Aurelia Butler

“The important question for me with regard to the pound is how much of that existing hawkish tone is already priced into the pound,” Mann told Bloomberg television in an interview.”If it’s already priced in, then what we see is what we get. But if it’s not completely priced in, then there could be depreciation pressure.” Asked how much of the messages from other central banks about higher interest rates outside Britain had been priced in to the value of sterling, Mann said: “They’ve been talking hawkish for a while but I think perhaps there’s more to go.”She told Bloomberg that weakness in the value of the pound was “significant for inflation” which has fallen from a peak of 11.1% in October but remained above 10% in January. Sterling is down about 1.6% against the U.S. dollar and about 3% against the euro over the past three months. The BoE raised interest rates to 4% last month but suggested it was close to ending a run of increases which started in December 2021.Mann voted for the latest 50-basis-point rate rise in line with the majority on the nine-member Monetary Policy Committee. At previous meetings she has voted for bigger rate rises than most of her MPC colleagues.The former chief economist at Citi and the OECD told Bloomberg that she remained worried about the persistence of core inflation and the strong pricing power of firms who were able to pass on their costs to customers.Asked how much further the BoE should raise rates, she said: “I’ve had recent speeches where I’ve indicated that I thought more needed to be done in order to ensure that expectations in particular are for a declining rate of inflation and the embeddedness to be mitigated.”On the recent weakness in Britain’s housing market, which deepened after former prime minister Liz Truss’s “mini-budget” crisis last autumn, Mann said she saw signs of recovery.”We’ve seen a reduction in mortgage rates from the high point last fall. We see more competition in terms of products coming from various lenders,” she said. “And so that suggests to me that there’s more revival in process as opposed to a continued downward momentum.” More

“The president’s budget extends the life of the Medicare Trust Fund by at least 25 years,” the report said citing the plan.The White House’s proposal would raise the net investment income tax, created by the Affordable Care Act, from 3.8% to 5% for all Americans earning more than $400,000 per year, according to the report.The White House did not immediately respond to Reuters’ request for comment. More

Chinese equities fell on Tuesday after disappointing trade data added to investors’ concerns that the country’s post-zero Covid recovery might prove less explosive than previously expected.China’s CSI 300 fell 1.4 per cent and Hong Kong’s Hang Seng index lost 0.4 per cent after imports in January and February declined 10.2 per cent compared with the same period a year earlier. Exports fared better, falling just 6.8 per cent. Analysts had expected declines of 5.5 per cent and 9.4 per cent for imports and exports, respectively.Investors in Europe looked ahead to testimony from US Federal Reserve chair Jay Powell to Congress later on Tuesday, when he is expected to provide guidance on the future path of interest rates.The Europe’s region-wide Stoxx 600 — up 9.4 per cent year to date — rose 0.1 per cent. Futures tracking Wall Street’s benchmark S&P 500 and those tracking the tech-heavy Nasdaq 100 added 0.2 per cent and 0.3 per cent ahead of the New York open. Tuesday’s Chinese trade figures came after outgoing premier Li Keqiang earlier this week told the annual National People’s Congress that the aim for economic expansion for 2023 was “around 5 per cent” — the country’s lowest growth target for more than three decades.Beijing’s decision to drop contentious zero-Covid policies late last year triggered a “reopening” rally in Chinese equities that has only recently fizzled out. The CSI 300 rose almost a fifth from November to the start of February but has declined 3.5 per cent since then. All sectors of the index apart from energy were in negative territory on Tuesday, with technology and healthcare stocks posting the sharpest declines. “Either reopening has yet to provide much support to import demand, perhaps because many consumer-facing services are not import intensive, or any boost has been offset by a further drop in imports for processing and re-export,” said Julian Evans-Pritchard, senior China economist at Capital Economics. Imports are expected to pick up later in the year, Evans-Pritchard added, but the better than forecast export figures “may drop back again before long as the one-off boost from easing virus disruptions fades” and foreign demand cools.Chinese and other emerging market stocks are nonetheless tipped by many investors to outperform those in the US this year as high interest rates and stubborn inflation weigh on the world’s biggest economy. A flurry of strong economic data releases since the start of February have forced investors to up their expectations for where US rates might peak, and how long they might stay at elevated levels.US government debt strengthened across the board, with the 10-year Treasury yield falling 0.03 percentage points to 3.94 per cent, down from a three-month high above 4 per cent last week. The dollar was steady against a basket of six other major currencies. More

The writer is chief market strategist for Europe, Middle East and Africa at JPMorgan Asset ManagementA slew of economic data has recently surprised to the upside. According to the purchasing managers’ index for the eurozone, the bloc’s economy is growing again. The US had a bumper jobs and retail spending report for January. Investors are now wondering whether the recession they had come to accept as inevitable is likely after all.The causes of the potential recession differed around the world. In the US and UK, central banks had openly stated that a recession would be necessary to drive away inflation. In the eurozone, the risk centred on gas shortages and energy rationing. And China looked set for a long and arduous journey out of Covid. Fast forward a few months and the picture has changed. China has reopened rapidly and, it seems, successfully. It is now experiencing the boom of pent-up consumer demand that other major economies experienced early last year. With little sign of inflationary pressures in China, the authorities can let the recovery run, and they are likely to announce additional stimulus.The landscape has also changed dramatically in continental Europe. Europe came into the winter with its gas storage tanks almost full, having replaced Russian gas with American liquefied natural gas. Since then, the drawdown through the peak winter months has been limited, thanks to a combination of consumers and businesses being a bit more careful with their energy needs and a remarkably mild winter. As a result, the energy crisis that we had feared has not materialised. The storage tanks are still 63 per cent full, which compares with only 30 per cent this time last year. This strong position means that even next winter is looking increasingly secure. The price of wholesale gas has tumbled and, as a result, businesses and consumers are feeling more upbeat — consumer confidence rose to -19 in February, its highest level in a year. What about the US and UK? Here, the question should be reframed from “is a recession still likely?” to “is a recession still necessary?” The answer to this question relies on the trajectory of inflation. If there are sufficient signs that the tightening delivered to date is slowing inflationary pressures, the central banks could pause or even ease policy to try to secure a soft landing.There is some, albeit tentative, evidence that inflationary pressures are easing in the US. Inflation in housing and rental costs could soon start to turn, according to some of the data provided by property renting companies. Despite a strong jobs report and near-record low unemployment, there is some evidence that wage pressures have also peaked.

Earlier in February, the markets got a little over excited about the potential return of “Goldilocks” — the “just right” conditions of robust growth and low inflation. Bond and stock prices rallied.Since then, the US consumer price index report has provided a reality check. Monthly core inflation ticked back up to 0.4 per cent, which corresponds to an annualised rate of nearly 5 per cent — hardly consistent with a 2 per cent inflation target. In addition, the country is feeling some of the inflationary backwash of China’s reopening, as gasoline prices served to raise headline inflation again. In the UK, there is unfortunately less convincing evidence that inflationary pressures have peaked. Wage growth continues to push north. Business confidence has been boosted by the fall in gas prices but UK policymakers still have work to do, as this may add to underlying inflationary pressures. The Bank of England will probably have to raise interest rates further to keep activity weak until inflation subsides.Overall, the tail risks of a deep global recession have been reduced. China has reopened, Europe is not running out of energy and the US is not stuck in a 1970s inflation spiral.But a period of very slow activity, if not a moderate recession, still seems likely and indeed necessary, in my view. Market talk of “no landing” — that the global economy can power on at its current growth rate — misses the fundamental point that demand is beyond available supply, which is why there is still too much inflation. We should work on the basis that earnings will contract by around 10 per cent in the developed world as slowing demand reduces operating leverage — the levels of returns on fixed assets — and profit margins are eroded as companies lose their pricing power.If demand continues to reaccelerate, this will most likely be met with higher interest rates. For now, both stock and bond investors should expect good economic news to be bad news for markets.  More

Jay Powell is set for a high-stakes appearance before Congress on Tuesday, as the Federal Reserve weighs how aggressively to keep raising interest rates in the face of stubbornly high inflation.Powell’s testimony before the Senate Banking Committee will be the Fed chair’s first public remarks since troubling inflation data releases showed the central bank is still struggling to cool the US economy despite its year-long campaign of monetary tightening.The Fed’s main interest rate is at a target range between 4.5 and 4.75 per cent, compared to near-zero at this time last year. But Fed officials have increasingly signalled they will have to lift it more — and keep it higher for longer — to ensure a more rapid decline in inflation towards the central bank’s 2 per cent target.Lawmakers and investors will be looking for clues from Powell as to whether he favours another one-notch 25 basis point rate increase at the next Federal Open Market Committee meeting on March 21-22 or if he might consider a more hefty 50 basis point increase.They will also be looking for signals of a shift in the Fed’s expectations of how high it will have to raise rates overall this cycle. In December, Fed officials projected interest rates will reach a peak of 5.1 per cent this year.But Powell may want to withhold judgment on both fronts because there is still one important monthly jobs data report due on Friday, and another month of inflation data next week, before the FOMC decision. “Powell will stick to hawkish themes, but will he be more hawkish than what’s already priced into rates?” Tim Duy, chief US economist at SGH Macro Advisors, wrote in a note on Monday.

Krishna Guha and Peter Williams of Evercore ISI said: “We think the Fed chair will open the door to a calibrated upward move in the estimated peak interest rate in March if the next batch of data confirms the strength from January, but will not turn max hawkish or fuel speculation of a 50bp move.”Politically, Powell is likely to face renewed pressure from Republicans to be aggressive and not fall behind the curve in tackling inflation. But Democrats have been growing increasingly anxious that the Fed will go too far in tightening monetary policy, triggering a recession that could undermine many of the labour market gains achieved during the recovery out of the pandemic.Meanwhile, Powell is also expected to face questions on banking regulation, with Democrats pressing the Fed to tighten capital standards for the largest institutions, and Republicans pleading for a looser treatment. Michael Barr, the Fed’s vice-chair for supervision, is leading a review of capital rules. More

Commercial seafarers might be the workforce that people rely on the most but think about the least. The vast majority of goods traded around the world are transported on ships. Capitalism wouldn’t work without the almost 2mn people who work on them. But it seems to take a lot for them to get noticed. When the Covid-19 pandemic hit, more than 300,000 commercial seafarers were left stranded on their ships well past the expiry of their contracts, because virus control measures and travel restrictions prevented crews from being rotated. Part of the problem then was the length of time it took many countries to classify them as “key workers” in spite of the fact that their work was, quite clearly, key.They have been caught up in the war in Ukraine too: according to the International Chamber of Shipping, 331 seafarers have been stuck on 62 ships trapped in Ukrainian ports since the war began a year ago. The ICS, together with 30 other organisations, wrote last month to UN secretary-general António Guterres to try to publicise their plight and push for a negotiated solution that could help them leave safely.But it doesn’t always take a global crisis for seafarers to end up adrift. Sometimes ship owners just abandon them, maybe after they have underestimated the cost of running a voyage, or when they realise a ship needs investment and it would be less costly just to walk away. Under international law, a seafarer is deemed to have been abandoned if the ship owner fails to cover the cost of their repatriation, has left them without maintenance and support or has otherwise cut ties with them, including by failing to pay their wages for at least two months.“There they are all of a sudden without anyone paying their wages and caring for them. In the worst cases, they are on board a ship that no longer has energy supply, can’t run generators — if it’s cold they can’t heat themselves, if it’s hot they can’t cool themselves, they might have no water, no food,” says Steen Lund, chief executive of ship vetting specialist RightShip, which tracks data on abandonments.It’s not always possible for seafarers to leave an abandoned ship. They might not have a visa to enter a country, or the local authorities might say they have to stay on board to keep the ship safe. Even if they can leave, many don’t want to walk away empty-handed because they are owed money their families have been counting on. In one recent case, a Syrian seafarer called Mohammed Aisha was trapped on an abandoned cargo ship in Egypt for four years after a local court declared him the ship’s legal guardian. He had to swim to shore every few days to charge his phone.Abandonments are relatively rare but they seem to be on the rise. Between 2006 and 2016, there were typically between 10 and 25 official abandonments reported each year, according to the International Labour Organization’s database, with the exception of the recession year of 2009. But more recently, the figures have climbed sharply. Last year, 118 cases were reported involving 1,841 seafarers, according to the International Transport Workers’ Federation, which reports most of these to the ILO. Seafarers from the Philippines, India and Pakistan were the most affected, while the abandonments happened in the waters of 46 countries.There has been some progress made in helping seafarers more effectively when they are abandoned. A new international rule in 2017 required ships to have insurance against abandonment, which pays out to cover the cost of seafarers’ wages and repatriation. The catch is it only applies to vessels flagged to countries that have ratified the Maritime Labour Convention, and even then compliance hasn’t been perfect. Still, the ITF says it has made a difference: about 60 per cent of last year’s cases involving insurance have been resolved, compared with about 40 per cent of cases without. Indeed, it is possible the rise in reported abandonments is partly due to more seafarers knowing it is worth reporting. RightShip is also trying to use data to track ship owners that abandon seafarers, so decent companies at the top of the supply chain know which ones to avoid. But outside the industry, who knows it goes on at all? “Shipping is just so unlike any other industry in [terms of] what’s tolerated,” says Stephen Cotton, the ITF’s general secretary. “If you were trapped at work for days or weeks chained to a desk, there would be outrage, so why do we let it go on in vessels?”[email protected] More

Greece is on the cusp of regaining its investment-grade credit rating after 12 years in the junk-bond wilderness, its central bank governor Yannis Stournaras has said as he urged the country’s next government to maintain fiscal prudence. Stournaras told the Financial Times that he was “confident” that credit rating agencies would upgrade Greek bonds within months, should lawmakers signal their intent to maintain reforms and take advantage of a “window of opportunity” to significantly lower the country’s debt burden. “We think that 2023 is the year we’ll get the investment grade,” Stournaras said.His comments come as the country gears up for spring elections, with the incumbent centre-right New Democracy party leading in the polls. The party has signalled that it will continue to carefully manage the public finances. Stournaras said the most likely timing of the upgrade was “immediately after the election”, but that it could even come before the vote takes place. Greece lost its investment-grade status in January 2011 after its economic crisis threatened to break the eurozone apart. Its ratings fell as low as CCC-, before recovering to BB+ — one notch below investment grade — as the country’s economic recovery gathered momentum. The country managed to shave more than 24 percentage points off its debt-to-GDP ratio last year alone, with its economy expanding by just over 5 per cent over the course of 2022. “A few years ago, few people expected Greece to remain in the eurozone. Now, not only does it remain, but it performs better than the eurozone average,” the governor said. Stournaras, who has headed the central bank since 2014, warned that this “benign [economic] cycle” must not be squandered and called on the government to make some desperately needed investments in the country’s battered infrastructure following a railway crash that has claimed the lives of at least 57 people. “Greece has managed to correct macroeconomic imbalances and improve price and wage competitiveness, but structural competitiveness remains low compared to other eurozone members,” he said. “The country’s infrastructure and the modernisation of the public sector remain an issue.”

University students at a rally walk to the headquarters of Hellenic Train following Greece’s worst recorded rail accident © Aristidis Vafeiadakis/ZUMA Press/dpa

Despite the gains of recent years, Greece still holds the highest debt load in the eurozone at 170 per cent of its output. Under the terms of its bailout, official creditors took on a large chunk of Greece’s debt, while charging relatively low interest rates for the government to service it up until 2032. “We have a window of opportunity that should not be wasted,” Stournaras said. “We need to bring down the debt-to-GDP ratio to such a level that nine years from now, so the interest payments, which are now under grace period, will not create a new debt problem.” Growth would also be lower this year, with higher interest rates expected to weigh on demand. “A sustainable fiscal effort will be needed,” the former finance minister said, adding that it would not be easy for the government to go from a small primary deficit to a position of fiscal surplus by 2024. High inflation would also dampen the economic outlook. Core price pressures — which exclude changes in food and energy costs, and are seen as a better gauge of underlying inflation — hit a fresh regional high of 5.6 per cent. However, Stournaras, who sits on the European Central Bank’s governing council, flagged that headline inflation readings were much “better”, or lower, than rate-setters had anticipated in December due to a sharp fall in energy prices.

He would not pre-commit to specific further rate rises in an environment where headline inflation was declining. “That could lead to an increase in market confusion rather than limit it.”His comments clash with the increasingly hawkish tone coming from many of his fellow ECB rate-setters. Its president, Christine Lagarde, has said the central bank is “very, very likely” to raise its deposit rate from 2.5 per cent to 3 per cent at its meeting on March 16, warning “inflation is a monster that we need to knock on the head”. Additional reporting by Martin Arnold in Frankfurt More

LONDON (Reuters) – Valentine’s Day helped to boost British retail sales in February but volumes remained down on last year as households cut back on non-essential items, a survey published on Tuesday showed.The British Retail Consortium (BRC) said spending in store chains increased 5.2% in annual terms last month, well below the 6.7% rise in February 2022. Sales were up on the 4.2% rise in January.Helen Dickinson, BRC’s chief executive said retailers face volatile trading conditions as consumers will be worried about energy prices and their taxes which are set to rise further in April.The BRC figures are not adjusted for inflation, meaning the rise in sales masked a much larger drop in volumes.While the Bank of England has signalled that inflation has turned the tide, British households are still contending with inflation running at over 10%, more than five times the Bank’s 2% target.The BoE raised interest rates to 4% in February and hinted that it was close to ending its run of rate hikes but said there were concerns about inflationary pressure in the labour market. Financial markets expect interest rates, now the highest since 2008, to rise to 4.75% later this year.Despite recent signs of improvement in Britain’s economic prospects, Paul Martin, UK head of retail at KPMG which co-produces the figures, said the outlook for the retail sector will continue to be challenging with consumer spending falling in real terms.Separate data from Barclays (LON:BARC) showed consumer spending on payment cards rose by 5.9% year-on-year in February. Barclays said annual growth rates were impacted by the lifting of Omicron Plan B restrictions last year, which caused a spike in spending due to pent-up demand.Esme Harwood, Director at Barclays, said several categories saw growth taper off in February as cash-strapped shoppers, hit by higher prices and shortages in fruit and vegetables, changed their grocery shopping habits.”The recent fruit and veg shortages are forcing Brits to consider alternatives for their weekly shop, as they continue to look for savvy ways to offset rising food price inflation,” Harwood said. “Popular trends this month include buying ‘dupes’ of popular products, shopping at discount stores, and limiting Easter spending.” More