4%, respectively.The KBW Regional Banking index and the S&P 500 bank index have shed 22% and 9%, respectively, so far this year as the collapse of two mid-sized lenders last month wreaked havoc on the banking sector.”Rising interest rates are worrying depositors that small- and mid-sized lenders are going to be facing increasing difficulties, that their business models are too heavily dependant on a low interest rate environment,” said Stuart Cole, head macro economist at Equiti Capital.”The risk is that the cost of emergency funding proves too expensive for the smaller banks and the market deems them to be no longer profitable.” Graphic: U.S. bank stocks lag in 2023 after March crisis – https://fingfx.thomsonreuters.com/gfx/mkt/jnvwybxlevw/Pasted%20image%201682418457657.png Investors are also concerned about the impact of elevated inflation and aggressive interest rate hikes by the Federal Reserve on companies’ margins.PepsiCo (NASDAQ:PEP) Inc rose 1.7% after raising its annual revenue and profit forecasts, while McDonald’s Corp (NYSE:MCD) gained 1.3% after it beat estimates for quarterly global comparable sales and profit, boosted by higher menu prices and more customer visits. General Electric (NYSE:GE) Co gained 2.3% on lifting the lower end of its full-year profit forecast, while General Motors Co (NYSE:GM) climbed 2.8% after the No.1 U.S. automaker raised its full-year profit and cash flow forecasts. United Parcel Service Inc (NYSE:UPS) slid 5.0% after the delivery firm forecast full-year revenue to be at the lower end of its earlier estimate as it grapples with a weakening economy. Peer FedEx Corp (NYSE:FDX) lost 1.7%.In a busy week for earnings, 178 of the S&P 500 companies are expected to report first-quarter results. Analysts have largely maintained their forecast of a near-5% drop in first-quarter profit for S&P 500 companies, according to Refinitiv data.Earnings from trillion-dollar companies Alphabet (NASDAQ:GOOGL) Inc and Microsoft Corp (NASDAQ:MSFT) are due after market close on Tuesday.At 8:44 a.m. ET, Dow e-minis were down 77 points, or 0.23%, S&P 500 e-minis were down 18.5 points, or 0.44%, and Nasdaq 100 e-minis were down 55.75 points, or 0.43%.Investors are also awaiting the Fed’s monetary policy decision in May for signals on the path of interest rates. Traders mostly expect the U.S. central bank to hike rates by 25 basis points next week and hold steady before cutting them later this year. Consumer confidence data for April and new home sales unit data for March are also on tap after the opening bell.Among other stocks, Spotify Technology SA (NYSE:SPOT) climbed 6.1% after first-quarter monthly active users crossed the half-billion mark for the first time, while 3M Co gained 1.4% on the industrial conglomerate’s plans to slash about 6,000 positions globally. More

LONDON (Reuters) – The long-delayed forum for European Union and British financial regulators won’t reopen the door for London’s financial centre to the bloc, EU lawmakers were told on Tuesday.The Windsor agreement on EU-UK arrangements for Northern Ireland will mean that the delayed UK-EU memorandum of understanding (MOU) for a regulatory forum will be implemented, raising hopes of improving market access later on.”This could really unlock cooperation, but it’s our view there won’t be that many material changes coming out of the MOU and the regulatory forum in terms of cooperation between the UK and the EU,” Thorsten Beck, director of the Florence School of Banking and Finance, told the European Parliament.”It’s more like a long term process going forward.”Beck and Christy Ann Petit, assistant professor at Dublin City University, were being questioned by lawmakers over a report they wrote for the EU parliament on post-Brexit financial services in Britain.Britain is struggling with identifying post-Brexit growth opportunities and the prospect of regaining broad access to the EU financial market is limited, the report said.While Britain has begun to downplay the need for major divergence with the EU, the EU has proposed a draft law to force banks and asset managers to shift chunks of euro derivatives clearing from London to the EU.Beck said there was a tension between the UK government pushing for a globally competitive financial sector, and UK regulators focusing on financial stability.”There will be pressure on regulators to compromise stability in favour of competitiveness at some point,” Beck said.Britain’s finance ministry has said it won’t “unlearn” lessons from the global financial crisis or undermine the independence of regulators to keep the financial system stable and protect consumers.Petit said she did not expect major divergence between EU and UK rules, given Britain seeks to comply with international financial rules. More