Aurelia Butler

If any Bank of England policymakers were wavering ahead of Thursday’s decision to raise interest rates for the 11th time in succession, the shock of February’s inflation data will have stiffened their resolve. The acceleration in consumer price inflation to 10.4 per cent, just as price pressures were expected to ease, made it all the more important for the central bank’s monetary policy committee to show that concerns over the health of global banks would not get in the way of their fight to restore price stability.Chancellor Jeremy Hunt, who warned this week that inflation was at “dangerous” levels, made it clear that he backed the BoE’s decision, saying that rising prices were “strangling growth and eroding family budgets” and that the sooner the authorities regained their grip, “the better for everyone”. In adopting a similar approach to that of the US Federal Reserve, European Central Bank and their Swiss and Norwegian counterparts, seven of the monetary policy committee’s nine members voted for a quarter-point increase that took the BoE’s benchmark rate to 4.25 per cent.“We believe inflation will begin to fall quite rapidly before the summer, but as yesterday’s release for February shows, we need to see that actually happen,” Andrew Bailey, the BoE’s governor, said after the decision.Yet like the Fed and the ECB, the MPC has left its options for future rate decisions open, saying the financial and economic outlook has become more uncertain and it wants to see more evidence of how the steep rise in borrowing costs since late 2021 is affecting the UK economy. Investors are betting the central bank will raise interest rates one last time, to a peak of about 4.5 per cent at the end of the summer. But economists said that while higher inflation and a stronger growth outlook had forced the BoE’s hand this week, the latest rate increase could prove to be the last.“The recent tensions in the banking system and the lingering risk of a recession should keep a lid on interest rates going forward,” said Yael Selfin, chief economist at KPMG. Ruth Gregory, at the consultancy Capital Economics, said the MPC had given a dovish message, and that while it had “stopped short of explicitly calling time on rate hikes, it is not on autohike”.

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In particular, the MPC downplayed the latest jump in inflation. It said the surprising strength of core goods prices in February was largely due to volatile clothing and footwear prices, and “could therefore prove less persistent”. Service sector inflation, which is a better guide to underlying price pressures, was slightly lower than the BoE had previously forecast. The MPC now expects inflation to fall more sharply over the next few months than it forecast at its last meeting in February because global energy prices have fallen sharply since then, and the government is extending its cap on household energy bills. In addition, wage growth in the private sector — a big concern for the BoE, because it could fuel more persistent inflation — has finally started to ease.The BoE also said China’s reopening was likely to be disinflationary for advanced economies because it would ease strains on global supply chains and this would outweigh any effect of stronger demand.The MPC will be hoping that by the time it next meets in May, it will have clear evidence that the steep rise in borrowing costs since late 2021 is having the intended effect and that inflation is on its way down.By then it will also know more about the extent of problems in the global banking sector. Recent tensions have led to a rise in banks’ wholesale funding costs, the MPC noted, adding that it would “monitor closely any effects on the credit conditions faced by households and businesses”.James Smith, economist at ING bank, said the BoE’s own surveys showed that businesses were becoming less aggressive about price increases and that if these trends continued “a pause in May is likely”.Some business groups are already complaining that policymakers have gone too far. Suren Thiru, economist at the professional body the Institute of Chartered Accountants in England and Wales, said the latest rate increase was “overkill”, while David Bharier, head of research at the British Chambers of Commerce, called it a “blunt instrument” that did not address the fundamental causes of inflation.However, the BoE has made it clear that if it sees evidence of “more persistent” inflationary pressures, especially in relation to wage growth and services inflation, it is prepared to raise interest rates again.Some economists think it will have no choice. Jessica Hinds, economist at Fitch Ratings, said a tight labour market could “keep services inflation too sticky for the bank to be confident it has done enough”, while Karen Ward, at JPMorgan Asset Management, said inflation’s persistence looked “more worrying in the UK than elsewhere” and could leave the BoE “outside the central bank herd” later in 2023.Bailey, in an interview broadcast after the MPC’s decision, suggested that the central bank would change course only when it had seen hard data to confirm its actions were working.“We’ve seen signs of inflation really peaking now . . . We think it’s going to come down sharply, really from the early summer onwards, but we haven’t seen that happen yet. We need to see it starting to come down progressively and come back to target.” More

The Democratic Unionist party privately warned the UK government that a “dual regulation” environment in Northern Ireland would not work for crucial industry groups, despite the idea now being one of its demands to restore the region’s devolved government.Jeffrey Donaldson, leader of the DUP, told MPs on Wednesday that the party wanted to see both EU and UK standards applying simultaneously in Northern Ireland in order to make Prime Minister Rishi Sunak’s new deal on post-Brexit trading arrangements for the region acceptable to Unionists.However, in a letter to UK ministers last September, Sammy Wilson, DUP’s chief whip at Westminster and one of the party’s most vocal critics of the Windsor framework deal, admitted that important commercial interest groups such as farmers had no interest in such a regime.“The big issue which the Ulster Farmers’ Union have raised is the area of dual regulation,” Wilson wrote in a letter to the agriculture department, Defra, seen by the Financial Times, adding that the idea “does raise some concerns for us”.He explained that farmers in Northern Ireland would always opt to follow EU rules for commercial reasons because that gave them equal access to both the UK and EU markets.“To keep their purchasers happy they would have to comply with EU regulations, even though the milk or beef may not eventually go to the EU,” Wilson wrote.Wilson, the DUP and the UFU did not immediately respond to requests for comment. Under the Windsor framework — which London says offers the region unparalleled economic opportunities — Northern Ireland industrial and food manufacturers must follow EU rules to access the EU single market. The UK internal market also accepts EU-standard goods.The idea of a “dual regulation” framework for Northern Ireland was proposed in former prime minister Boris Johnson’s controversial Northern Ireland protocol bill that was replaced by Sunak’s Windsor framework.The Democratic Unionist party on Wednesday voted against the framework, which leaves Northern Ireland following EU rules for goods, saying it needs “clarification, reworking and change” to protect the region’s place in the UK.But London has said there will be none. “There is nothing more to get out of . . . negotiation. It is done,” Chris Heaton-Harris, the UK’s Northern Ireland secretary, said on Thursday.Donaldson, who has been boycotting Northern Ireland’s power-sharing executive at Stormont since May over the Brexit row, will give his verdict on the framework after a panel he has appointed to canvass unionists’ views reports back at the end of the month.But at Westminster on Wednesday, he insisted: “What I do not accept is a situation where every business in my constituency must comply with EU rules even if they do not sell a single widget to the EU. That is wrong, because it harms our place in the internal market of the UK.”

However, UK officials say the DUP has yet to come up with concrete examples of where the requirement to follow EU rules has impeded Northern Ireland companies from trading with the UK.Trade groups say their members overwhelmingly support the Windsor framework. Northern Ireland’s dairy industry, for example, sends milk into the Republic of Ireland for processing and has said a dual regulatory regime would be unworkable. Stephen Kelly, head of the industry body Manufacturing NI, says 90 per cent of the region’s 4,640 manufacturing companies already follow EU rules because they export to Ireland and other EU countries.Despite the DUP defiance, an Irish News/Institute of Irish Studies-University of Liverpool poll published this week found 45 per cent support for the Windsor framework — with only 16.9 per cent of voters actively opposed to the deal — and the remaining 38.1 per cent neutral or expressing no opinion. More

China’s population of super-rich fell more than 14 per cent last year as President Xi Jinping’s zero-Covid policy, regulatory crackdowns and a property collapse took their toll on the nation’s large fortunes.The number of billionaires in China fell by 164 to 969 compared with a decline of 25 to 691 in the US, according to the 2023 M3M Hurun Global Rich List after depreciating currencies and falling stocks battered the wealthy across the globe.“This past year has been tumultuous for wealth creation,” the report said. While China was still the “world capital for billionaires”, the total wealth of the country’s richest plunged 15 per cent. China’s economy grew only 3 per cent last year as Xi sealed borders and locked cities down in an ultimately futile attempt to keep the Omicron variant at bay.The Shenzhen stock market in southern China ended the year down 17 per cent and the renminbi depreciated 6 per cent against the dollar.Some old faces, such as internet entrepreneur Jack Ma, who three years ago was China’s richest man, toppled further down the rankings, barely scraping into the top 10 of the country’s most wealthy.Ma has spent much of the past year in Japan after he and other ecommerce magnates were targeted by regulators as Beijing sought to tighten its control over data and the financial system. Real estate tycoons also suffered dramatic losses following a government campaign to reduce leverage in the sector that sparked a meltdown in property prices.Many of the country’s wealthy have started moving money to havens such as Singapore after Xi began pursuing a “common prosperity” policy aimed at reducing social inequality.But even with the fall in the number of the super-wealthy in China, the country remained the world’s “absolute No. 1” for billionaires, the report said, led by the capital Beijing, where Xi and many other Communist party leaders reside. Beijing had the most billionaires of any city in the world — 109, compared with 105 in New York and 103 in Shanghai. London was ranked fifth behind the southern Chinese tech capital of Shenzhen.

Asia, with 57 per cent of the world’s population, accounted for 49 per cent of the world’s billionaires and 39 per cent of its wealth while North America and Europe combined had 15 per cent of the world’s population, 46 per cent of its billionaires and 57 per cent of its total wealth. India had the third-highest number of billionaires at 187 while Germany overtook the UK for fourth place with 144, compared with 134. Russia’s total number of billionaires declined by two to 70, leaving it in eighth despite western sanctions imposed after Moscow’s invasion of Ukraine.Despite China’s vast number of billionaires, none of them ranked in the report’s top 10 global rich list, which was led by Bernard Arnault of LVMH with $202bn followed by Elon Musk with $157bn. The only Asian billionaire in the top 10 was Mukesh Ambani, the Indian oil, petrochemicals, telecoms and retail magnate, with $82bn. More